Who is Li Lu?

Born in 1966 in China, Li Lu moved to the United States in the 1980s to pursue higher education. After graduating from Columbia University, he began his career in finance, working for several investment firms before founding Himalaya Capital in 1997. Li Lu’s investment approach is deeply rooted in the principles of value investing, which he has refined over the years through his experiences and research.

Investment Philosophy

Li Lu’s investment philosophy is centered around the following key principles:

Margin of Safety

Li Lu emphasizes the importance of having a margin of safety in investments. This means buying companies at a significant discount to their intrinsic value, providing a buffer against potential losses. By focusing on undervalued companies with strong fundamentals, Li Lu minimizes risk and maximizes potential returns.

Long-Term Focus

Li Lu adopts a long-term perspective when evaluating investments. He looks for companies with sustainable competitive advantages, strong management teams, and a proven track record of success. By taking a patient approach, Li Lu allows his investments to compound over time, generating substantial returns.

Business Quality

Li Lu prioritizes business quality over other factors such as growth rates or industry trends. He seeks companies with:

• Strong competitive advantages
• High returns on equity
• Low debt
• Talented management teams

By focusing on high-quality businesses, Li Lu reduces the risk of permanent capital loss and increases the potential for long-term success.

Mr. Market

Li Lu often references the concept of “Mr. Market,” coined by Benjamin Graham. Mr. Market represents the emotional and irrational nature of the stock market, which can create opportunities for value investors. Li Lu takes advantage of these opportunities by buying companies at depressed prices and selling them when they reach their intrinsic value.

Dive into value investing by reading The Intelligent Investor by Benjamin Graham

Investment Approach

Li Lu’s investment philosophy offers valuable lessons for individual investors:

• Be patient: Investing is a long-term game. Avoid getting caught up in short-term market fluctuations and focus on the underlying fundamentals of the companies you invest in.
• Focus on business quality: Prioritize companies with strong competitive advantages, talented management teams, and a proven track record of success.
• Maintain a margin of safety: Buy companies at a discount to their intrinsic value to minimize risk and maximize potential returns.
• Stay informed but avoid emotional decisions: Stay up-to-date with market news, but avoid making investment decisions based on emotions. Instead, focus on the underlying fundamentals of the companies you invest in.

Li Lu’s investment philosophy serves as a powerful reminder of the importance of value investing, patience, and business quality. By incorporating these principles into your investment approach, you can increase your chances of success and build long-term wealth. As Li Lu himself once said, “The key to successful investing is not to try to time the market or to try to pick the winners, but to focus on the process of investing and to stick to it over the long term.”