is sponsored by the Private Equity Ranking Network, co-sponsored by Century Securities and CITIC Securities, co-organized by West China Securities, Ping An Securities , Yunxi Fund, and Tongxiao Investment, and supported by the Shenzhen Private Equity Chamber of Commerce. The theme is "Big Changes" "The Ninth China Hedge Fund Annual Conference 2020" titled "Game·New Era·Bravely Break the Game·Start a Long Voyage" was grandly held at the InterContinental Hotel in Hangzhou from December 17th to 18th, 2020. The annual meeting specially invites elite representatives of hedge funds to gather together to discuss new trends in the development of the hedge fund industry and look forward to the new future of the development of the hedge fund industry.
Chairman of Oriental Harbor Mr. Dan Bin holds a Master of Laws from Renmin University of China and an EMBA from China Europe International Business School. With 28 years of investment experience, he has served as a researcher at Junan Securities and chief investment manager of the Asset Management Department of Dapeng Securities. In 2004, he founded Oriental Harbor. He has long been committed to basic research on financial markets and has rich thoughts on the philosophy of value investment. Mr. Dan Bin was selected as the Global Outstanding Chinese Investor in 2007 and 2012; in April 2015, he was appointed as one of the 14 members of the Private Securities Investment Fund Professional Committee by the Asset Management Association of China. He has won many awards from many organizations such as the Golden Bull Award, the Yinghua Award, and the Private Equity Ranking Network. He is also one of the winners of the "2020 Evergreen Private Equity Fund Manager" award.
danbin Oriental Harbor Chairman
The following is the wonderful speech delivered by Mr. Dan Bin, Chairman of Oriental Harbor at the conference:
I am very happy to be invited by the Private Equity Ranking Network to join our colleagues here. Leaders of cooperation with securities firms, as well as high-net-worth clients and friends here, share some thoughts on investment. I just told Mr. Yan that he has been in the industry for 30 years and I have been in the industry for 28 years. In the long process, there are some investment issues. I can share my experience with everyone.
We say that investment is a career that seems simple in theory, but is very difficult in practice. There are two good books this year, one is "Value" by Mr. Zhang Lei , and the other is "Civilization" by Mr. Li Lu , Modernization, Value Investment and China", I have written book reviews for both of these books. If you are willing to learn, it is easy to learn a lot of theories from these investment masters, but it is very difficult to actually practice them. We often say that when we practice value investing, we should be fearful when we are greedy, and we should be greedy when we are fearful, or invest in the opposite direction. It is very difficult to practice these concepts.
Take this year's epidemic as an example. During the epidemic, I wrote a lot on Weibo, saying that everyone should be calm and rational, and not so panicked. I also advocated opening on time on February 3, but many experts and scholars opposed it at the time, saying that it could not be opened for fear of The stock market plummeted. In fact, as soon as the market opened on February 3, 3,000 stocks fell by the limit. I don’t know what everyone here was thinking on February 3rd. Were you selling stocks in a panic, or were you buying in the opposite direction? I also posted a long video on the evening of February 3rd, advising everyone not to panic. There is a high probability that we will hit a historic low on February 4th. The facts also confirmed my judgment at the time.
Why did I advise everyone not to panic so much? Because looking back at human history, there have been about 13 epidemics. Six months after each epidemic, the return on the capital market was not a negative return but a positive return, with an average positive return of 7.5%. Moreover, there are two epidemics in human history that can be compared with this epidemic. One is the Black Death that broke out from 1347 to 1350, killing 25-50 million people in Europe, and nearly two-thirds of the people in Europe died. Of course, a hundred years ago we had no capital market as a reference. However, during the outbreak of the Spanish Flu a hundred years ago, some data show that 17 million people died, and some people say that in fact, nearly 50 million or even 100 million people died. No matter what, let's think back. There were only 1.6 billion people a hundred years ago, but at a time when tens of millions of people died, how did the capital market change? It can be seen that the first high point of the market was in 1929. Especially when so many people died, the capital market did not plummet, but it was the beginning of a great rise.
