Li Lu on When to Sell a Stock and When to Hold? | FAME 2012 【C:L.L Ep.39】

[Transcript]

AUDIENCE MEMBER: Yeah, I have a question. How do you decide when to sell the stock?

LI LU: Well, that's very interesting question.

Now, it depends what's the source of your value. In some of the example that I stated in the source of the value, it really is the asset value.

In that case you really want to really re-evaluate your scenarios upside and downside every once in a while because the situation changes, for example, in your favorite stock in the Rus. oil, Lukoil and Gazprom, I sold it two years after I first bought it and it just other — But at the time they're still kind of a trading probably 90% — 80-90% discount — but I think the 80-90% discount is warranted somehow.

Today, they are still trading at a huge discount — I don't know what it is, you're probably more updated than I do — but relative to all the other countries that I would feel less comfortable with that discount, I need more and it just happened to be given a 99% discount — 99.5% discount — that was a fluke.

Now, if you're really talking about earnings (source of value), I tend to be less in a hurry because if you really bet it right and earnings will continue to grow. And every time you sell stock, you're basically take out essentially a 30-40% of interest-free borrow by not really selling the stock, you avoided paying the capital gain taxes — the state and federal together is somewhere in 20, 30 to 40%, and I think it's going up. So as long as you're in that, in a sense, you're borrowing from the government on the interest-free and risk-free basis.

And if the asset underlying asset continue to grow on compounding basis, I would say that is a reason to be less in a hurry to sell. If it reflects in the fair value, I would have to keep it, but if they really go to the extreme overvalue situations and the business environment changes, of course, you would change your course of action.

And that's a good thing about investing. Everything related and affected investment, all the circumstances changes all the time. That's why the game is so fun.

(Source: https://youtu.be/P4jZFgWNY2E)

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