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Value Strategies
Buffett-Munger Screener
Li Lu's lecture at Columbia university was recently posted on the site by Ravi
or rationalwalk and myself. It turns out Li Lu recently gave another lecture at
Columbia in April 2010. Thanks to my friend David Hui Lau of
[url=dahhuilaudavid.blogspot.com]dahhuilaudavid.blogspot.com[/url] for this
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I will post the beginning of the transcript here with a link to the rest at
[streetcapitalist.com]. The link to the actual video is posted at the end of the
article. By now many of you know that Li Lu is likely to be one of the CIO
candidates for Berkshire Hathaway. Based on Berkshires investment in BYD,
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the fact that Lu manages Charlie Mungers money, and that even Buffett
would give money to Lu if he ever retired (according to Greenwald) makes me
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Bruce Greenwald: Warren Buffett says that when he retires, there are three people he would like
to manage his money. First is Seth Klarman of the Baupost Group, who you will hear from later in
the course. Next is Greg Alexander. Third is Li Lu. He happens to manage all of Charlie Mungers
money. I have a small investment with him and in four years it is up 400%.
[Applause]
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Li Lu: Columbia is where my whole life in America started. I could barely speak the language. In
Columbia it was where I had a new life. It was really in the Value Investing class where I got my
career start. I was really worried about my student loan debt at the time and a friend told me about
this class and said I need to see a lecture from Warren Buffett.
VALUE IDEAS
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Those were three powerful concepts. I had never viewed the stock market like that. I viewed it
negatively as a place made up of manipulators who were lining their own pockets. I embarked on an
www.gurufocus.com/news/98375/li-lus-second-lecture-at-columbia
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7/2/12
Two years after that I bought my first stock. After I graduated I worked at an investment bank for a
year and realized it was a mistake. I tried to start a fund but I didnt have a track record. The first
year I managed money I lost 19%.
Being a value investor means you look at the downside before looking at the upside. Before
becoming an investor you need to look at how you can fail at this game. There are all sorts of ways
you can fail. You need to examine who you are and see if you could be good at it. If you could ever
find something you can do well that you really like that will be your best investment. You will do
better than competitors. If you can do it with intrinsic passion, that really over time will add
enormous value to you.
Back to the game of investing. This concept of margin of safety is an essential concept to be a
good investor. The future is unpredictable, you will always be dealt surprises, some positive most
negative. You need to build in a level of safety so that whatever happens, you will not get crushed.
If you can really successfully know what you are getting into, you can pretty much navigate. Most
people are troubled by what they dont know. The world is divided by those who know and those
who dont know. If you really know you will not pull triggers like Wall St. traders. If you are truly
intellectually honest, you would not do anything.
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This class teaches you to know what you are getting into, especially accepting what things you
dont know. The game of investment is really continuous learning. Everything affects an investment,
it constantly changes. You are not investing in the past but the accumulative cash flow of the
future. You have to want to find a certain set up where you can know something that most people
dont know. There are plenty of things I dont know but they dont factor into the purchase because I
am using a huge margin of safety. Buying a dollar at 50 cents. So if things turn against you, you will
be okay. That is not easy. This business is brutally competitive. It is so impossible to know
everything and know exactly what is going to happen to a business from now till the end that you
really have to accept that what you dont know.
Finding an edge really only comes from a right frame of mind and years of continuous study. But
when you find those insights along the road of study, you need to have the guts and courage to
back up the truck and ignore the opinions of everyone else. To be a better investor, you have to
stand on your own. You just cant copy other peoples insights. Sooner or later, the position turns
against you. If you dont have any insights into the business, when it goes from $100 to $50 you
arent going to know if it will back to $100 or $200.
The rest of the transcript can be found at the following link:
http://streetcapitalist.com/2010/06/24/li-lus-2010-lecture-at-columbia/
There is no embed code, but the three hour long video can be found at the following link:
http://cbs360.gsb.columbia.edu:8080/ess/echo/presentation/749b9e77-b822-456f-87849dff07518360
About the author:
I am VP of Business Development for Sum Zero (http://sumzero.com), the largest community of
buy-side analysts; consisting of over 5,900 hf and mf analysts, and over 3,600 extensive investment
write-ups. I have prior experience in a value based pe firm focused on PIPE transactions in microcaps, and at a value based research firm, which focused on smid caps. In my personal portfolio I
have outperformed the market by a cumulative ~48% since 3/2008 (inception date). I can be
contacted at jacob(at)sumzero.com for sumzero related inquires. My website is
http://www.valuewalk.com/ Visit Jacob Wolinsky's Website
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www.gurufocus.com/news/98375/li-lus-second-lecture-at-columbia
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Li Lu (Updated on 06/30/2012)
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Superguru - Jun 27, 2010 at 2:50 PM
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