How To Get More Information on Elusive Superinvestors?

[Voodooking]

I really want to get some more information on the strategies and thinking of some of the following value guys, who are touted as being some of the very best in the world.

 

Li Lu - Himalaya Capital

Greg Alexander - Acacia / Ruane Cunniff

 

I'd love to find out how these guys operate and what makes them tick, what strategies they employ, how they think about portfolio construction etc. but I haven't been able to find out very much about them.

 

I can't find any information relating to their 13F's. It's as if they have some sort of special dispensation whereby they don't need to report to the SEC. Is this because they don't hold any US stocks and only invest in other countries internationally? Is it because they've managed to find a loophole so that they don't have to disclose their positions for another reason?

 

I know that Li Lu has a book, but it seems to be more about his early life than investing in particular. Bruce Greenwald invested some of his private capital with Lu, so you know he must know his stuff.

 

Warren Buffett has said that these guys, along with Seth Klarman are his favourite three living investors.

[gfp]

You could start with this speech -

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/li-lu's-2015-speech-at-peking-u/msg293043/#msg293043

 

bottom of this thread has some color on Greg Alexander's investing -

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/greg-alexander%27s-acacia/

[winjitsu]

http://therationalinvestor.blogspot.com/2010/07/li-lu-on-investing.html

 

Plunge super heavily into one stock when all the stars align. Looking at the numbers, suggests that he almost had up to 50% in BYD at some point. He has held onto BYD all these years, only selling out a small position to redeem an investor who had some personal liquidity needs.

 

"Charlie Munger remarked that one candidate who he is particular close with was up 200% in 2009 with 0 leverage. Some people think that the person Munger is referring to is Li Lu, a fund manager who turned Munger and Buffett onto BYD. Lu personally owns at least 2% of BYD, which rose 400% in 2009."

 

"Bruce Greenwald: Warren Buffett says that when he retires, there are three people he would like to manage his money. First is Seth Klarman of the Baupost Group, who you will hear from later in the course. Next is Greg Alexander of the Sequoia Fund. Third is Li Lu. He happens to manage all of Charlie Munger’s money. I have a small investment with him and in four years it is up 400% [2006 - 2010]"

 

On Due Diligence:

 

"Example: Timberland

-Start by giving a 5 second look at the business. Timberland. The business is trading around clean book value, consisting mostly of tangible liquid assets, working capital, plus 100M in real estate. Deployed capital is 200M with 100M return.

-Then check why the business fell apart and became cheap. Think if you had owned the entire business at that price.

-At the time, was the height of the Asian Financial Crisis, saw their sales falling off the cliff in Asia. Any thing with exposure to Asia was falling apart. Try to check what other people are thinking about this. You may not listen to their advice but you may want to know what other people are looking at.

-Timberland had no other analysts covering it.

-Why no coverage?

-Look at business across years. Timberland has been growing, pretty profitable, did not need financial markets. Family owned. Owns 40% controlling 98% vote.

-Immediately, that is a turnoff to most people. You can do a quick data search.

-You need to have a curious, active mind to ask questions and find answers.

-Timberland had most of the vote, no analyst coverage, a bunch of shareholder lawsuits. If you were a member of the other 95% of the investment business you might say maybe management is milking the business.

-Download every court document lawsuit. Read it. You NEED a very curious mind to figure out WHAT is happening. Dig every single time. READ EVERYTHING.

-The first time, it takes a couple minutes to look over financials. Then gather questions and do deep research.

-Most lawsuits came from Timberland missing guidance, annoying investors, which annoyed the owner of the business. They decided to stop talking to Wall Street. So it was not about milking the business or fraud. They were not crooks.

-How do you determine if they are good managers? Decent people?

-Act like an investigative journalist. Most business owners leave a trail for you to follow and see how they deal with different situations. Most professional managers would not see this as part of their job, but YOU are part of their 5%.

-Go to their community, visit people they know, their Church, their Synagogue, introduce yourself to their friends and neighbors. It is worth it to spend as much time as possible, to find what these business people have done and what their neighbors say about them to accurately get an idea of their personality.

-The father seemed like a simple, decent guy, just a high school graduate. the son went to business school, was already COO of the company even though he was Lu’s age. Lu saw what boards the son sat on, and noticed that they had a mutual friend. Managed to get himself on the board with the son and became friends quickly. Came to realize these where high quality, very ethical businessmen.

-After all that, saw the stock was still trading low. Decided he did not miss anything. The other 95% may not have done enough research to see this or have some kind of institutional imperative that prevents them from owning.

