Ver

On Thursday PDD was at all time price for an all time company, hope it goes even lower.

I live in Hawaii. Excellent place for clarity of thinking but can be isolating. This winter for the Rockies sounds brutal. Japow always delivers though, even if its getting annoyingly popular. Hope you can get some good runs in this season.

Buying and selling have nothing to do your original purchase price, nor do any past decisions affect your actions now. All that matters is the valuation and the discounted cash flows it will make in the future. These confusions arise because people try to invest where they don't know how much cash it will make and try to cope with that uncertainty in ineffective ways. If it's helpful, just think of it as a VC funding round. No VC is going to say 'well I invested in their Series A but not the series D because I'm nervous about averaging up.' Their discrete nature seems to make it easier to think rationally.

I've found surfing and skiing to be most conducive to thinking clarity and energy management while being insanely fun. Hawaii for surfing, Hokkaido for skiing. Both scale reasonably well with age so there's a long runway.

Li Lu - "We don’t beat ourselves up. We only do things we truly understand, and refuse to do what we don’t. In this way, we can act with no misgivings and avoid the markets ups and downs from affecting our emotions. You will only be able to accumulate a long track record if you can live this way. Having a calm mindset is therefore extremely important...We are very picky with our clients and do not manage money simply to make the rich richer. This is how we feel like we are contributing to society. If you arrange your life in this way, you will be more at ease and less anxious. You will be able to walk through life unhurried and at your own pace. A lot of investors have told me that they want to invest like I do but their clients won’t let them because they’re always thinking about how much money they can make in the next hour or so. I personally think that you should not take these kinds of people as your clients. They then say that if they didn’t have these clients, they wouldn’t have any clients. And then how would they go about finding clients like mine? I didn’t have any investors when I started, only the money I had borrowed. My net assets at the time were negative. Munger likes to ask, how do you go about finding a good wife? The first step is to deserve a good wife, because a good wife is no fool. Clients are the same. When our fund started, it was my own money for many years plus some from a few close friends who believed in me. Over time, as you accumulate more experience and build your track record, suitable people will naturally find you. And amongst them, you can choose the most suitable. You can do it this way very gradually with no need to rush – and with no need to compare yourself to others. The most important thing is therefore to be able to let things come as they are. You must have faith in the power of compounding and the power of gradual progress." The best companies are willing to accept short-term pain for long term advantages. No reason why it should be any different with investors and their funds. Either screen hard and only accept like-minded clients who won't cause performance to suffer or follow Reece Duca's route and only manage your own money to avoid any risk of it. The hard part is that even accepting only like-minded clients is likely to affect performance.

How much you concentrate depends on how much of the company's future cash flows you understand, and then how attractive the opportunity is. The decision starts from how much you understand, not how much you should diversify. The former dictates the latter, but many people mistakenly think from the other direction. Finding a good company at a good price is not done by diversifying attention. The amount one concentrates depends on the opportunity set one can understand, which fluctuates. Concentration levels therefore naturally should change depending on availability and degree of opportunities. Personally I've held between 2 - 8 companies. Currently 3. My major mistakes were diversifying attention and by omission missing better opportunities in 2022 and Pop Mart in early 2024.

Netease returned over 4000x 2002 - 2021, 56% annually. It's not a $200B company yet but in 2001-2002 was valued at 60% of its net cash soon after IPO. 2001-2003 was a once in a several generation opportunity to buy some of the best companies in history at distressed valuations. Netease, Netflix, Amazon, Apple. Walmart in 1974 is also in that category, valued at low to mid single digit earnings, very early on in its growth. It returned 3700x the next 25 years, almost 39% annually. But then again, who did allocate large quantities into these top companies when their future looked bleak, and stick with it after they've 10x'd or 100x'd? These companies were black sheep at the time; look at all the flak Bill Miller got for holding Amazon. Duan Yongping did put in 100% into Netease near the bottom in 2002 but even he sold in 2009 after 130-160x. It's an intriguing event to study and train for.

Bought more Pop Mart. Cheap price with high certainty over the next 10 years, but the business model is annoying to explain. I can't think of a business more alien to the typical fund manager, which is probably why it can get mispriced so consistently.

Yeah its more of a holistic business model question. There's all kinds of commodity companies who can be the low cost provider for a few years but without any structural advantage, its too easy to get undercut. If Costco used their other tactics but without the membership, their model would lack a lot of the compounding effects that the current one has. Walmart certainly emulated scale economies shared when Sam Walton and David Glass were around. Walton was up against a lot of retailers who would try to sneak extra margin or prioritized too many competing concerns. Amazon also is no longer the same Amazon that Nick Sleep wrote about. It has a 55% average take rate (20% of that being FBA) and relies on monopolistic practices to prevent being undercut (this is a neutral statement). They've completely switched away from scale economies shared to competing on delivery speed and merchant lock-in. PDD does do scale economies shared but the means are rather complex.