Let us see that the panic index reached 90 in 2008, and it has reached 85 this year. The panic index is so high, which means that on February 3rd, you are afraid and I am afraid. Only when everyone is generally afraid will there be such a high level of panic. index. Buffett is 90 years old this year. Before he was 90, he only encountered one meltdown. This year, he encountered four meltdowns, and they were market meltdowns, which means that investors around the world are very afraid of such a situation.
It can be said that this year is the best year to practice value investing and reverse investing. Recently, many friends have been discussing 2021, saying that the past two years have been good, will it not be sustainable in the third year, 2021? If we want to talk about the future, it is difficult. But based on my 28 years of experience in the industry, there is a saying that is very true: "Every year is difficult and every year is good, but every year is good." Even during the 2008 financial crisis, we still had good opportunities to choose good companies to invest in; and in times of smooth sailing, investors could stay in a happy mood. Why does Buffett tap dance to work? Because the law of the capital market is that it will spiral upward in the long run. The most important thing is how you view the market.
In addition, the impact of this year’s epidemic on the global capital market can be said to have come to an end for the time being, but the long-term impact has just begun. Today is December 18, 2020. If today is not December 18, 2020, if ten years have passed and this year is December 18, 2030, then maybe today will be the 19th anniversary of our PaiPai network. At the annual meeting, at that time we will review whether the company you bought today or the company you hold will have huge returns in the next ten years. Of course, we say that it is difficult to look at the future. It will be very difficult to make decisions in the next three, five, and ten years. But if we don’t know how to look at the future, we can go back and look at what we should do today.
From another perspective, real estate has benefited many Chinese people as a carrier in recent years, and the next 12 years are likely to repeat what the United States has done in the past 12 years. What will lead to a huge gap in residents' wealth in the next 12 years is likely to be equity assets. We see that in order to control the epidemic this year, the whole world has injected greater liquidity into the capital market than in 2008. Such a large amount of liquidity will most likely play a huge role in promoting the capital market like in 2008. We see that housing prices in South Korea have increased by 52% in just one month this year. Looking at European and American countries, real estate has also seen a relatively significant increase.
Of course, in the next 12 years, I think in China, the probability of repeating the huge effects of real estate in the past 12 years is relatively small, and there is a high probability that equity assets will become mainstream. If the capital market can increase from RMB 80 trillion to RMB 600 trillion, the impact on the market will be completely different. So we say that in addition to "big releases", the institutional arrangements at the bottom of the capital market, pension funds, mutual funds, and private equity The development of funds is very important. At the same time, there is another point. Now China's capital market and the world's capital market have been integrated. Many friends are worried that some companies are overvalued. However, while worrying, you should also see that there may be other situations, such as At that time, when the markets of South Korea and Taiwan were opened to the world, local funds and investors believed that companies like TSMC and and and were overvalued. However, in the end, foreign investors bought 50% of the shares, and they continued to rise.
We have seen that in the past few years, foreign capital has continued to flow into China in general, and it has also changed many of our operating models and perceptions. We have observed that basically good companies in major markets around the world are rising and developing along a 45-degree slope, with significantly reduced volatility. This is very similar to the situation shown by A shares , so the Chinese market is now Hong Kong-listed. , the trend of U.S. stockization is very obvious. We say that investment is a world language, not just a Chinese language. In the process of practice, we can see that this language will continue to develop and grow.
In recent years, changes in Sino-US relations have attracted much attention. How do you view China? It seems that it does not need discussion, but it is actually worth our deep thinking. Why? Just like on February 3rd, if you believe that the central government can control the epidemic within two months, you will increase your position. If you don't believe that, you will queue up to sell stocks.The picture I share with you here was when I was taking classes at Harvard Business School in 2007. The first dean of the Kennedy School of Business and the author of "Destined for War" said that this picture was for the Joint Conference of the United States. It was prepared by the generals. Because these generals asked him to talk about the changes in the relationship between China and the United States, he made this picture (as shown below).
