How to Pick A Right Company / Stock
Rule No 1: Choose the right Industry: Ø A long lasting industry with growth potentials ü i.e. banking (15% avg over 100 years) vs. Textile (5% to 0%) Ø Weak or Anti-Economic Cycle ü i.e. Consumer Staple vs. Shipping
Rule No 2: Choose the right Company Ø Market Power: ü Stay in a market with enough depth and width ü Have a market leadership or monopoly position Ø Company Power ü Long term Survival plus Short-term growth ü Have pricing power – anti-inflation and past cost pressure Ø Financial Power ü Light Asset plus low CapeX requirement ü Low debt or No debt, but having continuous and positive cash flows
Rule No 3: Choose the right Management Ø Someone you want your daughter marry with ü Honest, Professional, Diligent ü Strategically correct and willing to create shareholder value Ø A transparent firm with leadership and good culture ü Good and positive things never need to hide ü A corporate has its own personality, mainly from its leadership and cutlture
Rule No 4: Choose the right Price Ø The least important point ü Hard to timing the Lows, but relatively easy to identify a good company ü A great firm is able to withstand risks ü A growth firm can grow from High P/E to Low P/E
10 year Stock Portfolio Ø Real Estate – Vanke B (200002 CH), COLI (688 HK) Ø Insurance --- China Life (2628 HK); Ø Consumer --- Li Ning (2331 HK), Tencent (700 HK); Dong Xiang (3818 HK), Want Want (151 HK) Ø Banking --- ICBC (1398 HK), CMB (3968 HK); Ø Logistic/ Chain-stores --- Wumart (8277 HK), Parkson (3368 HK) Ø Commodity – CNOOC (883HK), China Coal (1898HK) Ø Conglomerate – Beijing Enterprise (392HK) |