-If you are not a good analyst, you will never be a good investor.

-But we decide to buy. How much do we buy? Imagine having $900. The other 95% will take tiny positions, 50 basis points. You need to use concentration, a $200 position. Think of how much work you did. Lu visited all the stores to see how margins improved – they had a fad going on where kids wanted the shoes. Their asian business is tiny, reduced earnings by less than 5%.

-Lu put a ton into Timberland. What happened after next 2 years? Stock went up 700%. Propelled by earnings. No real risk – went from trading at 5x earnings to 15x with earnings growing 30% a year. It adds up."

[smathew]

Greg alexander's indian holdings (Acacia)

http://alphaideas.in/wp-content/uploads/2013/07/201409InvestorWisdom.pdf

[Guest longinvestor]

While we go Guru hunting around the world, somehow what comes loudly out of their mouths is quickly drowned out. Concentration. 

 

Go on, find one more.

[alwaysinvert]

https://seekingalpha.com/article/3980970-using-li-lu-introduction-asian-equities

[Voodooking]

Wow! Thanks for all the help guys. Some great information for me to study.

 

Being able to view the equivalent of 13F's in India is really interesting and puts a few ideas into my head. I wonder if Mohnish Pabrai ever cloned Greg Alexander in India...?  :)

 

It seems like a real shame that armed with this resource and these Indian companies, I can't see any way to buy any of them... I'm a UK resident / UK nationality and from what I understand, there is no way to invest in stocks in India unless you are of Indian origin, is this correct?

 

Longinvestor: Not really sure what you mean by your post. Are you suggesting that these 'Guru's' seem to concentrate less and diversify more than they should do, or that individual investors are likely to fall into that trap?

[Guest longinvestor]

Wow! Thanks for all the help guys. Some great information for me to study.

 

Being able to view the equivalent of 13F's in India is really interesting and puts a few ideas into my head. I wonder if Mohnish Pabrai ever cloned Greg Alexander in India...?  :)

 

It seems like a real shame that armed with this resource and these Indian companies, I can't see any way to buy any of them... I'm a UK resident / UK nationality and from what I understand, there is no way to invest in stocks in India unless you are of Indian origin, is this correct?

 

Longinvestor: Not really sure what you mean by your post. Are you suggesting that these 'Guru's' seem to concentrate less and diversify more than they should do, or that individual investors are likely to fall into that trap?

 

The opposite. Gurus repeatedly tell about how they concentrate and how it worked for them but the crowd is unlikely to listen to them and follow the herd mentality of di-worsification and will have elaborate theories as to why.

 

 

[netnet]

Li Lu on researching the CEO of Timberland:

Go to their community, visit people they know, their Church, their Synagogue

my goodness. No wonder Munger has this guy managing his outside money.

 

From the link on Li Lu, re: Timberland,

Eventually you will stumble into one big opportunity.

-In the meantime, you will stumble into Timberland style investments which aren’t bad.

7X not bad!!!  Basically he is looking for a Microsoft or BRK type of return, he literally says

If you do what Ben Graham or Tweedy Brown does, you will make 15-20% returns but you wont make the huge returns of Buffett.

-The biggest ideas can give 10,000x returns.

 

This is pretty humbling!!

[JayGatsby]

Wow! Thanks for all the help guys. Some great information for me to study.

 

Being able to view the equivalent of 13F's in India is really interesting and puts a few ideas into my head. I wonder if Mohnish Pabrai ever cloned Greg Alexander in India...?  :)

 

It seems like a real shame that armed with this resource and these Indian companies, I can't see any way to buy any of them... I'm a UK resident / UK nationality and from what I understand, there is no way to invest in stocks in India unless you are of Indian origin, is this correct?

 

Longinvestor: Not really sure what you mean by your post. Are you suggesting that these 'Guru's' seem to concentrate less and diversify more than they should do, or that individual investors are likely to fall into that trap?

 

The opposite. Gurus repeatedly tell about how they concentrate and how it worked for them but the crowd is unlikely to listen to them and follow the herd mentality of di-worsification and will have elaborate theories as to why.

More important, I think, is the analysis that goes behind that concentrated investing. Concentrated investing without the right analysis is a recipe for disaster. Unconcentrated investing with the right analysis still works fairly well. Marathon doesn't allocated more than 3% per position if I remember right, but their returns are still exceptional.

 

You're right that swinging hard at the perfect pitch when it comes amplifies the returns, but the first step is recognizing the perfect pitch.

