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Li Lu (Himalaya Capital) lecture - San Francisco State, 2012


Guest ajc
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Great talk. It's plain to see why Charlie Munger holds him in such high regard.

 

Part 1:

 

Part 2:

 

Part 3:

 

 

Note: In part 1 his cough really gets in the way, but in parts 2 and 3 it 's basically a non-factor.

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Thanks for posting. That's the first time I've ever heard someone say they use what Charlie calls an iron prescription. Fantastic.

 

In Part 2 when he's talking about a Russian oil company, is he saying Lukoil? It's hard for me to hear clearly.

 

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He had mentioned Lukoil and Gazprom as being 0.10 dollars.  I remember when this was the case in the early 00s.  In the mid 00s I purchased a Russian oil company called Tatneft which turned out pretty good.  Right now both Gazprom and Lukoil are about 44% of value of Exxon Mobil per mcdep.com.  The discount is for political issues which I think are greater with Gazprom then Lukoil.  Lukoil also has a 5% dividend and sells for less than 3x FCF.

 

Packer 

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Did a search for Korean Preferred but did not see anything come up. Has anyone looked into any of the Korean Preferred that he mentions here and a few other places?

 

I was interested in that section too -- did he mention a stock name in there?  I couldn't tell....

 

I've only limited experience in here.  I held LG Household prefs (051905 KP) for a fairly brief period last year for the very reason that Li Lu talked about.  The LG Household ords look pricey enough but the company is growing fast, the CEO is ex P&G I think and is transforming the company.

 

Anyhow, I bailed (with a very tidy profit too I must be said, but that was just luck).  I am at a huge information disadvantage to someone like Li Lu, who I think has a Korean (native) analyst working full time for him in this area.  I just don't have access to such resources.

 

Perhaps more importantly, the status of prefs in Korea is not very clear.  The pref holder is not entitled to anything more than, in the case of LG Household, something like KRW50 more than the ords receive as a dividend.  To the extent that the ords eventually receive all the cash flows from the business, the pref holders will be fine and the pref security is very very cheap.  But what if the company is sold?? What if the company is wound down??  There are no precedents for this in Korea, no one (as far as I know) knows what would happen.  So yes, these prefs sound very interesting and the chances are that LG Household will not be wound down.  But if it is, you could lose almost all your money.

 

Perhaps the best way to play them is to limit the position size.  But there's no 'right' answer here -- it'll depend on the individual and his individual preference  ;D

 

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Weiss has brought to market a fund of Korean preference shares, which are trading at levels hugely discounted to their common shares equivalent.

 

Weiss has invested in the Korean market for a decade, and although investors are familiar to its presence in the closed-end sector, The firm has never launched a UK-listed investment trust. It has only previously hunted in the space for discounted vehicles and turnaround opportunities unrecognised by the wider market.

 

It raised gross proceeds of £105 million for the new fund, which is called Weiss Korean Opportunities.

 

Weiss said the placing was 'significantly over-subscribed' and the vehicle began trading on the alternative investment market (AIM) today.

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I did some studies on the Korean preference stock after listening to Li Lu's lecture.

You can buy Samsung Preference shares (GDR:SMSD.IL or 005935.KS) at less than 5X PE or Hyundai Motors Preference shares (GDR:HYUD.IL or 005385.KS) at less than 3X PE.

 

Like Li Lu said, they are franchises/compounders with large margin of safety, provided that the discount narrows (to a more reasonable 15-20%) sometime in the future of course.

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cofabmd thanks for bringing this up

 

This vehicle looks like a cool way for non Bloomberg terminal investors to in vest in South Korean undervalued assets.

Going to look some more but without more info probably going to pass.

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Weiss has brought to market a fund of Korean preference shares, which are trading at levels hugely discounted to their common shares equivalent.

 

Weiss has invested in the Korean market for a decade, and although investors are familiar to its presence in the closed-end sector, The firm has never launched a UK-listed investment trust. It has only previously hunted in the space for discounted vehicles and turnaround opportunities unrecognised by the wider market.

 

It raised gross proceeds of £105 million for the new fund, which is called Weiss Korean Opportunities.

 

Weiss said the placing was 'significantly over-subscribed' and the vehicle began trading on the alternative investment market (AIM) today.

 

Thanks for this info! Looks like it's a 1.5% management fee - is Li Lu using the Buffett Partnership fee structure...?

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