Source: Mr. Dan Bin’s speech PPT
If you are not Chinese, you are these American generals. When you see this picture, of course you don’t want the historical picture to become a reality. Of course, when we talk about the rise of China today, many people may no longer have much objection, or as Chinese people, they are full of confidence. But the era I grew up in is the one on the far left in the picture, that is, we mainly grew up in the era when the United States was a very powerful country. If China could surpass the United States and become the world's largest economy, many People don't believe it. Let me give you an example. When I was studying at CEIBS in 2007, a famous professor gave me a class. He taught us for four days. He listed a lot of economic data every day, and the explanations were very reasonable. But every day he was very pessimistic. The last one My question to the professor is: According to your logic, does China have a future? He categorically said no.
Buffett has always believed that the United States will become a great country. I wrote a sentence in "The Rose of Time", "The reason why Buffett is great is not that he has a wealth of 45 billion US dollars at the age of 75, but that he is young." "I want to understand a lot of truths and stick to them throughout my life. "It is very difficult for us to look at Buffett's decision-making background in his early investment career, and our decision-making background in the past five or six years is also very difficult. The stock market crash in 2015, the polarization in 2017, the epidemic in 2020, and the decision-making background is also very difficult. You may not have thought that the price of oil will fall negative this year. If you use one word to describe 2020, I think it is black swan. Flying all over the sky.
decisions are very difficult. We see today that Buffett has become a great investor, but the early decision-making background is very difficult, much more difficult than it is for us. He started working in private equity funds in 1957, and by 1981, from his 20s to his 50s, it was very difficult to invest at my current age. He experienced the Vietnam war, starting in 1957 and continuing until 1974. The U.S. military was defeated. Let's look at the book "Principles" written by Mr. Dario. He did not join the army because he was ill, and many of his neighbors and classmates joined the army and some died. At that time, young Americans rebelled and said The American Dream was broken, and the American Dream was broken. In the past ten years, how to invest during the war? Some time ago, Trump was infected with COVID-19, and U.S. stocks were jumping up and down. Buffett had encountered events such as the assassination of the president, which must have been much more serious than the president's infection with COVID-19. In those days, U.S. stocks must have plummeted. , so how to deal with it?
There were also two oil crises and seven Middle East wars. Buffett’s partner Mr. Munger almost went bankrupt in 1964. The challenges he faced were much more severe than ours, but his belief in the country remained unchanged. Sometimes there is not much difference between people, but at critical moments in history, what widens the gap may be what you believe, so belief in your own country is very important.
On the premise of having faith in the country, Buffett spent his early and very difficult years. For example, the period from 1978 to 2006 was the best time in the United States, but even in the best time, you could not choose a good industry and it was very difficult to invest. Many of us ordinary people may be able to sense that China has made countless great achievements in the past 40 years of reform and opening up, but why do so many people still lose money in the stock market? Yesterday I was communicating with a brokerage friend, and he said that more than 65% of his company's clients still lost money this year. It's a big year for public funds and private funds, but 65% of ordinary people lost money.
Why? If you choose the wrong industry, even in peacetime, it is very likely that your choice is still wrong. For example, choosing to invest in the steel industry may not be easy to say in the short term, but it is not a good choice in the long term.I met a friend in Nanjing before and he said that he still made a loss after buying a certain steel company for eight years. It's really hard to say for individual stocks, but as far as an industry is concerned, he might still make a loss if he holds it for another eight years. I have commented on three banks in "The Rose of Time". After 2008, I became very wary of leveraged business models. There was once a saying that banks are swamps. Once you enter, you will be deep and shallow. Feet, it’s not easy to make money.
Which industries will perform better in the long term? I saw these two tables in 2009. If you saw these two tables at the same time as me, which industry should you choose to invest in?
First of all, it is the cosmetics industry. I have two daughters. I found that they put things on their faces as soon as they were sensible. It is natural for girls to love beauty. Recently, a leading company in the medical beauty industry went public. The cosmetics industry is an evergreen tree abroad. In addition, there are 12-14 trillion-dollar companies in the pharmaceutical industry in the United States, which are second only to the Internet in terms of profitability and market value.
There is also the soft drink industry. When we saw this table, we chose a Chinese benchmark company. Including a water company that was recently listed in Hong Kong, in fact, our research found that it is also a monopoly, so why its valuation in Hong Kong is so high also has its long-term logic.
