Li Lu’s background

Li Lu grew up in China in a poor family and witnessed the Tiananmen Square protests; between the Chinese government and the Chinese people.

Luckily, he came to the US and was able to study at a good university. There he once saw Warren Buffett lecturing and started investing.

Then, after about 20 years, he dared to approach Warren Buffett and Charlie Munger and try to befriend them. And he did so well that they even recommended his fund.

Li Lu’s strategies for value investing

• It’s important to talk to people who have different skills. Li Lu likes to talk to businessmen and scientists in other industries, even if he doesn’t invest there. Because he wants to learn new things.
• Li Lu likes to read Value Line.
• He likes to look at the “New Low” list, or Dogs of Dow.
• Li Lu is good at meeting and evaluating management teams.
• In small businesses, management is particularly important.
• The advantage of being interested in investments is that it is an interest that both pays off in the long run, and something you get better at.
  If you are a passive investor, which we all are who are not responsible for a fund or the like, you should have a strong margin of safety.
• If you are confident enough in your cause (like Julian Robertson’s concept that 2-3 big things are enough) and you are sure you have a sufficient margin of safety, you don’t need to keep looking for more information.
• Consider: What do you not need to know?
• Li Lu tried his hand at being the CEO of a company, but it didn’t go well. His strength was as an outside observer and being able to rationally give advice. Not running the day-to-day business.
• Find the best companies, and the worst companies, and compare them.

Li Lu’s words of wisdom

• Find a job you can’t help but think about it all day, every day. Li Lu is obsessed with investing and thinks about it all the time when he walks.
• If you are a value investor, you are possibly genetically different from the rest of the population. And able to think for yourself, have your own opinion, and not have to agree with others all the time.
• As a value investor, you are more of a researcher and thinker, with great curiosity, than an operational person.
• If you find a really quality company, you should really investigate it further:

Li Lu quotes:

“If you are not a good analyst, you will never be a good investor.”

“If you truly love this game, I would suggest that you don’t take short cuts. It might take longer but it is more rewarding.”

“If it was a business you inherited, you would not be trading. You would really seek out knowledge on how it should be run, how it works. If you start with that, you will eventually know how much that business is worth.”

Read more: About the strategies of other famous value investors.