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.

Given how heavily he was selling Apple in the 220's it would be extremely illogical for him not to have sold what he could when Apple was in the 250's.

Exciting to hear, definitely getting this! I'm curious, were you able to get his personal account portfolios by year in the 50's? I could not find anything concrete after the end of 1951.

Some money really shouldn't be made in the first place.

It should be Apple, PDD, Maotai for the rmb assets (capital controls), Tencent. He mentioned last month before the China surge that he tried to buy PDD and Tencent heavily. He does sell puts/covered calls with Apple at specific times. There's a lot outside of H&H, as that is just one holding vehicle. In 2018 he said Apple was 90% of his assets, I presume not including the PDD angel ownership which was 3.77% in 2020, minus dilution. Anyway the reason I made this was I recently heard about the scenario I alluded to the OP: a successful entrepreneur/investor's mother copied Duan rigidly for many years and has killed the former's own good returns. That got me thinking, both for myself and what I recommend to friends who ask for advice. Fair, guess I need to be more active! He was an extremely famous Chinese entrepreneur before investing so he was able to meet with Ding Lei through that. A young Colin Huang was introduced to him after that, but Duan basically handpicked, mentored and invested in Huang, even giving him key access to his own company (BBK's) resources long before PDD. That kind of selection and mentoring is a huge avenue for value-add. Kind of like what Charlie did with Li Lu, but ideally earlier on before they even had a chance to prove themselves.

D, ideally lower. The fraud and cheating will usually start small but if they get away with it, they are likely to scale up, so it must be dissuaded from the start. I have a friend who ran a private midsize tech company. His cofounder, who oversaw the financial side of the business, hired his secret mistress as an office manager and when they got larger, the controller. Over several years she embezzled many hundreds of thousands, possibly more than a million, including using corporate cards for family vacations and such. The cofounder couldn't do anything because the mistress was blackmailing him, and my friend had no idea until they had an outside audit done. In the end she basically got a slap on the wrist.

Hah the skepticism! I have no reason to make any of this up. Anyway the original person mentioned is Duan Yongping. Of course he's known, he's even Buffett and Li Lu's friend. That was without leverage, and the number is being conservative based on public data. Naturally the returns fall over time once assets grow into the billions. But to keep it simple, when you start with $2-3M and grow into a few tens of billions in 22 years of your own money, even with injecting some new cash in between you're still going get a very big annual return number. Nor is it such an outlandish figure either. Buffett beat the Dow by 35-40% before he started managing other's money, though he did use a large bank loan. We'll never know what his real returns would have been if he never managed outside money. Reece Duca did significantly better than that, albeit with leverage, and he's only done one public interview ever. There are assuredly many more who stay below the radar and only manage their own money. The top 0.1% or whatever of investors will have outstanding results, this should hardly be surprising. The question is how to best use and learn from this with limited time and attention. The extreme answer being like the mother mentioned in the OP, trusting and rigidly copying them. That's the interesting part, like what Gregmal shared.

One of the best investors in the world has publicly posted his moves in real time for the last 10-15 years, while also candidly chatting about companies. This is someone who's beaten the SPX by over 30% annually for a couple decades. Would you be willing to abandon your own investing and simply copy his (few) moves? This isn't cloning one position each from a variety of above average or well-marketed investors, but genuinely outsourcing all thinking to one exceptional person, including portfolio allocation. The combination of abandoning decision making but retaining the execution is a different phenomenon than handing over the money to a fund manager, which is entirely passive. If no, would your answer change if your mother or wife — smart but without experience in business or finance — precisely copied his moves and killed your returns year after year? The above is a real-life example. Not saying there's a right or wrong answer but psychologically it is interesting, in addition to the greater environmental factors that make this even possible. That being investing is a game where amateurs can beat professionals beyond indexes, where a housewife can outperform 99% of fund managers with minimal effort and stress. *Before anyone brings up buying Berkshire, this is different: a) Buffett is managing other people's money, causing him to be extremely risk averse and less focused on maximizing long term returns than if he was managing his own b) Significant age and AUM difference c) Buffett's moves are 13f delayed and he doesn't talk candidly about companies

Indeed, if you can understand PDD then why bother with anything else? Otherwise Maotai is very reliable along with Tencent. Both are simpler to understand.

The Chinese government cannot wreck the economy because that will violate their social contract. They can make it less efficient in the name of reducing risks and increasing security, but there is a limit as to how far they can go. You saw how quickly the government folded on Zero covid once protests erupted. Then last year reasonable video game regulations were immediately canned when the markets freaked out. The regulators apologized and the chief regulator responsible was fired. Their recent ecommerce regulation was made with the lightest touch, having the companies themselves agree to self-discipline with no penalties instead of making public decrees. Importantly, the WW3 talk comes from the west and is not there in China. Xi even told the EU back in 2023 that he would not be fooled into attacking Taiwan, a statement that is not easily walked back internally once leaked. From China's perspective, war now makes zero sense when the US is powerful and ready, especially when its production advantage means it is narrowing the force gap every year. The huge difficulties Russia has experienced make war less likely, not more. Now in 5-10 years if the US is experiencing some severe internal crisis? Completely different story. That said there are many problems with Chinese companies beyond the oft-discussed fraud. A few are absolutely world class, but many are experts in destroying capital to chase dreams. There's a reason the Hang Seng was at 1997 levels earlier this year, not just from depressed valuations. And A shares are worse, not sure if you can profit from holding any company beyond Moutai for several years.