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

Chapter 3 Why should I insist on investing in growth stocks (3)
Dan Bin: Of course it would be the best. In 2014, someone asked me to write the preface of "Memoirs of a Stock Operator", and I read this book when I first entered the industry in my 20s, but it is completely different from what I read now.For example, if you see what mistakes others made back then, you won’t make them again.Of course, people with high savvy are very likely.I am very frank, what mistakes we have experienced, where we made mistakes, and where we failed, is actually telling everyone not to make mistakes again.We are very frank, including that we are well again this time, what is the most fundamental reason?Including Lin Yuan, it was not good in 2008, and now it’s getting up. Why do people with this investment style get up again in the past few years? What’s the logic behind this?Is it worth learning and promoting?What is worth pondering behind the performance is the person's philosophical logic and thinking points.This issue is more important in contemporary China, because many people say that there is no value investment in China, and there are no good stocks worth investing in.In fact, Lin Yuan and our performance have proved that this statement is wrong, because even under such a cruel market background, our net worth is still at a new high.Value investing is to choose a good company and make money from the growth of the company. This logic should be a universal method.There is nothing wrong with this theory, but there is no ability to choose this kind of enterprise.If investors can realize this point, it will be the greatest progress for China's securities market.For example, Chairman Guo said that he advocates investing in blue-chip stocks. The key is what are blue-chip stocks and what are blue-chip stocks that can withstand the economic cycle?For many investors, this is a further problem.They will ask themselves: "Do I have the ability to choose this blue chip stock, this crown jewel company?"

Why do ordinary people in Hong Kong only like to buy blue chip stocks?Because only blue chips create wealth, and most other companies destroy wealth.Judging from the development history of enterprises in the past 500 years, the survival rate of the world's top 3 companies is only 5% to 100%, and most enterprises will disappear in 70 years.Basically, 100% of the companies in these stocks in our market will disappear in 20 years. Isn’t it a problem for ordinary people to invest in these stocks?This is a progressive issue, and if you think about these issues clearly, there will be results.Because of China's current environment, such as short-term and death squads, of course we can't say that it is wrong, and they are indeed making money.But whether this money is suitable for you to earn is an interesting question.There are many incredible things happening in our securities market every day. The mismatch between supply and demand and the trading culture caused by the desire for quick success and quick profit formed in the past [-] years are very interesting.

Xueqiu: As an investor who used technical analysis when he first came into contact with investment and has been practicing value investing since then, what do you think of the role of technical analysis?

Dan Bin: All the tools, I personally think, are like the 108 moves of Shaolin Temple. There are 1999 moves in martial arts, but whoever masters them will become an eminent monk.Although anyone can put on airs, it is difficult to reach the top.The same goes for technical analysis.When I was in Junan, I once won the board of directors research award. One article was "B-Shares Sharpen a Sword in Ten Years", which was published in the "China Securities Journal". A week after it was published, B-shares soared; It was "The Great Reversal of the Stock Market in January of the New Millennium", probably in January 1, and it was also published in the "China Securities Journal", which was written by technical analysis.Including I also wrote "Looking at Chinese History with a Technical Analysis Perspective", which used Chinese history to count waves.The key to these things depends on how individuals use them. Some people use them for a week, a month, or 5 minutes of investment, but they can also put them in broader things. Different things are completely different.Technical analysis is not to say that it is useless, and it still has a role, but for real wealth creation, relying on business growth is still a more certain way to make money.For example, assuming that Moutai's profit has increased by 100 times, it is normal for the stock price to increase by 100 times. This is certainty.It still requires talent to use technical tools such as wave theory well. If it is really a bottom-up style, technical analysis and other things can be ignored.

Xueqiu: Under normal circumstances, how do you evaluate the intrinsic value of the enterprise?
Dan Bin: Precise valuation is definitely impossible, that is, vaguely correct.Because the part that can be accurately valued can only account for about 53%, and 47% cannot be accurately valued. This is what CEIBS teachers said in class.Determining a precise valuation of a business is very difficult.For example, how much is Guangzhou Pharmaceuticals worth now?The gap is too big.If we estimate now, there are too many unknown factors.For example, can Wanglaoji make 50 billion yuan, 100 billion yuan or 300 billion yuan?Jiaduobao said it will do 1000 billion yuan.If JDB can make 1000 billion yuan, how much can Wanglaoji do?They are 300-150, 40-[-], [-]-[-], and inverted [-]-[-], or is it that the Wanglaoji brand is gone?How to estimate this?So, it's hard.But if investors have a general ambiguity, such as assuming that they open [-]-[-], how big is the Chinese herbal tea market?If the entire market is [-] billion yuan, they each account for [-] billion yuan; or [-] to [-], Jiaduobao has more, Guangzhou Pharmaceutical has less, and then estimates the value based on the approximate market-to-sales ratio, because the market-to-sales ratio of Coca-Cola and Pepsi-Cola The rate is there.There are very few companies engaged in fast-moving consumer goods. For example, Heqizheng is [-] billion yuan. Can you say that Wanglaoji can do Heqizheng?Based on this calculation, the valuation is vague, and then it is just to look again.

