📖Li Lu
Management Evaluation
Judge management by actions, not words.
Evaluate management by their actions, not their words. Look for a track record of capital allocation, shareholder communication, and aligned incentives.
🏠 Everyday Analogy
📖 Core Interpretation
In Management Evaluation, Li Lu focuses on the gap between price and value. Returns come from paying less than what a business is worth, not from guessing short-term market moves.
💎 Key Insight：Track record reveals true management quality.
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❓ Why It Matters
Ignoring valuation turns even good companies into poor investments. Overpaying compresses future returns and leaves little margin when assumptions are wrong.
🎯 How to Practice
Estimate intrinsic value with conservative assumptions, set clear buy ranges, and act only when price offers a meaningful discount with acceptable downside.
⚠️ Common Pitfalls
Confusing a low price with true cheapness
Using one metric without business context
Overly optimistic assumptions that erase margin of safety
📚 Case Studies
1
Post‑Crisis BYD Volatility (2011)
After initial success, BYD’s stock price fell sharply amid concerns over growth, competition, and China’s EV policy shifts.
✨ Outcome：Li Lu maintained a concentrated stake, emphasizing intrinsic value; the company later recovered and reached new highs as EV adoption accelerated.
2
BYD Investment (2003)
Li Lu and Charlie Munger invested in Chinese battery and EV maker BYD when it was little-known and cheap.
✨ Outcome：By holding for over a decade, the investment multiplied many times as BYD became a global EV leader.
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