Li Lu: After decades of contemplation, here are 30 pieces of advice I offer to Chinese investors I have compiled 30 suggestions put forward by Li Lu in different occasions to communicate with investors, hoping to help my brothers overcome confusion and find their own investment path in this ever-changing period. 01 The primary characteristic of a value investor is not to mind being a minority, but rather to feel very comfortable being a minority. Have a natural feeling that your judgment of things is not influenced by others' opinions of approval or opposition, but purely based on your logic and evidence. 02 We need to invest a lot of time and energy to become an academic researcher, rather than a so-called professional investor. To cultivate oneself as an academic researcher, detective, or even journalist, one must have an insatiable curiosity to explore the workings of all things. 03 You must be very honest and not deceive yourself, because deceiving yourself is the easiest thing. So you need to see the world as it is, rather than seeing it the way you want it to be. 04 A true value investor will clearly tell you that cycles cannot be predicted, and they will not make predictions. Once you enter the cycle prediction stage, you will find that there are short, medium, and long cycles, which have changed from a few years cycle to a few hours cycle. When you start to enter this mindset, you are no longer a value investor. 05 In my most successful investment cases, the source of knowledge was not annual reports, but rather some other aspects of knowledge that allowed me to make judgments on other issues that were different from the market, providing me with some genuine and unique insights. But you don't know in advance how knowledge is connected to each other, so people should be honest with themselves and do things according to their own interests. Because everyone's ability circle is inevitably different, and everyone's interests are also different, we should honestly move forward according to our own interests. 06 Starting from the simple, truly understanding a very simple enterprise, starting from a small, simple business, guiding you to study increasingly complex enterprises according to your own interests. At this point, knowledge is gradually established, and it is honestly established. 07 The existence of the market is dedicated to discovering the weaknesses of human nature. When you overestimate your abilities and then become very lucky in the market, such as suddenly winning, this is the scariest thing. You will easily enter a vicious cycle, and in the end, this market will definitely defeat you. The market is very cruel and very real. 08 Any simple enterprise is not easy, it is quite difficult. When you discover that some people are doing better than others in difficult industries, you can understand what competitive advantages are and where they come from. 09 As a beginner, you can choose a company that is easy to understand, which can be a very small company such as a street convenience store, a restaurant, or a small listed company, it doesn't matter. Try to understand a company and how it operates: how it makes profits, how it organizes its financial structure, how management makes decisions, how it differs from competitors in the same industry, how it adjusts itself according to the overall environment, how to invest surplus cash, how to raise funds, and so on. ten If there is one thing that has a positive correlation with investment results, it is the amount of company annual reports read, which may indeed have a positive relationship with investment knowledge. The more companies you know, the more their history you understand, the more industries you know, and the deeper your analysis of them. Especially if you think about the enterprise from the perspective of the owner in the right way, this reading will actually have a positive relationship with your future investment judgment, sensitivity to opportunities, and grasp. If you use the wrong approach, such as studying K-lines, studying more is useless. eleven There are many research methods, and the seller's research report can also be viewed because there is some data that can be used to provide more objective answers. But you have to analyze carefully and rationally, with a critical eye, in a relatively objective way, to judge what can be learned and what facts can lead to what conclusions. You must use logic to drive, rather than using imagination and your hopes as intermediate grafts. twelve My success may have come from no more than 10 ideas in the past 26 years, so you really don't need so many ideas. thirteen Understanding a company is a long-term process, not just a few days, weeks, or months. It is often measured on an annual basis, and some even require more than 10 years of research before you can have a say. So if you really study it thoroughly, you dare to bet. fourteen When judging a company, do not easily conclude that the success or failure of the company will depend on the person in question. I have also encountered many people who seem to have the right conditions in all aspects, but as a result, their companies are doing very poorly. So I think we must go back to each enterprise itself and analyze the specific situation. fifteen If you really see yourself as the owner of a business, you won't use the concept of earnings per share. You need to constantly train yourself not to think about the concept of "earnings per share", but to think about yourself as the owner of the business and what the market value is. sixteen All industries will have excellent investment targets, and as long as this industry exists for a considerable period of