Li Lu—renowned investor, founder of Himalaya Capital, and one of the world’s prominent voices on value investing—recently delivered a lecture titled “Global Value Investing and Our Times.” And when Li Lu speak, the value investing community should listen.
It marked the third time in a decade that Li Lu has spoken to students of the “Value Investing” course at Peking University’s Guanghua School of Management. In this comprehensive speech, he explored a wide range of topics, and of course, shared insights into his philosophy on value investing.
Below, I summarize ten investing lessons you can learn from his talk:
Lesson 1: “Take the Macro as It Is”
One of Li Lu’s most recurring themes is that investors should neither ignore nor try to dominate macroeconomic forces—instead, they should accept them as the backdrop against which companies operate.
For instance, a rising labor cost environment could:
Diminish margins for companies that rely on cheap labor.
Drive automation and technology investment, benefiting certain sectors or firms.
Or if export dynamics shift due to trade tensions, a company with international exposure may face new tariffs or supply chain disruptions. Macro changes might not kill a strong business, but they can alter its profit trajectory or strategic focus.
He argues that obsessing over top-down factors (e.g., global trade tensions, recession forecasts, or interest-rate cycles) can trap investors in paralysis OR lead them to over-trade.
“Our fundamental attitude is: the macro environment is an objective reality; we can only accept it. The micro level is where we can actually do something. This is the basic stance of a value investor. The world is objective and will not change because of our wishes or subjective judgments.”
Rather than forecast every twist in the economy, Li Lu highlights that value investors should study the underlying fundamentals of the businesses they own.
Acknowledging that companies do not exist in a vacuum, he emphasizes how awareness of broader trends can be helpful—just not to the point of becoming the primary driver of one’s investment decisions:
“Value investing, no matter where it is practiced, is inevitably tied to its era. While in principle it emphasizes bottom-up analysis, the companies we invest in unavoidably operate within a specific period and face macro influences. We cannot escape the time in which we live.”
Thus, while macro conditions matter for context—like understanding consumer sentiment, secular growth tail- or headwinds, or trade policy shifts—the investor’s main energy should still be devoted to identifying mispricing at the micro (company) level.
As Li Lu puts it:
“Our investment is about taking the world as it is… and then acting on specific companies where we have real insight.”
Li Lu’s advice:
Map Macro Trends: Keep track of major policy changes, demographic shifts, or global trade realignments.
Assess Impact on Your Companies: Does the shift threaten their advantage, or does it open new market opportunities?
Stick to Fundamentals: Avoid letting macro narratives blind you to a company’s deeper strengths (or flaws).
Lesson 2: “Margin of Safety vs. Long-Term Quality”
Drawing heavily on the lineage of Benjamin Graham and Warren Buffett, Li Lu describes how value investing has evolved to balance two complementary principles:
Margin of Safety (a la Graham): Focus on buying at a price well below intrinsic value to protect yourself from unknown risks or imperfect knowledge.
Long-Term Quality (a la Buffett & Munger): Seek out wonderful businesses—companies with high returns on capital, enduring competitive advantages, and the potential for long-term compounding.
As Li Lu explains, the strongest outcomes occur when an investor can apply BOTH principles:
“Benjamin Graham taught us the concept of a margin of safety, because you can’t always fully predict a company’s future. Meanwhile, Buffett and Munger showed that the biggest gains come from excellent businesses expanding their intrinsic value over long periods. The real challenge is finding high-quality companies at prices low enough to provide a margin of safety.”
Li Lu underscores that understanding a firm’s intrinsic worth is an ongoing process. Even if you buy in at a discount, you should keep evaluating whether that discount still holds as the company evolves or if new risks emerge.
Likewise, “long-term quality” can be difficult to assess; it requires analyzing corporate culture, reinvestment opportunities, and management’s track record of allocating capital effectively.
When it comes to selling, Li Lu notes that if you own a truly exceptional business, be very cautious about letting it go simply because it looks expensive at a glance:
“If you really understand a company’s growth potential and its competitive moat, short-term overvaluation may be less important than the ongoing compounding of value. It’s very difficult to find such rare, high-quality ‘holy grail’ companies. Once you do, you need a strong reason to part ways.”
Lesson 3: “Circle of Competence: Knowing What You Truly Understand”
Li Lu firmly believes that clarity about what you do and do not understand is the bedrock of successful, long-term investing. This idea echoes Warren Buffett’s famous “circle of competence” principle but is also rooted in Li Lu’s experiences holding stocks through massive drawdowns (like BYD or Berkshire Hathaway itself).
“Whether you can continue to hold a company in the face of macro confusion—or a 50% drop—depends on whether you truly understand its value creation. If your circle of competence is genuine, you won’t be easily shaken. If it isn’t, the market will eventually beat you.”
To build (and over time expand) this circle of competence, Li Lu advises:
Deep Fundamental Research: Scrutinize a company’s business model, competitive edge, management comments, and financials.
Incremental Expansion: Start with a simpler sector or business you grasp well. Over time, expand your knowledge base and expertise, thereby compounding your circle of competence:
“Young investors can begin by buying cheaper stocks, because a low purchase price provides time and safety for you to learn. As you come to understand a business deeply, you can progress to owning truly excellent companies. But don’t hold just because you want to hold long-term—hold because you genuinely understand the value.”
This underscores Li Lu’s broader philosophy: investing is not a one-time event but a continuous learning process that requires humility, curiosity, and discipline.
Without these, an investor can’t maintain conviction during volatile periods—a recurring theme in his talk.
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