Why does the investment profession hold such a powerful attraction? I recall that in one of his books, the legendary Howard Marks pointed to two core reasons why investing is so appealing: (1) financial reward and (2) an endless intellectual puzzle. It is this combination of material reward and intellectual challenge that draws the brightest minds into a highly competitive game.
That is also why investing in general, and value investing in particular, has never been a path strewn with roses. As Charlie Munger put it bluntly: “It's not supposed to be easy. Anyone who finds it easy is stupid.”
The challenge is even harsher in Asian markets, home to large numbers of retail investors prone to herd behaviour, and where capital market transparency and the interests of minority shareholders are sometimes not at the top of companies' priorities. How can one adapt to the particularities of a local market without losing one's core philosophy? This is a constant concern for many value investors in Asia.
We are no exception. By chance, while wandering through bookshops on the busy streets of Hong Kong, we found a deep resonance with these concerns in the work of Qiu Guolu (Khâu Quốc Lộ), a well-known investor in the Chinese market. Curiously, in a field so full of complexity, the book carries a remarkably simple title: “The Simplest Things in Investing”.
Below is a summary of the four points that resonated with us most. Please note that these are our own views and reflections. Every investor, with their own life experience, track record and risk appetite, will find their own layers of meaning when turning the pages themselves.
1. Why does value investing work over the long term?
The most interesting paradox of value investing is that it works sustainably over the long term precisely because it does not work every year. If there were a formula that beat the market every day, every month or every year, the crowd would copy it immediately and the edge would quickly disappear. As Joel Greenblatt neatly summed it up:
- First, value investing works;
- Second, value investing does not work every year;
- The second point is what guarantees the first.
2. Think like a true business owner
See every share as a stake in a real business, rather than a three-letter ticker dancing on the board for a quick profit. Only with an owner's mindset can you begin to research and assess a business seriously, comprehensively and correctly.
In the book, Qiu Guolu recalls invaluable advice he received from a former boss in fund management:
“First, treasure your clients' money as you would treasure your own hard-earned money.
Second, analyse stock investments in the secondary market exactly as if you were investing in a real business in the primary market.”
3. Three core questions that make it “simple”
Qiu Guolu's investment philosophy comes down to answering three questions that seem very basic yet go straight to the heart of every investment:
- (1) Why is this business cheap (valuation)? We need to be clear about where the bargain really lies. Are you buying a business whose current price (P₀) is roughly equal to its current intrinsic value (V₀) but far below its future intrinsic value (Vₙ – growth investing)? Or are you buying when the price (P₀) trades at a deep discount to both current value (V₀) and future value (Vₙ – traditional value investing)?
- (2) Why is this business good (quality of the business model)? Does the business have pricing power? This kind of durable competitive advantage usually appears only when a business has one of two qualities: (1) it can do things its competitors cannot, or (2) it can replicate its model at a speed competitors cannot match.
- (3) Why buy now (timing)? This is always the hardest question and the hardest to execute in practice. Our practical advice is to focus on answering the first two questions thoroughly, then define a reasonable “price range” and “time window” in which to accumulate, rather than trying in vain to call the top or the bottom.
And above all, never misunderstand the word “simple”. As the author stresses:
“Simplicity here does not mean reducing chaotic, disordered things or throwing them away; it means digging into the depths of complexity. You must grasp the essential core deeply, and only then can you judge which unimportant parts can be set aside.”
4. Independent contrarian thinking and firm psychological discipline
In investing, keeping a cool head to think contrarily and defend an independent analytical view against the crowd is vital. Qiu Guolu writes:
“Contrarian investing is the simplest method but also the hardest to learn, because it is not a skill but a quality of character...”
To cultivate this quality, the author cites Charlie Munger's classic way of thinking, “Invert, always invert”, together with the cycle philosophy of the legendary John Templeton: whatever reaches the height of prosperity is followed by a great decline.
However, contrarian thinking does not mean blindly going against the crowd without reason. It requires a combination of sharp intellect, enduring patience and the ability to bear loneliness while the market disagrees with you. Because:
“The market lacks neither opportunities nor eyes that can spot value; the only thing it lacks is a heart that patiently holds on to value.”
Closing thoughts: investing – a journey of accumulating value over the years
At the end of the book, Qiu Guolu encourages young people to see investing as a career worth pursuing for a lifetime.
Unlike many professions limited by age or physical health, or easily displaced by the rapid pace of technological change, investing is one of the rare fields where time is on your side. Practical experience, a foundation of knowledge and an understanding of human nature, the longer they are accumulated, build an ever stronger “moat” of capability. When your character, conviction and learning have been tempered through many market cycles, you gradually come to understand the rules of the game and the way money flows, and to reap well-deserved results.
The quotations from Qiu Guolu are our English renderings of the Vietnamese edition of the book.