Li Lu: Enormous Opportunities For Value Investing in a Globalized Future

Johnny HopkinsLi Lu, Value InvestingLeave a Comment

During his recent keynote speech at the Columbia University Global Center (Beijing), Li Lu reflected on the evolution of value investing, emphasizing its roots in Graham’s principles during tumultuous times, including the Great Depression and World War II.

Graham’s key ideas were: stocks represent ownership, the market serves investors, and investments require safety margins. Buffett and Munger expanded value investing during America’s growth era by focusing on buying great companies at reasonable prices and holding them long-term, leveraging compound interest.

Li highlights global value investing’s potential in diverse regions, emphasizing its relevance in modernizing economies. He believes modernization represents an irreversible paradigm shift, creating vast opportunities for applying value investing globally.

Here’s an excerpt from the keynote:

Li Lu: This represents the most exemplary expansion of value investment by Munger, Buffett, and Berkshire Hathaway. Additionally, Munger’s unique perspective is his emphasis on the “circle of competence.” He pointed out that its establishment may vary from person to person. For different individuals, it is best to establish a circle of competence within the scope of their understanding and “fish where there are fish.” Therefore, finding great companies and fishing in fertile waters is a unique contribution of Munger.

In our generation, if we want to make a small contribution, I believe it is to put value investment into practice globally over the past 30 years—what we call global value investment. We have been practicing not only in China but also in Southeast Asia, South America, and North America. We have experienced various stages, such as China’s era of rapid growth, its era of relatively slow growth, and today’s era of doubts and growth.

In terms of the international environment, we have gone through the honeymoon period between China and the United States, as well as the current process of contradictions and integration within global integration.

Additionally, South America, Southeast Asia, and other regions have experienced different stages of modernization. Over the past 100 years, value investment has been successfully applied in diverse environments, countries, and states. There are also lessons worth summarizing, which provide the most important source of confidence that this concept can be continuously applied.

If we can contribute anything, we hope to make efforts toward the global application of value investment. After all, eighty to ninety percent of people live outside developed countries and are still undergoing modernization.

Modernization is not just a powerful movement lasting two or three hundred years; in my opinion, it represents a shift in the civilization paradigm. This shift is unstoppable and cannot be reversed.

This journey will continue until seven to eight billion people around the world enter modern life. Just as humanity transitioned from hunting and gathering to agricultural civilization—a shift that lasted thousands of years and could not be changed—the same is true of today’s modernization process.

The foundation of the market economy is private enterprises, joint-stock management, financial markets and other basic elements. As long as such elements exist and the transfer of the basic civilization paradigm is carried out continuously, there is a huge space for application for value investment. Such a place is also a place where there are fish.

You can find an English version of the transcript here:

Li Lu Keynote Columbia University Global Center (Beijing)

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