Friday, May 17, 2013

Li Lu

Don't know how good this guy is but saw his talks nonetheless...

And damn! his throat clearing practices are terribly annoying!
But, it's good I sat through this talk because he made some very cool points
  • Margin of Safety - a 20% margin of safety is simply a tracking / calculating error. The margin needs to be much bigger
  • Margin of safety combined with a compounding machine - now, that's brilliant
  • Diversification is important just because probabilities say that a broad range of outcomes can occur
  • Understand that the most successful long term investors have an extraordinary ability to sit still and not invest for long periods of time - but you keep studying throughout
  • A circle of competency can be really small but really good - an attitude in investing doesn't help
  • When to sell a stock? Depends on the source of the value - when he invested in Russia at 5-10 cents per proven barrel reserves of oil, when open market prices were USD 20 per barrel (i.e. 95-97.5% discount to depressed oil prices); he sold out after 2 years when the discount to intrinsic value was between 80-90%. This was because he wanted a much higher margin of safety for a country like China in the mid 1990s.
    • Here, the source of value was the asset
    • But if the source of value is earnings, they have the ability to compound and grow and have it on a tax free basis (not applicable in India) for a long time. Hence, one can choose not to sell for a long long time provided the margin of safety remains based on the earnings generating power

And FYI - the part 1 is ok. Parts 2 and 3 are good. 

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