Collection: Li Lu - #38 | How Would Li Lu Invest a Small Sum of Money?
[Transcript]
LI LU
If I were a student today and has a few tens of thousands of dollars. I'll be really, very happy to live in an environment as it is today.
Now, if you have a large amount of money, we have multiple challenges all over the world which we cannot really go into it today. But if you have a smaller pool of money, there are tremendous opportunities like that in all small pocket.
I give you one example that you can really do more work to see whether it's interesting. In (South) Korea, there's a form of a securities – preferred securities – essentially, it is a non-voting common stock that pays slightly more preferred dividend – not much – but it cannot vote. But for interesting reasons that they are trading sometime up to 70-80% discount to their common equivalent.
And in that group of securities that there are several companies that really have enduring franchise that have been growing earnings and revenue on a compounded basis for over 3-4 decades. Who's a franchise nearly as a fortress, you know, fortress-like, great earnings power machines and you still have a lot of opportunity of expansion and trading at prices that it is essentially just tiny fraction of what really should be worth in open and a private transaction, if you buy the whole company.
And situation just like that really exist even today. There's absolutely no reason, especially some of those companies that I talked about it. The family really controls the voting of the company anyway so there is virtually no differences between the voting common and non-voting common. It was virtually no differences and yet the trading was 80% discount.
I'm not talking about 20% discount, but 80% discount. It's trading at 20 cent on the dollar if you believe that common value is like the true value. So there are really opportunity that my point is really existed on all the different ones.
So if you're starting your career, if you're young, if I were you starting all over again. I would have first to study all the great examples in the past in which market went to the extreme on small segment of the security that give you a tremendous, tremendous margin of safety, now all sort of things happen, you will still come out okay, even if you lose money, you're still in the game.
Study that one and then study, you know, what is available today. At any given time, there are always always opportunity like that. And it really has something to do with our fundamental human psychology, as long as human remains the same – which I suspect we will – after billions of years that opportunity exists.
Which is quite encouraging sign for young people. So if I were you, I would be very excited today as I was when I was sitting in the audience in your shoe about 20 years ago. So good luck for that.
(Source: https://youtu.be/q87crQmDETY)
[YAPSS Takeaway]
"So if you're starting your career, if you're young, if I were you starting all over again. I would have first to study all the great examples in the past in which market went to the extreme on small segment of the security that give you a tremendous, tremendous margin of safety, now all sort of things happen, you will still come out okay, even if you lose money, you're still in the game.
Study that one and then study, you know, what is available today." ~Li Lu
