Snowball Special Issue No. 015: Looking for Ten-fold Stocks

Chapter 2 Why should I insist on investing in growth stocks (2)
Dan Bin: Investing is independent thinking, you need to vote on your judgment, and the key is to be consistent with what you say and what you do.Say what you think, do what you think is right, and let God do the rest.If you think it's right, go ahead and do it. As for whether what you're looking at is the right direction, let's talk about it.We say that investment is far-sighted, accurate, and dare to take heavy positions.You can see far, but not right?If you get it wrong, you have to bear the consequences of getting it wrong.Investing is mainly about looking far. If you are right, you will succeed, and if you are wrong, you will take risks.

In fact, judging from the situation of Guangzhou Pharmaceuticals we invested in, when Baiyunshan A (SZ000522) and Guangzhou Pharmaceuticals merged, the earnings per share were about 5 cents, less than 6 cents. It is 20 yuan, and then counting the exchange rate, we can know how much it is converted into Hong Kong dollars. At that time, it was seven or eight yuan in Hong Kong dollars.So even without Wanglaoji, Guangzhou Pharmaceutical still has a margin of safety.It not only has a margin of safety, but also is value-oriented and growth-oriented. If you don’t do this at this time, will you regret it for life?If Wanglaoji really does a good job, Guangzhou Pharmaceuticals may have a market value of 12 billion or 500 billion yuan, and it may be a better company than Moutai.Although Maotai can go to the world, it is a luxury after all.For fast-moving consumer goods like this, Wanglaoji is more representative of strong Chinese culture if it can represent culture. If it can go global, it will be a completely different thing, just like Coca-Cola and McDonald's represent American culture.So, at that moment, when we made such an investment, I thought that this should be something that every normal investor should do. If I didn’t do it, I might regret it so much that I would beat my chest all day long.Because such a big opportunity is in front of me, but I can't grasp it.

There will not be too many major investment opportunities in our life, just like Buffett’s metaphor of punching holes 20 times. If we miss one, two, or three times, then it is extremely regrettable to miss these opportunities.For investors, when a major historical opportunity is in front of you, whether you can quickly make judgments and investment decisions is very important, because the opportunity is fleeting.

Only earn our own opportunities

Snowball: How can we find such a major historical opportunity in investment?

Dan Bin: This is related to long-term accumulation.First of all, although we have many opportunities, we only earn opportunities that belong to us.There are some opportunities in the market, such as cyclical industries. If our style is not suitable for investing in cyclical industries, then no matter how much it rises or falls, it has nothing to do with us.But when the asset-light, consumer, style opportunity we love presents itself, go all out.Because this is what we have been paying attention to for a long time, once it comes out, we will pay attention to it very quickly, so it is not a very accidental thing.For example, paying attention to Wanglaoji has been stationed in our hearts for many years, but suddenly we have this opportunity, which is equivalent to a breaking point.

The most regrettable thing about some investments is that when this point comes, you don’t do it, or your words and deeds are inconsistent. This is the biggest problem, but this is not an obstacle for us.Because we do what we think, correct and observe in the process of doing it.For example, in Guangzhou Pharmaceuticals, we are also making corrections through constant and close tracking.Investment is a process of continuous work. You must continue to struggle. When the point is reached, you have to make this decision.

Xueqiu: How can we improve the certainty of investment?
Dan Bin: Investment itself is uncertain, but when buying Moutai or Guangzhou Pharmaceuticals, this kind of historical opportunity is actually very certain.For example, when Moutai was at RMB 170-180, I told many friends: "Moutai's profit was more than RMB 8 last year, and it is RMB 14 this year. If you dare not invest in Moutai at 170 or 13 times, then what else do you invest in?" "If you are a professional investor, you don't need to invest, you don't need to invest in anything.As for Moutai, it is almost a flawless enterprise.Many people say that since Sangong consumption is prohibited, they will not vote for Moutai.What is certainty is the knowledge of things.For example, we believe that the most fundamental logic that determines the future development of Moutai is the rising middle class in China, not the public consumption that many people think, and the rise of the middle class will consume the best wine in China.So, when you think that the reason for the real rise of Moutai is China’s development, benefiting from the results of reform and opening up, the rise of a large number of middle classes, and the growth of China’s wealth, then when you are at 65 yuan and [-] times PE in Moutai, You dare to invest; those who think that public consumption is the decisive reason will not dare to invest.This certainty still depends on whether the perspective of looking at the problem is objective enough and whether the root cause of the development of things is grasped.Of course, we may also be wrong, but at least in that position, we are willing to make that decision, which is more focused on Moutai.That's what we thought and did that.Therefore, if you want to improve the certainty of many things, it is actually a process of cultivation.Just as Munger commented on Buffett, "Investment skills have improved by leaps and bounds after the age of [-]."

Investment is a reward and punishment for human nature
Xueqiu: What qualities should a successful investor possess?
Dan Bin: Independent thinking, hard work, modesty and objectivity.All careers are not so smooth, it is a process of continuous cultivation.Investment is a reward and punishment for the quality of human nature, and the quality of human nature requires you to practice Taoism.We say that the old monk is an eminent monk who has achieved the Tao, but he has faced the wall for ten years, thought a lot of things, and endured a lot of hardships before he can achieve the Tao.There is a saying in the north called "money is hard to earn, shit is hard to eat", which means that earning money is the same as eating shit. How difficult is this job?The smartest people in the world are in this market, why can you make money?This is very difficult to do.What kind of traits are you talking about? First of all, you have to think that this thing is not for nothing, it can only be obtained through continuous hard work, and finally it is a matter of investing in talent.There may be some people who do not have investment talent, no matter how hard they work;

Snowball: Charlie Munger said that investors under the age of 40 are not seen. What do you think of the relationship between age and investment?
Dan Bin: Just when we were 40 years old, that is, 5 years ago, we lost a lot of money.Therefore, only by experiencing these things can these experiences, experiences and lessons become our own precious wealth, and this has a lot to do with age.If we hadn't gone through those things earlier before 2008, then maybe we wouldn't have it in 2008.When things were going well, for example, from 2003 to 2007, if we did financing, structured products and continued financing, we would be OVER in 2008.Why did we carry it over in 2008?On the one hand, because we knew earlier that investment cannot be borrowed or financed.In the past two years, many people who raised funds to speculate in stocks have gone bankrupt, because they originally had tens of millions of yuan, but they raised hundreds of millions of yuan, and the money was gone in the end.On the other hand, if we had come out at the top in 2007, we may now be repeating mistakes that we did not experience before.Of course, people have to reflect.The ancient Greek philosopher said, "A person cannot step into the same river twice", and we have also found that the same mistake will be repeated if we do not reflect on it when we invest; If you lose 10 billion yuan, you will not repeat the mistake of losing 10 billion yuan next time.If you keep making repeated mistakes, it is not suitable for investment.

As Munger said, "I don't see investors under the age of 40", because before this age, many things cannot be understood.For example, some people graduate from graduate school, become a researcher in their 30s, and then start investing in their 30s. It takes about 5 to 8 years. By the time they are 40, they may not have experienced many things.We were lucky enough to invest ourselves as soon as we got into the market, but for a lot of people, investing careers don't last that long.Only after experiencing the ups and downs of several rounds of bull and bear markets can we know what money can be made and what money cannot be made.Just understanding this point is incomprehensible without more than 10 years of investment experience.

Snowball: Is it possible for people to really learn from other people's mistakes?

(End of this chapter)