Tuesday, June 8, 2010

Warren Watch: Listener learned well

Found via My Investing Notebook.

Those hundreds of hours of discussions with thousands of college students may pay off for Warren Buffett in a big way.

The most direct dividend may be a 44-year-old Californian who is a possible candidate to make investment decisions for Berkshire Hathaway Inc. after Chairman and CEO Buffett.

Li Lu was in the audience in 1993 when Buffett talked to about 80 Columbia University graduate students in New York for a class on value investing taught by Bruce Greenwald. Buffett answered questions for more than two hours, explaining his investment methods and ways of thinking about money.

Buffett still speaks regularly to business students, saying he believes his ideas can influence how they think about the business world, among other benefits.

About 15 years later, there’s Lu himself, in a video posted by DailyMarkets.com, as guest speaker in Greenwald’s class. The professor, introducing Lu, praised his mastery of the rigors of value investing: learning about companies and industries; calculating their value; and making good decisions.

“Nobody, I think, over the last eight to nine years has done that significantly more successfully than our speaker tonight,” Greenwald said.

Comparing the video and a World-Herald account of the 1993 class, Lu and Buffett seem to be reading from the same page.

Buffett: “Over time I evolved more into trying to find the wonderful business. And if you find one, the best thing to do probably is not to sell it. It will go on and on usually, even if it looks a little overpriced.”

Lu: “That’s the good thing about really buying a good business. The business takes care of itself. You’re riding up and down with the strength of the business.”

Lu told the students that only about 5 percent of people are cut out to be value investors, with “insatiable curiosity” about almost any subject and the drive and ability to build up encyclopedic knowledge and to leap into the right investments.

“You have to be very, very comfortable being very much by yourself,” he said, since nearly everybody else follows different investing ideas. “It probably means that you’re somehow genetically mutated through the process of evolution. ... You have to know you’re right because your evidence shows it’s right.”

Once in a great while, he said, all that research turns up an outstanding investment idea that everyone else misses.

“When the thing happens, you have to just devote day and night into it,” Lu said. “You have to do everything complete. You have to do it fast. And that’s why you have to train yourself all those times. ... When the opportunity comes, you have to jump on it.”


Related previous post: Li Lu: Berkshire Hathaway CIO Candidate? - By Tariq Ali