Li Lu Framework Thinking

Problem

Value investing research often gets stuck on fragmented concepts: analysts know margin of safety, circle of competence, and Mr. Market, but struggle to apply them to a company's business model, management, valuation, and holding decisions. This skill turns Li Lu's public investing framework into a reusable analysis path, moving judgment from “a good company” to an evidence-based review.

How It Works

• Value investing base: It checks ownership, market service, margin of safety, competence, attractive markets, and purchasing-power share before scoring a company.
• Civilization framework: It uses the 1.0, 2.0, 2.5, and 3.0 stages to situate macro constraints and treats “the largest market becomes the only market” as context for industry space and global expansion.
• Entrepreneur model: It evaluates founders on first-principles thinking, resilience, trustee spirit, and compounding learning, using BYD and Muyuan-style cases to spot signals and red flags.
• Business and valuation: It reviews business model, moat, free cash flow, management, and predictability, then looks for price-value dislocation through fuzzy valuation, cross-cycle earnings, and replacement cost.
• Cycles and holding discipline: For strong cyclical sectors such as pig farming, it uses high- and low-cycle pricing, capacity exit, industry losses, and bottom signals, while emphasizing concentration, long holding, low turnover, no leverage, and selling rules.

Boundaries

It provides a structured research framework, not real-time data, trade signals, or return guarantees. The output is only as good as the input data; for cyclicals, capital-intensive companies, and global expansion cases, supplement financials, capacity, policy, and competitor data before treating the framework as a formula.