5 Comments
Jan 7Liked by Richard Toad

Nice write-up with a clear divergence between the market & variant views. In this case, did Li Lu identify a clear catalyst that could correct the market's (incorrect) view to match his own? Or did he make the investment under the idea that the market would gradually converge as the company reported results over time? Curious about when it is appropriate to identify a catalyst as part of a thesis vs. trust that the market will gradually get it right

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author

Great question. I am not sure about Li Lu. With a good duration of LP capital, he might afford to trust the market will gradually get it right, though most of the time, the market gets it right sooner than you think (especially for business with growth as intrinsic value is growing)

Catalyst is a very strong philosophical belief. Almost all hedge funds mandate catalysts. As market becomes more short-term oriented holistically, more funds focus on thing that can "work" ASAP.

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Jan 8Liked by Richard Toad

Got it. Appreciate the response. Thanks!

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No asymmetry between perception and reality, no outsized returns.

Great post!

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author

That's right. Thanks brother!

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