Xueqiu: Do you mean to do the deterministic ones first, and use the margin of safety to offset the uncertain ones?

Dan Bin: It’s easy to say, but hard to do.For example, when you buy Guangzhou Pharmaceuticals, you can find it at the beginning, but if you hold it until now, what is its margin of safety? Do you want to set a stop loss?It's hard.According to my many years of investment experience, when the A shares of Guangzhou Pharmaceuticals are more than 30 yuan, they will definitely trade for a period of time. This process depends on the situation of grassroots research.Guangzhou Pharmaceuticals boasted to Haikou that it will achieve 100 billion yuan next year.If we can really achieve 100 billion yuan, increase the output and spread the goods, it will be very powerful.Valuation can only be seen step by step.

Xueqiu: Is investing boring?

Dan Bin: I find it very interesting.We live in a rapidly changing country with many things going on.From the perspective of investment, such as thinking about the competition between Wanglaoji and Jiaduobao, is the brand or the channel important?This can definitely be written into a textbook.Jia Duobao is now secretly changing the concept, Wanglaoji belongs to someone else, but Jia Duobao himself said it was a name change.It is very interesting to see how Jia Duobao succeeds in society.It was originally rogue logic, but many young people agree with Jia Duobao.I saw some people commented: "Jiaduobao reflects a social trend of thought among young people after the 'Cultural Revolution. .We will find it very interesting: the same thing, you see it this way, others see it that way, so investing is very interesting.

Xueqiu: How do you determine your circle of competence?

Dan Bin: For us, what kind of money we can earn has already defined our circle of competence.Some business in the industry you think is the best, just grab it.

Xueqiu: Some people say that good companies in China are becoming more and more difficult to find. What do you think?
Dan Bin: It is certain that there are fewer good companies, but there are also many good companies out there, and no one buys them.Moutai, for example, currently has a dynamic price-to-earnings ratio of less than 20 times. A company like this has a high growth potential, and any market in the world will give it a PE of more than 20 times.

Xueqiu: What kind of company do you generally like?
Dan Bin: It is best to be like Moutai, which has a wide moat, because the best investment is when the output increases and the price also increases.The general business model is that the output increases, but the price falls. However, Moutai not only increases the output, but also increases the price faster than the output. This moat is too wide.The model of Guangzhou Pharmaceutical is inferior to Moutai, because it still needs to work hard.

Most want to buy Ali Group and Shunfeng Express

Xueqiu: Is there any company that you really want to buy but can't?

Dan Bin: In the early years, what I wanted to buy was Jack Ma’s Alibaba Group, but he was listed on the B2B business. It would have been nice if it had been listed as a whole at that time.Internet companies, such as Tencent and Baidu, have made investors a lot of money, but Ma Yun actually made many investors lose money because his most valuable things were not listed.We also wanted to buy some of their internal employee shares, but it was very troublesome.In addition, such a good company as Shunfeng Express and Shenzhen has developed rapidly in recent years. If it is a small company listed on the GEM, it will be incredible. We will definitely invest in it. It must have more prospects than Suning Yunshang (SZ002024) at that time. enterprises.

So, there are always such opportunities around us, but some are ours and some are not.Of course, we don't have to worry, there are always opportunities.I have been in the industry for 20 years, and I have some opportunities every year, such as Baotou Iron and Steel Rare Earth (SH2009) in 600111.In fact, I was also optimistic about Baotou Iron and Steel Rare Earth at that time. If we bought it at that time, we would earn 20 billion yuan.Of course, if you see it but don't do it, it's tantamount to talking in vain.

Xueqiu: Have you considered investing in Alibaba indirectly by buying Yahoo (YHOO)?
Dan Bin: One of the problems with buying Yahoo is that if it is investment income, the market only gives you a one-time valuation, but the real business model is continuous. It is not an investment behavior, but a continuous behavior of owning this thing.If the market thinks that your income comes from one-time investment income, the market will not give you a high valuation.This is a rather regrettable thing.

Xueqiu: What are your most successful and most unsuccessful investments so far?
Dan Bin: In terms of the absolute amount of money lost, the year of 2008 may have been the most. The lesson learned is that the cyclical industry encounters a macroeconomic downturn and Davis double-kill, which is very cruel; in terms of the amount of money earned, Mainly through Moutai and Tencent, which made us a lot of money.

Xueqiu: Why did you invest in an Internet company like Tencent?
Dan Bin: Tencent, although it is an Internet industry, we thought it was a platform consumer industry at the time.Because after its platform with hundreds of millions of users is built, it will consume money when playing on the platform.Although there are Sina, Qihoo, etc., Tencent's high barriers were almost unbreakable at that time, and it was difficult to break through.

Xueqiu: Do you have any suggestions for young investors today?
Dan Bin: Be diligent, maintain the spirit of independence and learning.There is no shortcut to investment, we must believe in this era and opportunities.The last time I met a few young people, they thought that there was no chance, and the way to ascend was blocked. I can say from my own experience: no.Wasn't it the same when I was an agent in Junan?You still have to rely on self-struggle to get what you are now.Whether we can have a future after struggling is determined by God, but if we want to succeed without struggling, then it is unreasonable.

(End of this chapter)