Today, I will share my views on investing in the third type of asset (those that generate cash flow) to achieve a hundredfold return.
To achieve a hundredfold return on this type of asset, there is a very clear logical line — that is, to return to the most core characteristic of its asset attribute: it can generate cash flow.
We can see its basic logic using arithmetic that even elementary school students can understand.
If an asset can generate 100 yuan of free cash flow each year and continue to do so for 40 years, then even without calculating its asset value, just looking at the free cash flow it can generate over the next 40 years can yield 4000 yuan.
If this asset's current market price is only 40 yuan, then clearly, as an investor, I can directly spend 40 yuan to buy this asset, and after 40 years, I can achieve a return rate of 100 times just from its cash returns. If we add in its asset value, my return becomes even more substantial.
Therefore, the key and utmost importance of investing in such assets revolves entirely around discounting the total sum of future free cash flow generated by the asset.
In this regard, a few prior masters have set clear examples for us, which I have also shared in past articles.
In chronological order, they are: Philip A. Fisher, Warren Buffett, and Charlie Munger.
In Fisher's time, the concept of "buying stocks is buying companies" was not as clearly articulated as by Buffett and Duan Yongping. However, his lifelong principle was to buy good companies and hold them as long as they do not deteriorate, which is fundamentally the same logic. His investment philosophy later became one of the important sources of Buffett's principles.
Fisher's two most well-known classic cases of achieving a hundredfold return on investment are Texas Instruments and Motorola.
For Texas Instruments, he bought in 1953 and held it until 2004. Over these 51 years, Texas Instruments provided him with over 1500 times the return.
For Motorola, he bought it in 1957 and held it until 1996. Over these 39 years, Motorola gave him over 200 times the return.
We are even more familiar with the cases of Buffett and Munger.
The Washington Post, American Express, See's Candies, Berkshire Hathaway, and Hershey are all classic investments by these two predecessors that achieved or exceeded a hundredfold return.
If we also count other investments that did not reach a hundredfold but exceeded 30 times, there are even more, such as Costco, Coca-Cola, and so on.
In fact, Duan Yongping is also quite impressive, for example, his investment in NetEase. However, his investment timeline and cases are still relatively short compared to the above masters, so I have not listed him here.
The reason why these predecessors could achieve such returns from these targets essentially boils down to returning to the fundamentals of the company, assessing whether the business model and corporate culture enable the company to sustain profitability and generate substantial free cash flow for decades.
Then, based on this, they would make a large purchase when the market severely undervalues them.
After that, as long as the fundamentals of these targets do not change, no better targets are found, and their prices are not excessively high, these predecessors would continue to hold, allowing time to compound growth.
We often say that there are many good stocks in the US market, but in fact, the A-share market also has companies that have brought investors hundredfold returns through cash dividends (reinvested) and stock price increases since their listing.
Gree Electric Appliances, Fuyao Glass, Luzhou Laojiao, Yili, Yunnan Baiyao, Shanxi Fenjiu, Kweichow Moutai, Wanhua Chemical, Pianzihuang...
All are typical in A-shares.
(Note: I list these A-share stocks not to suggest investing in them, nor do I believe they will provide a hundredfold return in the future; it's merely to illustrate using historical data.)
However, whenever these stocks are mentioned, the public's commentary is never judged from the perspective of corporate culture, business model, or free cash flow, but rather from attention-grabbing and viral angles such as "sexiness," "windfall," and "trends."
Such attention-seeking and traffic-boosting judgment methods are hardly investment!
Given such clear standards and logic, why can the vast majority of us not achieve this?
Firstly, most people just want to get rich overnight and do not want to become wealthy slowly;
Secondly, and more importantly: understanding a company, grasping its corporate culture, business model, and future free cash flow is extremely difficult — just like Duan Yongping said, understanding a business is equivalent to completing an undergraduate degree.
It's so difficult; how many people are willing to put in the effort and time?
Therefore, in the end, the vast majority of people want to take shortcuts and end up engaging in activities that appear to be investments but are actually gambling.
As a result, is it possible for the vast majority of ordinary people to achieve this and gain hundredfold returns from such assets?
No, it is not possible.
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