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 ---
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),
Ø Conglomerate –
