원문 보기
in the early 1990s while studying at Columbia business school value investor Lee Lu invested some of his student loan money and deeply undervalued Russian oil stocks it's a part of the world where there is huge political instability and sadly we send quite a bit of that in 2022 but it is a real lesson in investing with a huge huge margin of safety towards the end of the period in which Lilo owns these Russian Investments the Asian financial crisis happened and Russia actually devalued its currency by 90 percent but even though lilu effectively lost 90 just on the currency in this investment he still made a 10x return overall just because of how cheaply he was able to acquire these companies this is the second video in a three-part series here on the channel looking at some of lilu's best investments so if you do enjoy the video be sure to subscribe and the channel is actually getting very close to 40 000 subscribers and I'm hugely appreciative of all the support that I've gotten on this YouTube channel over the years and uh as a result I want to just do a small giveaway I was actually really surprised and quite lucky a week or two ago to actually have some mail from guys Pierre and he actually sent me a copy of his book The education of a value investor I actually already have a copy of this book so I actually want to give away my original copy of this book that I've now read a couple of times to a subscriber to say thank you for potentially hitting that 40 000 subscriber Milestone here soon so if you're interested in going on the draw to win a copy of this completely free just comment the word aquamarine down in the comment section below of course aquamarine Capital being guys Spears fund and if you are interested in winning a copy of that book just be sure to check out the next video I upload here on the channel as well where I will announce a randomly selected winner from the comments so what was the investment case with this obscure Russian Oil stock that uh lilu invested in in the 1990s well he actually shared quite a bit of detail on this investment in a speech that he gave in 2012 at San Francisco State University and uh the story basically goes that in 1993 Russia went through the pretty sudden process of privatizing a lot of really valuable Russian assets and included in the basket of assets that were privatized were a couple of major oil and gas giants namely Luke oil and gasprom stock certificates in these companies were literally handed out to ordinary citizens and to employees at some of these companies and the process all sort of happened so quickly that in many cases a lot of the people receiving these stock certificates really didn't truly appreciate the value of what they'd just been given there wasn't really like a super functional stock market or Stock Exchange as we would be really familiar with in most developed markets today and these people were literally you know getting physical Paper Stock certificates and uh you know again not really appreciating the true value of what they represented when someone simply just turned up and offered them cash which they did definitely recognize for their stock certificates they were pretty much willing to just give them away for almost any price and when liloo sort of looked at the situation and went through some of the basic numbers and looked at how extreme the low pricing kind of got relative to the net asset value of oil reserves for these companies he had a couple of things to say he said it was ridiculous and now I thought at that point that some kind of margin of safety even considering the political situation in Russia so just how extreme did this pricing get well at the time the sort of five year Rolling average price for oil was about twenty dollars per barrel and if we completely forget the earnings that these companies were throwing off and we simply look at the net asset value of The Proven oil reserves of these companies and applied a twenty dollar you know per barrel price to the barrels of oil that these companies had on the ground uh we could start to kind of estimate what these companies are likely worth so for example if a company had a million barrels of proven oil reserves and the price per barrel at the time is twenty dollars that would mean they have a net asset value of 20 million dollars that's kind of the process that lilu was going through here and laylu was pretty amazed to find that even though the price of oil was about twenty dollars per barrel the uh market price at which these stocks were trade in implied a price per barrel of oil of somewhere between 10 and 20 cents per barrel in other words uh these stocks were trading at anywhere from a 99 to 99 and a half percent discount to everything that essay value he was buying a dollar of oil value for somewhere between half a Cent and one cent on the dollar now of course lay low is only one of many super investors that I like to follow are the most notable one of course being Warren Buffett at Berkshire Hathaway so if you're interested in seeing a curated list put together by me of the main stocks that Warren Buffett has been buying in 2022 check out the first link in the description below which will take you over to Simply Wall Street it will give you some stats on the companies that Buffett has been purchasing as well as some commentary from me on why I think he might be interested in those companies if you're also interested in using the simply Wall Street platform for your stock analysis that link will get the first hundred people to use it a 40 discount on the unlimited plan now this investment for Lee Lu actually reminds me of two