Let me start with two quick disclosures: 1) Charlie Tian, the author of “Invest Like a Guru” and the founder and CEO of GuruFocus, sent me a copy of the book; 2) I’ve known Charlie for more than five years; our friendly relationship undoubtedly colors my view of his work.
The way we think about investing is influenced by the market environment we’re “born” into. For Charlie, life started with the tech bubble of the late 1990s. With a Ph.D. in physics in the field of lasers and optics, he came to the table with an enviable hand. He first purchased shares of New Focus, Oplink and Corning in the early 2000s; large gains came with ease. Corning, for example, nearly tripled over the course of nine months after he invested (that’s a nice IRR). But as we all know, the end of the bubble was near. The easy gains of years past were about to become devastating losses. By mid-2001, Charlie had lost half of his investment in Corning. The other stocks that he owned did even worse. Charlie threw in the towel on his tech stocks in late 2002 (at the bottom), with each dollar of initial investment worth less than 10 cents.
His approach in the years to come was painted by his painful experience during the tech bubble. Around that time, he discovered Peter Lynch’s investment classic, “Beating the Street.” This was the beginning of his education as a value investor. In the years following the bubble, Charlie expanded his reading list to include value investors like Don Yacktman. This interest was the early seed that led to GuruFocus, which Charlie started in 2004. The focus of the website – and of Charlie’s investment career – has been to learn from the best investors in the world. “Invest Like a Guru” is a compilation of the lessons Charlie has learned over the last fifteen-plus years.
Charlie is honest and realistic about the pros and cons of his approach (I’ll call it “sustainable quality at a fair price”). He is an investor, not a speculator. The high-flyers that garner so much attention in the financial media are outside of Charlie’s focus. His approach is for the patient investor that is perfectly comfortable watching others make money on names like Tesla (TSLA). Simply put, he wants good companies at fair prices – and spends most of the book expounding on his definition of “good” and “fair.”
I didn’t agree with everything Charlie had to say - and that's a good thing. It’s an important reminder that there’s more than one way to invest. Many investment books are chocked full of truisms that add little value for the practitioner. “Invest Like a Guru” isn’t one of them. Charlie shares a detailed framework for finding investment opportunities (in addition to discussing the various tools available on GuruFocus). The book also has timely examples of value investing in practice.
In the epilogue, Charlie shares the important lesson he learned from a near-catastrophic investment in Sears (SHLD) in 2007: “Never buy low-quality companies, no matter how undervalued they seem to be!” This is a lesson most value investors (like myself) learn the hard way: you don’t have to chase low-quality merchandise at bargain bin prices. Your time is better spent finding high-quality businesses that are misunderstood." In the end, Charlie hits the nail on the head: “Buy only good companies and buy them at reasonable prices.” I couldn’t agree more.
Disclosure: None