time, many will emerge. Even if the industry itself lacks growth potential, it will maintain growth at a certain speed because we cannot do without it. If the competitive landscape of this industry has formed a highly integrated and further synchronized integration, then these enterprises will also become excellent investment targets. seventeen Value investing itself does not necessarily have to invest in a specific industry, such as consumption, finance, or technology, and there is no such distinction. Value investing is a way of thinking, a set of behavioral guidelines, a set of predictive methods, and has nothing to do with what industry to invest in. eighteen The vast majority of people do not believe in compound interest because it is not common in daily life. For example, the most likely compound interest is experience and wisdom, but according to the learning methods of the vast majority of people, their knowledge cannot be accumulated and is aging, so they cannot even see the most basic compound interest. nineteen To truly understand value investing, there are several books that must be read. The first book is Graham's' The Intelligent Investor '. Next is Buffett's biography, such as Roger Lewinstein's "Buffett: The Growth of an American Capitalist". To study Bamang, one should also read the Poor Charlie's Codex. Securities Analysis is also a must read classic. Relatively close to us, to understand some experiences of growth companies, you can read Philip Fisher's "How to Choose Growth Stocks". Michael Porter's "Competitive Advantage" clearly outlines the main trends of competition and can serve as a foundational introductory book for studying long-term competitive advantage. Find the next opportunity for long-term investment Click to purchase the Li Lu new book set twenty The margin of safety is very important. When considering various or even very unlikely events, your investment can still be guaranteed to be safe. This is the more reliable investment. Including epidemics, major economic crises, and even wars, they should all be within your consideration. twenty-one When making a purchase, a relatively large margin of safety is required. Once you buy, your understanding of the company will become increasingly profound. At this point, there will be some changes in the calculation of value and price, and your ability to predict the future will also undergo certain changes. At this time, the price range you can tolerate should be more spacious. twenty-two The selling situation can be roughly summarized into the following three types. Firstly, if you make a mistake, sell it immediately. Secondly, when there are other better investment targets, if the ratio of price to value, risk to return is not as good as the new target, they will also be sold. Thirdly, there has been an extreme price and value split, and no matter how the company grows in the future, it is difficult to prove such a price. At this point, you also need to sell because your opportunity cost becomes cash. twenty-three Investment is a probability game. We assume that you have a 90% chance, but there are 10% other possibilities, and the result is that the 10% has happened, which is the correct mistake. At this point, you should sell. twenty-four If a company has a strong moat, excellent sustainable profitability, and a competitive advantage, then generally speaking, its good aspects will protect themselves. You don't need to think so clearly, nor do you need to make any preparations. So really preparing for the future is preparing for bad things, good things don't need to be prepared, just accept them. twenty-five The amount of investment should be small, and when investing, the grasp should be large. In situations where the grasp is large but the amount is small, the bet should be large. twenty-six Even if you are very confident, you cannot be 100% correct, all you get is a high probability. But if you always invest at the highest probability, the long-term accumulated results will inevitably be very good. twenty-seven In the eyes of value investors, the biggest risk of investing in the stock market is not the fluctuation of prices, but whether your investment will suffer permanent losses in the future. A simple decline in stock prices is not just a risk, but actually an opportunity. Where else can I find cheap stocks? twenty-eight To understand the performance of stocks over the past 200 years and the next 20 years, it is necessary to understand and be able to explain this line - the basic map of past human civilization. It's difficult to remain rational during every stock market crash without understanding this. twenty-nine Human nature is similar, what is needed elsewhere, China also needs it, but we may not have reached the same level due to our economic level. Our domestic demand, compared to what is lacking in developed countries, is definitely a relatively certain direction for our long-term growth. thirty The influence of management varies at different stages. In the start-up stage of a company, management is very important, and during the transformation period of a company, management is also very important. However, in a normal state, the logical importance of the business itself is far greater than that of management. So it depends on the specific state of the enterprise you are investing in. Many Chinese companies are still in their early stages, and the Chinese economy itself is undergoing significant changes, so these companies and industries will also undergo significant changes. Therefore, in China or other developing countries, the role of management is usually much more important than in developed countries and relatively stable economies.