[Guest longinvestor]

Wow! Thanks for all the help guys. Some great information for me to study.

 

Being able to view the equivalent of 13F's in India is really interesting and puts a few ideas into my head. I wonder if Mohnish Pabrai ever cloned Greg Alexander in India...?  :)

 

It seems like a real shame that armed with this resource and these Indian companies, I can't see any way to buy any of them... I'm a UK resident / UK nationality and from what I understand, there is no way to invest in stocks in India unless you are of Indian origin, is this correct?

 

Longinvestor: Not really sure what you mean by your post. Are you suggesting that these 'Guru's' seem to concentrate less and diversify more than they should do, or that individual investors are likely to fall into that trap?

 

The opposite. Gurus repeatedly tell about how they concentrate and how it worked for them but the crowd is unlikely to listen to them and follow the herd mentality of di-worsification and will have elaborate theories as to why.

More important, I think, is the analysis that goes behind that concentrated investing. Concentrated investing without the right analysis is a recipe for disaster. Unconcentrated investing with the right analysis still works fairly well. Marathon doesn't allocated more than 3% per position if I remember right, but their returns are still exceptional.

 

You're right that swinging hard at the perfect pitch when it comes amplifies the returns, but the first step is recognizing the perfect pitch.

 

Agreed, that's right on! The word Guru really means someone who can do this, like second nature.

 

There are very, very few who have a track record of a) Seeing the fat pitch b) don't swing at other pitches c) swing mighty hard at the few fat pitches.

 

The alternate to unconcentrated investing is concentrating on the true Gurus or concentrators. For example, Munger has much of his money with Li Lu because he takes a concentrated approach, in China, which is out of Munger's orbit. I do something similar, concentrating in Berkshire while it is selling at an attractive discount. Concentrating on the concentrator. It certainly helps when there are no to low fees to do so. I do not have skills like Ted Williams or Warren Buffett in identifying the fat pitches. It is working out quite satisfactorily, and looks good going forward. 

[Charlie]

http://therationalinvestor.blogspot.com/2010/07/li-lu-on-investing.html

 

Wow! One of the best interviews I have read for a long time. Thanks for posting.  :)

 

Anyone invested with Li Lu? Anyone know his holdings?

 

No wonder Munger is invested with him in the Chinese stock market.

Big tail winds. Much weak competition. Much volatility.

 

Sounds like a No-Brainer.  ;)

[winjitsu]

https://twitter.com/studymunger/status/857722434903916544/photo/1

 

Li Lu Story by Munger

[DooDiligence]

https://twitter.com/studymunger/status/857722434903916544/photo/1

 

Li Lu Story by Munger

 

Nice...

 

“I was there the other day and this very nice portfolio manager—very smart, polished, generous, nice man. Assistant—very nice, polished, intelligent woman. And he said, ‘Well, you know, since we outperform in my fund, which has $100 billion dollars, by 2 percentage points a year…’

 

I raised my eyebrow. I just looked at him for a while. He said, ‘Well, I mean that we outperform our competitors by 2 percentage points a year.’

 

And I said, ‘Yes, and that overperformance—a lot of it was a long time ago when you had way less money.’

 

And there was another horrified pause and finally the woman says, ‘He’s on to us.'” -Charlie Munger

[Spekulatius]

https://twitter.com/studymunger/status/857722434903916544/photo/1

 

Li Lu Story by Munger

 

Nice...

 

“I was there the other day and this very nice portfolio manager—very smart, polished, generous, nice man. Assistant—very nice, polished, intelligent woman. And he said, ‘Well, you know, since we outperform in my fund, which has $100 billion dollars, by 2 percentage points a year…’

 

I raised my eyebrow. I just looked at him for a while. He said, ‘Well, I mean that we outperform our competitors by 2 percentage points a year.’

 

And I said, ‘Yes, and that overperformance—a lot of it was a long time ago when you had way less money.’

 

And there was another horrified pause and finally the woman says, ‘He’s on to us.'” -Charlie Munger

 

I would be more telling for investors how much net money in excess of  benchmark they made for their investors , net of fees.

It does not really help their investors in aggregate, when they made 100% returns with one million (most of that being their own) and then vastly underperform when they grow their AUM to one billion, just to spit out some arbitrary numbers. The aggregate return for investors (net of fees) minibus  the returns of the SP500 benchmark for like timeframes would probably show that on aggregate, the contribution of many money managers, even of those with good looking track records, is quite the negative.