8 Value Investing Secrets from Li Lu

Who is Li Lu?

Li Lu is a Chinese-born American value investor, businessman, and philanthropist. He is the founder and chairman of Himalaya Capital Management. He is also co-founder of The Asian American Foundation and serves as its chairman.

8. Self-Defense through Margin of Safety

Build in a margin of safety by buying assets below their intrinsic value. This protects you from unforeseen risks and potential management missteps.

7. Ignore Volatility

Understand the difference between stock price fluctuations and the underlying business performance. Focus on the long-term health and potential of the company, not short-term market noise.

6. Focus on ROIC

Prioritize companies with high Return on Invested Capital (ROIC) as it indicates efficient use of resources and a strong competitive advantage. Over time, your returns tend to align with the underlying ROIC of the company.

5.Combat Commitment Bias

Limit public pronouncements about your investments. Excessive talk can solidify your perception regardless of new information, potentially hindering sound decision-making.

4. Seek the Truth

Avoid biases and misleading influences. Strive for an objective understanding of a companys fundamentals before making investment decisions.

3. Be a Journalist

Approach investing like investigative journalism. Dig deep, gather information, and form your own conclusions about a companys true value. Dont rely solely on readily available information.

2. Know Yourself

Understand your personal interests and expertise, focusing on industries and companies you naturally gravitate towards. This enhances your analysis and avoids chasing trends blindly.

1. Value Investing Works

The market doesnt cater to value investors, creating mispricing opportunities. Capitalize on these discrepancies through thorough research and a long-term perspective.