The Underrated Genius of Lee Lou

Aug 27, 2024

Lecture Summary: Lee Lou - The Quiet Investing Genius

Introduction

  • Many renowned investors are well-known, but Lee Lou remains largely unnoticed.
  • Lou manages $15 billion, generating nearly 30% annual returns.
  • He has a fascinating backstory involving escape from China and inspiration from Warren Buffett.

Early Life and Background

  • Born: April 6, 1966, in Tangshan, China.
  • Historical Context: Born during the Cultural Revolution.
    • Mao sought to eliminate capitalism.
    • 1976 Tangshan Earthquake devastated the area; Lou survived.

Education and Political Involvement

  • Attended Nanjing University in 1985, studied physics then economics.
  • Participated in the Tiananmen Square protests.
    • Protests were against economic inequalities.
    • Lou became one of China’s most wanted students.
  • Escaped to France and then moved to the United States.

Encounter with Warren Buffett

  • Attended Columbia University, faced financial struggles.
  • Accidentally attended a Warren Buffett lecture, transforming his view on investing.
  • Buffett taught stocks are slices of ownership in businesses, not just market transactions.

Investment Philosophy

  • Intrinsic Value: Core concept learned from Buffett.
    • Stocks fluctuate short-term but trend towards intrinsic value long-term.
  • Economic Moats: Businesses must defend their high returns against competitors.
    • Example: Nike’s brand serves as an economic moat.
  • Balance between being a generalist and a specialist.

Investment Career

  • Founded Himalaya Capital in 1998 amid the Asian financial crisis.
  • Initially suffered losses but held strong, focusing on intrinsic value.
  • Learned that the biggest risk is not volatility, but permanent loss of capital.

Relationship with Charlie Munger

  • Munger became a mentor, advising on fund management.
  • Importance of long-term contracts with clients to avoid short-term pressures.

Performance and Legacy

  • Achieved 36% annual returns from 2004-2009.
  • The fund grew 20 times in size from 1998-2010.
  • Lee Lou remains an influential, yet under-the-radar figure in investment.

Conclusion

  • Lee Lou’s journey offers valuable lessons in investing and the importance of maintaining a long-term view.

Lee Lou’s story is a testament to resilience and strategic thinking in the investment world, inspired by the teachings of Warren Buffett and Charlie Munger.