The Greatest Investor You've Never Heard Of, Li Lu, Sam Zell, & Fidelity's Value Investing Legend Joel Tillinghast
The TLDR: February 2024
Hey everyone, welcome to another edition of the TLDR; which just so happens to fall on the leap year Thursday.
Each month in the TLDR you can expect:
5x Favourite Things: 5 favourite reads.
Honourable Mentions: Other worthy reads.
Uncharted Perspective: 5 favourite charts.
5x Favourite Things
A hand-picked selection of five things I found particularly insightful or valuable.
1) "The Practice Of Value Investing" by Li Lu
In 2019, Li Lu of Himalaya Capital gave a presentation to a group of students in Beijing, China, titled ‘The Practice of Value Investing’. Later published in Li Lu’s book, ‘Modernity, Value Investing and China’, a man called Graham Rhodes translated the official version and the Q&A segment into English. Rhodes is the founder of boutique investment management firm, Longriver, based in Hong Kong.
Ignore your self-prescribed style and identify for a moment. While the title suggests this is a discussion for value investors, it applies to every investor. Li Lu gives these students a masterclass on the importance of understanding that stocks confer part-ownership of a business, the necessity of a margin of safety, the concept of 'Mr. Market' as an irrational guide, and the significance of staying within one's circle of competence. He emphasises the practical challenges and mental discipline required for successful investing, contrasting it with speculative investing, and shares personal anecdotes throughout.
In this speech, he eloquently encapsulates the idea that investing transcends mere financial decision-making; permeating life more broadly. This resonates with me because it’s the reason I am passionate about investing. It’s an outlet for persistent curiosity and a nucleus for education on the world around us.
The original source can be found here, on Longriver’s website. The link in the title is a PDF version I made for myself in case the original ever disappears.
“My journey as a student of value investing has been especially meaningful to me on a personal level. In seeking a livelihood, I gate-crashed this profession by good fortune and without any forethought. Later, I realised I had stumbled upon something wondrous. This profession is an incredible thing. It lets you spend every minute studying new things. It won’t just be your assets that grow through compounding; you will also feel your knowledge, practical experience and judgement compounding at the same time”.
2) An Interview with Fidelity’s Value Investing Legend Joel Tillinghast
Courtesy of John Rotonti, this interview with Fidelity’s Joel Tillinghast is a concise back-and-forth that is packed with nuggets and thought-provoking responses. I especially liked his response to a question which asked why a lack of independent thought is toxic; “The person who did your thinking for you won’t always be there when something changes”. Retired in 2023 after a 30-year stint in the stock-picking business, Tillinghast has managed funds in excess of $25 billion in AUM and was a favourite of Peter Lynch. In the forward of Tillinghast’s book, Lynch describes him as “one of the greatest, most successful stock pickers of all time”.
“I reduce behavioral risks by thinking about my bad habits and trying to avoid situations where they come into play. I reduce ignorance risk by focusing on industries and businesses I understand. I reduce agency risk by steering clear of crooked and inept management teams. I reduce business risk by focusing on more resilient, adaptive businesses. I don’t pay more than fair value”.