Why are people like Buffett so great? His annualized rate for 63 years was close to 30%. If there are investors in China who can live to be 100 years old, for example, if they live to the working age of Buffett and Munger, if one-third of their annual returns can reach Buffett’s annual returns, then he will be recorded in the history of Chinese investment. superior.
also has food processing and specialty chemical industries. There is a leading company in the chemical industry. This company has performed very well from 2004 to the present. Therefore, any business model of monopoly can often achieve good results, regardless of whether the monopoly is a competitive monopoly. , or a natural monopoly, and generally speaking, there will be a good return.
Of course, many friends in the securities industry may not understand why the valuations of the same company in Hong Kong are so different? Two days ago, a friend showed me a company's private placement project to see if I would like to participate. I saw that their PB was about 5.6 times. Judging from the company's valuation, I personally would not be very good at investing. Maybe we can still make money in China, because our domestic people do not speculate in stocks based on PB, but as soon as they hear that the bull market is coming, they start to gather together to decide whether to buy securities. Therefore, I generally do not advocate non-professional investors investing in stocks. For example, my mother and others lost hundreds of thousands by investing millions in stocks.
This year is a great year for investment, but if you don’t do well this year, it will be very easy to lose money. If there was a period at the beginning of the year when it was said that the bull market was coming, and you bought a brokerage firm, one wave of brokerage firms rose a lot, and the first wave of brokerage firms fell by 30%, and some experts said that China's rise depends on chips. If you buy chips, the chips fell by another 30%. , so there is only more than 30% left. Some people talk about new energy, and they buy new energy and it drops by 30%, leaving only 10%. Therefore, even in the bull market, many people still lose money, because we Chinese investors always discuss one question: Where is the next hot spot? Will the sector rotate? If we discuss it this way, we will still fall into the possibility of chasing the rise and killing the fall.
Thinking from the underlying logic, the computer, semiconductor, and liquor industries are all very good industries. Recently, someone joked that the investment strategy for next year will still be liquor. I met an investment guru and asked him how to make money in the past few years. Liquor plus leverage, white wine plus leverage, this is how you get rich every year. In fact, many people have a lot of criticisms about this industry, so the industry chosen for investment is very important.
In addition, I would like to discuss another issue with you. The higher the net worth of your clients and friends, the more they may worry about some problems. The more outstanding entrepreneurs, the more they will worry about many problems. Many of our friends first choose to immigrate to Canada, Australia, the United States, etc. as soon as they have money. In 2018, there was a call for private entrepreneurs to withdraw from the stage of history. Many friends have very deep concerns about these issues.But I have lived in China for so many years, and I personally think so. More than 40 years in my own country have taught me that if you are really talented, have a broad mind, and are willing to continue to fight for it... don’t complain about yourself all day long. If you live a good life, you may change your destiny and current situation.
Based on my understanding of China during my own life, I believe that the light of history may illuminate China's future. I am full of confidence in China's future. Here I share two short stories.
The first one is that I went rafting in the Grand Canyon of the United States for 12 days in 2012. During the rafting process, we were rowed by several Americans. When these Americans were chatting, I heard a statement. I was very shocked at the time because When I was in college, I read all the important documents in the United States, including the poem under the Statue of Liberty, which deeply moved me. At that time, I regarded the United States as a country like a lighthouse. Those Americans said that the United States would be divided into several countries. The reason they gave was the change in the demographic structure. The proportion of black people at that time was 13%. Soon the demographic structure of the United States will change, and white people will become a minority. They are very Worried about the future of America. We’ve seen this year how Trump’s rise to power has divided America. Politics cannot be discussed in American families, and differences in political views may lead to divorce. America's problems are worrying.
The second little story is that one of our Oriental Harbor customers came back from France after the epidemic. He came to Shenzhen to chat with me and said that he wanted to move his entire family from France back to China. I was very shocked when I heard that because many people around me Some friends have immigrated to Hong Kong, Australia, etc., or to the United States, the United Kingdom, etc. No one said they wanted to move their family back from abroad. This was the first time I met someone who said they wanted to move their entire family back to China. I asked why? He said that he was engaged in trade and logistics in France, and said that I had traveled all over old Europe and new Europe. The social development of these countries has basically stagnated, and they are not as dynamic as China, with so many opportunities to make money. In addition, the future of France is very worrying. Among children studying in French primary schools, the proportion of blacks and Muslims is very high, exceeding that of whites.
