My Diary 423 --- How to Pick A Right Company / Stock

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)