Li Lu's Best Advice on Successful Investing | FAME 2012 【C:L.L Ep.41】

[Transcript]

AUDIENCE MEMBER 1: I'm curious to hear your opinion on what you think are the domestic industry segments you think are most overvalued and undervalued today?

LI LU: Well, I – as I said that to be a successful investor, you don't really have to know everything. You don't have to be a creeper who claims he knows everything, every stock.

In fact that if you truly know something that tend to really fall into a small circle, Buffett would like to – Munger would like to call this 'Circle of Competence.' You would have find in your circle, that circle tend to be small.

So every time you hear people talking about, oh gee, I think of that industry is overvalued, this industry is undervalued. That is not intellectually honest to me at least. Investing that last thing you want is to have that error of arrogance. You know, arrogance might be a too strong word, but I think the more honest you are intellectually, the more prosperous you tend to be. I have never find any intellectually arrogant people who can successfully practice the game of investment.

AUDIENCE MEMBER 2: First of all, thank you for coming. You talked about finding you know great financial dislocations to try and find these tremendous upside situations. Would you maybe expound on your research like how do you find these great dislocations where things are trading in 10% of what they were?

LI LU: Well, I find as I look in my own career of all the ideas that I find, they really tend to come from all sources and I don't have a particular rule where they come from. If you have curious mind, if you study all the time, you maintain a good network of relationships with other smart intelligent investors and have a way of really looking into what they do, you tend to find a lot of source of interesting ideas.

And in today's age because this regulatory requirement was disclosure, I wouldn't be surprised you can really find a lot of great ideas just out of reading publicly available information. It is judging what is a good opportunity, that is really difficult.

AUDIENCE MEMBER 3: What is the process like of you finally developed conviction and ideas? Is that kind of like an 'Aha moment' or can you describe how you come to that conviction level?

LI LU: Well, one of my favorite way to describe the conviction of idea is that if you can find the most intelligent person who would oppose your idea and you're able to argue more successfully than he does against your ideas, that is when you can develop or entitle to some views.

And even then you want to really confine yourself to a small segment of things that you think you're right. Of course, as you gain more experiences, your circle tends to expand, but only small and gradually over time. So I think of being intellectually honest is a huge requirement of being a successful analyst and a successful investor.

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

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