The future of France is indeed worrying. There are currently 2 million Muslims in France, and it is possible that by 2050 the number of Muslims will exceed the number of native ethnic groups in France.
In addition, I went to Moscow in 2012. The professor took us to visit Moscow University. I asked him a question, why did people like Putin appear in Russia after tremendous changes? He said that Russia is an oriental nation. Secondly, he said that the future of Russia is very worrying because the average number of births per couple in Russia is 1.5%.
Generally speaking, the United States has American problems, Europe has European problems, and China has Chinese problems. However, many of the problems of these developed countries are the most fundamental problems and are irreversible. In another 50 years, we are likely to encounter another earth-shaking change.
This year is really full of "black swans". We lost Kobe at the beginning of the year and lost Maradona at the end of the year. When it comes to Maradona, Argentina must come to mind. Argentina is a very rich country, why is this happening? Back then, I went to Argentina and hired a Chinese tour guide to show me around. The Chinese tour guide said that the efficiency of one Chinese is that of 3-5 Argentines. Every time I come back from abroad, I feel more confident about China. For example, I go to Turkey and Istanbul, which is a very developed city, but what do I perceive in Turkey? What is the real power that determines a country? It's religion, tradition, culture, and their frequency of change is 100 or even 1,000 years. Why does China have a future? Because no matter which country you come back from, you can deeply feel that there is no country in the world that believes in making money like the Chinese.
During the Spring Festival, we often say "Gong Xi Fa Cai". I think only the Chinese can say this sentence. The Chinese may have said this sentence for hundreds of years and it has been integrated into our bodies and blood. War has been frequent in Chinese history, but as long as there are a few decades of peace, China's accumulated wealth will either be the first or second in the world.We see that countries and regions influenced by Chinese culture have all become developed countries and regions. There is a high probability that Vietnam will also become a developed country when it implements reform and opening up.
The premise for seeing far is that some come from your own insight, judgment and learning ability, and some come from life experience. Whether you are suitable for investment is the most important factor. Can you shield the mistakes you have made? , let these mistakes become your precious wealth, so that you can continue to iterate.
Yesterday a friend asked me why the stock market is rising when the economic situation is not good. For example, changes in many industries have been very difficult in the past few years, and the economic situation is not good. In the changes of the past thousands of years, we have seen that whichever country starts the industrial revolution will have huge changes in per capita wealth. We say that the advent of the smartphone era has given birth to a number of companies with a market value of more than 10 trillion. So after the smartphone era, will greater companies be born? Most likely it will. If the human brain is connected to the extreme, what kind of social picture will we have? When a person passes away in the past, how do we commemorate him? Get a big picture... It is likely to change in the future. If we use a chip to record a person's brain memory and brain waves before he dies, and the body disappears after the person passes away, we can install him on a robot. Theoretically, I can walk back and forth in your house, and I can have brain-to-human connections with your family. If he is not recharged, he will probably die.
I read a report a few days ago that the United Kingdom has formed a robot corps. In other words, how to accurately identify the enemy? If China and the United States go to war and Britain joins the war, how will we identify the Chinese? If the identification is not good, the Japanese and Koreans may be killed together. But if we Chinese also build a robot corps, how will we identify the British and Russians? Maybe the people with blue eyes and big noses were also killed. If the age of robots comes, it is very likely that one day robots will kill all humans, because humans still need to produce garbage, robots do not need it, and robots may hate humans, even if humans are their mothers.
So Musk and Hawking are very worried that after the era of artificial intelligence is truly realized, the danger to mankind will be like atomic energy, which on the one hand benefits mankind and on the other hand destroys mankind. In other words, if technologies such as human brain connection and artificial intelligence are used to benefit mankind, larger companies will definitely be born to promote the development of mankind.