The appropriate position is anywhere from 0-100% depending on the understanding of the business and how attractive the opportunity. Both these will vary so of course the max percentage should vary too. To take the extreme case, I know a few successful entrepreneurs who have 99% of their assets in their company. They know everything about their company and their niche, plus their company is the best positioned with a good business model and culture. It's way safer for them to keep it concentrated like that instead of spreading it into worse companies they don't know. There would be little difference if they retired and "invested" by handing over the reins to a trusted and exceptional CEO while keeping up to date. Of course, the bar of understanding a company at the level of a top entrepreneur in the industry is simple but extremely difficult. Buffett, Munger, Duan Yongping each had periods with 75-100% in one company, but these are rare opportunities. Buffett said it would have been fine to put 100% in Coca Cola in the 80's or Cap Cities in 74, something worry-free and less dangerous than diversifying mindlessly. For us not at their level or who approach it part time, there's nothing unusual with lacking good opportunities, or understanding less and allocating less. The percentage isn't important, but whether the position size is matched to the certainty of future cash flows and opportunity.

Sold Alphawave semi ($AWEVF) due to the Qualcomm acquisition. Had a large position but didn't want to talk about it previously due to very low trading volume and high volatility. Sale price was well below expectations with only a 70% return but timing luck made the IRR look good. Qualcomm got a steal at that valuation.

Agreed with gamecock and reds, take whatever % of the assets you and your wife want to preserve and just sit it in t-bills. Doing all this other stuff just adds complexity and will hurt your performance. It's better to simplify and focus what you are good at while removing possible sources of worries. All these problems are solved at the investing principles level, of matching the degree of concentration with the degree of understanding the company's future cash flows. Losing sleep or worrying? A clear sign you're too heavily concentrated for the degree that you understand. Put another way, if you had 95% of your assets in your own company with an amazing business model, low valuation, that you knew with certainty would produce oodles more cash in the future, who cares about the concentration. Best of luck and congrats on the success thus far!

It's quite fascinating. In a way, U.S. wants to be China and China wants to be the U.S. On one hand, the U.S. lacks manufacturing capability and has severe structural imbalances. Many understandably mourn the lack of factory jobs in middle America that paid well and didn't require a college education. U.S. factory owners get frustrated that they can't compete with lower cost Chinese manufacturers and have to close. With few good jobs, communities get hallowed out, people lose purpose and become addicted to drugs, and the cycle worsens. They need somebody to blame. On the other side China has that manufacturing in abundance. However, there's huge numbers of Chinese OEM/ODM factory owners exhausted at thankless and endless work with minimal profit. No matter how hard they work and how efficient their operations, up to their eyeballs in debt, they can only capture a tiny portion of the total retail value; around 8-10%~. With such low value capture, they lack the ability to pay employees well unless operating at massive scale, so employees don't prosper either. All the rest goes to mostly western middlemen and some Chinese intermediary sellers on Amazon or other platforms. And this is with American consumers being willing to pay grossly inflated prices out of ignorance. The Chinese factory owners look jealously at all the western companies who make all the profits, while many employees only take these jobs because everything else is worse. Wonder why we don't ever hear the tales of how insanely overpriced all the stuff we buy is; we're talking 10x+ markups compared to the same product in China. Some of this pays for inevitable logistics costs, but most is unnecessary. The western customer is getting an apparently good deal buying from China, but they're actually getting screwed for how good it should be.

Agreed. If you own great companies who have the resilience to adapt and thrive to a rapidly changing world, what's the need to panic? The stock price moving lower doesn't determine their intrinsic value. If your owned companies were private, couldn't be sold for 10 years, and you couldn't see their stock price, would you still care? If so that's more a reflection on the companies themselves than the market. All that matters now is finding great companies at juicy prices. The rest is just noise.

I haven't seen good substantiated arguments in favor of this. Where is the root of this claimed collapse coming from, Deepseek-type model optimization? Why would Jevon's paradox not apply? Yes Microsoft cancelled a few leases. However the cancelled leases were immediately grabbed by Google and Meta and "Microsoft says it remains on track to spend about $80 billion building out AI data centers in its fiscal year that ends in June." Core data center requirements like power supply are booked 2 years out in certain areas. Hyperscaler capex is real. It may slow but will it drop off a cliff? Data center suppliers are one category. Nvidia, Broadcom, Marvell, Credo, Vertiv, Astera labs etc.