other uh investment stories that I've covered here on the channel before one is Charlie munger's investment in belridge oil that was in the three-part best investment series that I actually did on Charlie Munger not so long ago and in that situation uh in 1977 manga was buying beverage oil a full very similar reasons basically because they had you know oil reserves that would have been significantly undervalued by the market and in that case the pricing was pretty extreme he was getting about a 95 discount to net asset value in this case lilu was getting like more than a 99 discount so even more extreme bellridge oil later went on to be a 30X return for Charlie Munger after the business was bought out by much larger oil companies the other investment that the story kind of reminds me of was an investment that a young Warren Buffett made in I believe the 1950s and a company called National American which was essentially a very quantitatively cheap business that Warren Buffett stumbled on it was a very closely held stock owned for a long period of time by a lot of local farmers actually and the overlapping stories here is that uh like the Russian oil situation many of these Farmers didn't have a true appreciation for what their stock certificates were really worth in the case of National American the share price was about thirty dollars and it was a pretty thinly traded again inefficient Market lots of paper stock certificate kind of trade in happening here but the company was earning a pretty stable about 29 in earnings per share so it was effectively a PE of one again when Buffett and his colleagues at the time turned up with real cash um you know to these Farmers houses and offered to buy their stock from them and they didn't truly know the value or they had maybe paid a hundred dollars per share back in the day and it had just steadily gone down forever in their eyes they were more than happy to you know hand over the stock certificates now I want to play a couple of Clips here from this 2012 talk that lilu gave where he basically explains what ended up happening with the Russian oil stocks now I apologize in advance if the video and audio quality isn't particularly good in these clips it's not the greatest recording on YouTube of this of this talk but I still I think it's interesting to play for you here what Lee Lou had to say firstly around what the price of these companies uh did initially keeping in mind here that it was trading at about 10 to 20 cents per barrel of oil when the market price at the time was more like 20 dollars per barrel of oil and it automatically traded up for a longest period of time it was a 20 or 30 cents 50 cents your daughter has briefly traded to three dollars now let's check out another clip from that talk uh Whitley Lou this time talking about the massive currency devaluation and the eventual return that a lot of early investors in the situation still were able to capture and then a few years all of a sudden the two dollars will no longer looks very protected because the currents are literally at one point it went about 90 I mean nine zero but if you really bought it at the 10 cents which is a half cents half percent of the value less than you know not the ten percent of value turns it down 90 you still came out quite all right in fact you still follow me to 10 time your money that's how an extreme the situation has become that will be a good example to study so they have it from lilu even uh after the massive currency devaluation of like 90 percent uh during the Asian financial crisis early investors in this situation were able to probably about 10x their money and just to give you a little more detail on that it looks like privatization happened in around 1993 and like I say it was a very inefficient Market it wasn't like today where we could just log into our online brokerage accounts and see a bunch of info about you know uh price to earning multiples and Price to Book and recent um you know trading volume and stock prices and so on it was much much less efficient but it looks like about five years later in 1998 the stock was actually listed on the over-the-counter markets and it became a little more liquid or probably quite significantly more liquid when that happened and as Lilo explained uh early investors were able to do very well capturing probably about a 10x gain even after the currency devalue Nation clearly could have been very very substantially more if that devaluation hadn't happened so that is the story of lilo's investment in some of these very very very undervalued Russian oil stocks to me it's a somewhat sketchy situation um I would say I don't see myself investing in something like this unless maybe the valuation did get this extreme I I really don't know but it is a great lesson in margin of safety you know even when we have huge events come out of left field like a 90 currency devaluation in this case lilu was able to capture such an extreme discount to the value of those net assets that he still made a really phenomenal return so that's all I've got for this one like I said towards the start of the video if you want to go in the draw to get um you know one of my copies of the education of a value investor by Guy sphere which is a phenomenal book um like I say read a couple times now and um I should read it again at some point because it is one of my favorite investing books but if you do want to get in the draw for that just leave a comment down in the comment section below that includes the word aquamarine and please subscribe if you haven't already and help us uh jump over that 40 000 subscriber threshold
Comments 0