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How to Pick a Right Company / Stock
I had a catch-up chat with Richard Ji, a good friend who shares similar passion and investment characters with me. We had a very broad discussion over the market. One of things impressed me is his investment philosophy – 5Ms: Market Size, Market Share, Margin, Management and Moats (entry barriers).
Inspiring by his thoughts, this diary note summarizes my own philosophy or methodology when picking the investment candidates. I call them as “Four Rights”.
No 1: Right Industry:
Ø A long lasting industry with growth potentials
Ø Weak or Anti-Economic Cycle
No 2: Right Company
Ø Market Power:
ü Have a market leadership or monopoly position
ü Stay in a market with enough depth and width
Ø Growth Power
ü Pricing power to anti-inflation and past cost pressure
ü Long term survival capability plus short-term growth catalyst
Ø Financial Power
ü Light Asset plus low Capex requirement
ü Low debt or No debt, but having continuous and positive cash flows
No 3: 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
No 4: 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
寫於2010年8月28日
香港