"Buying stocks is buying a company, but understanding a company is very difficult." In a program aired on November 11th, Duan Yongping made a rare public appearance, engaging in an in-depth conversation about investment, business, and life with Fang Sanwen, founder and chairman of Xueqiu. This man, who founded BBK Electronics in his early years... He is a legendary figure who later transformed into a value investor. His words are simple, yet they hit the nail on the head regarding the essence of investing.
"Buying stocks is buying a company," is the first lesson Duan Yongping learned from Warren Buffett about investing. But he immediately added, "Understanding a company is very difficult. I think understanding other people's businesses is very important; without understanding businesses, investing is very difficult." He pointed out that the reason investing is "simple yet not easy" is that the concept is easy to understand, but extremely difficult to put into practice.
Throughout his investment career, Duan Yongping has not held a large number of major positions. He likens his investment rhythm to that of a "punching machine": "I probably haven't used up all 20 holes yet." In his view, investing is not about frequent trading, but about concentrating bets on businesses that he truly understands. He doesn't predict the market, doesn't chase trends, and only focuses on the companies themselves—"When do you see me talking about the market, when do you say 'it's going to go up today' or 'it's going to go down tomorrow'?"
This dialogue was not only a sharing of ideas from a seasoned investor, but also a practical lesson on how to "understand a company".
"Buying stocks is buying a company."
Duan Yongping's investment career began with "boredom" after retirement. He transitioned from an engineer to an investor, initially unable to even understand candlestick charts, until he read Buffett's quote, "Buying stocks is buying companies," which gave him a sudden insight.
He has only made substantial investments in a handful of companies. "I can count them on my fingers," Duan Yongping said. "The earliest company I've invested a significant amount of money in was NetEase. " Then came Yahoo, and later Apple. "My investment in Berkshire Hathaway isn't a large percentage, but Kweichow Moutai is a significant holding, and Tencent's current percentage is also acceptable."
NetEase was one of his most successful early cases. He recalled, "I myself was in the game industry... " "Based on their background, I talked to their game team and felt that they were a group of people who were very passionate about games , and their business model was also good." In addition, NetEase's stock price was extremely low at the time, and he bought in with all his funds during the market panic, "and it increased 20 times in 6 months."
Apple has been his most important holding in recent years. He bought it in 2011, when he could clearly see Apple's transformation from a hardware company to an integrated hardware and software platform. "At that time, the change in Apple's business model was already very clear. In this industry, I didn't need to make any judgments; it was something I could see."
Moutai and Tencent are also companies he has held for a long time. He joked, "I usually tell everyone that I only have three major holdings now: Apple, Moutai, and Tencent, and that's pretty much true."
General Electric This was one of his few "mistakes." During the 2008 financial crisis, he bought shares in the company but quickly sold them. "I think I wouldn't have invested in General Electric in today's terms. The company's business model wasn't good, but I wasn't at that level back then."
He said that if you don't like a company, you should sell it decisively: "If you're not satisfied, run away quickly. If you don't like a stock, you can vote with your feet."
"What you don't do is more important than what you do."
The core of Duan Yongping's investment philosophy is "Don't invest in what you don't understand." He repeatedly says that investment success lies not in knowing how many companies you know, but in truly understanding the business models of a few companies.
Regarding the boundary between "understanding" and "not understanding," he believes it's a "gray area": "People who ask others everywhere definitely don't understand. So, does someone who doesn't ask understand? You could say it's a gray area." He uses NetEase as an example: "At least I've made over 100 times my initial investment. Would you say I understand or not?"
He places particular emphasis on corporate culture, especially user orientation. When analyzing Apple, he commented, "I think Apple does a very good job with its user orientation; it's not the kind of company that's overly aggressive..." "Companies that are user-centric care a lot about making good products and about user experience." He cited Apple's example of delaying the launch of its large-screen phone by three years as "a huge mistake," but ultimately it returned to being user-demand oriented.
He proposed the concept of a "do-not-do list"—what not to do is more important than what to do. "People care about what we've done, but a big reason we are who we are is because of the things we don't do. Over thirty years, we've made fewer mistakes than others," precisely because "if we know something is not right for us, we won't do it, and by not doing it, we'll make far fewer mistakes and increase the probability of doing the right thing."
He also has a unique understanding of "margin of safety." "Buffett's margin of safety doesn't refer to cheap prices; it refers to how well you understand the company." Cheap things may become cheaper, and true protection comes from a deep understanding of the business.
"Rationality is more important than intelligence."
Although Duan Yongping is an investment expert, his advice to ordinary investors is very down-to-earth.
He said that "rationality" is more important than "intelligence" in investing. Reflecting on his investment in NetEase, he frankly admitted: "Why was I able to hold it for so long and make so much money without selling? Because that amount of money wasn't much for me, so I could think about things more rationally. If I only had that much money, I might have sold it earlier, so staying rational is a very difficult thing."
He believes that ordinary people don't need to understand too many industries and companies: "I don't understand too many businesses either; I've only known a few over the years." In his view, it's better to cultivate a few industries and companies that you can understand than to cast a wide net.
He remains cautious about the current market. Speaking of Apple, he bluntly stated, "It's not cheap." He added that investment requires considering opportunity cost, saying, "If you can earn over ten percent a year, there's really no need to buy Apple."
He concluded by reminding everyone that investing is the monetization of knowledge. "Understanding business is crucial; without it, investing is extremely difficult." Those who spend their days predicting the market and chasing trends, "they simply don't understand." True understanding allows investors to transcend market fluctuations and focus on the value creation of the company itself.
(Source: China Securities) (Report)
