I'll second that @McLovin, and thanks for sharing @Solvetheriddle.
I created a transcript and used AI to summarise his key points for those that are a bit time poor (but do yourself a favour and watch the full lecture if you can)
Key points:
1. Being a value investor:
- Value investors are a small minority (~5%) compared to the 95% of other investors in the market.
- You need to be comfortable standing alone, basing your decisions on reason and evidence, not popular opinion.
- Constantly learning and researching is crucial, as investing is a lifelong journey of gaining knowledge about businesses, industries, politics, science, technology, and more.
2. Thorough research:
- When a potential opportunity arises, you must be willing to dig deep and do comprehensive research.
- This includes talking to management, competitors, customers, visiting facilities, and reading all available information.
- Li Lu gave an example of researching a company called Timberland, where he visited stores, talked to managers, and even joined the board to better understand the business and management.
3. Decisive action on rare opportunities:
- Great investment opportunities with a large margin of safety are rare, but when they appear, you need to act decisively and bet significantly.
- Li Lu mentioned examples like Timberland, which was trading at a low valuation despite strong fundamentals, and a Korean company called Daehan City, which owned valuable assets not reflected in its stock price.
- Over an investing career, you may only encounter a handful of such opportunities, so it's essential to seize them when they arise.
4. Long-term holding of exceptional businesses:
- Occasionally, you may find a truly exceptional "franchise" business with sustainable competitive advantages and the ability to compound capital at high rates for many years.
- In such cases, it may be wise to hold these investments for the very long term, as selling would trigger taxes and the difficulty of finding an equally attractive opportunity.
- Li Lu mentioned examples like Bloomberg, which has high switching costs and a virtual monopoly in its industry.
5. Continuous learning:
- To succeed as a value investor, you must always be learning about different businesses, industries, and disciplines.
- This accumulated knowledge helps you spot opportunities and gain insights that others might miss.
- Li Lu emphasized the importance of reading widely, including subjects like biology, physics, and history, as they can provide valuable mental models for investing.
6. Concentrated bets on big ideas:
- Over a long investing career, the biggest returns will likely come from a few concentrated bets on big ideas where you have a unique insight and strong conviction.
- This requires continuously preparing, learning, and waiting patiently for these opportunities to arise.
- Li Lu shared his own experience of missing out on a big opportunity early in his career because he was focused on short-term performance and pleasing investors, emphasizing the importance of staying true to your principles.