Oriental Harbor In the past 28 years, we have generally invested in two types of companies. One is companies that change the world, just like smart cars. Our overseas investments mainly invest in companies that change the world. In addition, companies that cannot change the world mainly invest in companies like liquor. It may take a hundred or even a thousand years to change the liquor culture. It is very difficult to change these cultures, so we mainly invest in these two types of companies around the world. How to interpret
investment from another perspective? My own understanding is that it is a high-probability event among small probabilities. The survival rate of the world's top 500 companies is only 3%. Investment is about whether you can find these 3% companies for long-term investment. If you can find such companies, price increases are generally a success. Thousands of times. This way you will get a good return on your investment. Why value investing has given birth to so many great investors in many countries, and they are all evergreen, is because they are all based on the roots of the enterprise, choose some great enterprises, enterprises that can invest in the long term, and grow together with them. This will eventually be achieved. So how do you find a good business? From what angles? Mainly industry space, business model, profitability, competitive advantage, and corporate culture.
In addition, in the 2018 reprint of "The Rose of Time", I once talked about some American companies. In fact, this book has stood the test of time, and the underlying logic is this kind of logic. For example, if a company is bought for five yuan and sold for 50 yuan, and the result is back to five yuan, then you must reflect on your underlying logic. Is there something wrong with your thinking logic? Otherwise, you will make money nine times out of ten, but one mistake is enough to make you lose everything.But if you start from the bottom-level thinking logic, even if you buy it for 50 yuan, it can rise to 500 or 5,000, which means that your bottom-level thinking is right.
What are you afraid of when investing? Only by being afraid of stepping on landmines and not being afraid of relying on profits will we have a better future.
In addition, the concept of safety margin is easier said than done. For example, taking leading liquor as an example, if you buy at the highest point in 2007, when is the most profitable time? The real money was made in 2016. If a company is too expensive to buy, falling into this misunderstanding is also problematic. For example, a leading electric vehicle company has made profits for just four quarters, with a price-to-earnings ratio of about a thousand times. In the A-share market, for example, there are leading ophthalmology companies, including leading e-commerce companies listed on the U.S. stock market. If it comes from this It may also be difficult to invest based on the traditional concept of margin of safety.
Therefore, all investment theories are very simple, but they are very difficult to practice, and the same is true as the company grows. The products we issued to many banks have early warning lines and stop-loss lines. If there was a stock market crash in 2015, it would be easy to liquidate. My colleagues here may also feel this deeply.
Generally speaking, the probability of this position being a historical bottom is very high. I have been in the industry for 28 years, and the bull market has never lasted more than two years, and the bear market has lasted three, five, or seven years. However, after the impact of the trade war and the epidemic, we say that when we see stock market crashes, the prices are usually above 6,000 points and below 3,000 points. It is the probability of a historical bottom. If I stay in the industry for another 30 years, I don’t want it to be below 3,000 points. I hope it will be the beginning of Slow Bull. There is a high probability that I personally believe that the greatest era of the A-share market is probably coming, and this period will last for twenty or thirty years, if there are no wars and other events. Because the registration system is here, only the registration system can lead to real growth and slow growth. Unfortunately, many people make analogies and say why the United States is doing so well under the impact of the epidemic, while China is still lying there. It has a lot to do with our composition. In other words, it would be very different if many good companies were not listed in the United States but in China.
In other words, betting on an era is the reward, but it is very regrettable that all companies whose dreams have been realized are either listed in the United States or Hong Kong. All companies whose dreams have not been realized are in our A-shares. It's a very big regret. In other words, if many good companies have been listed on our A-shares long ago, then the return on the entrepreneurial version of our A-shares may be much higher than Nasdaq, and it is likely to become the company with the highest return rate in human society. Of course, It's a pity, but what we are seeing now is changing very quickly.
Buffett said that life is like a snowball, the important thing is to find enough wet snow and a long slope. 40% of the world's profits are earned by the United States. Buffett has practiced rolling super big snowballs in the past 63 years. In China, Oriental Harbor has also been rolling for 16 years, and it has also rolled out a small snowball that is relatively good. However, we say that China, this land and this country, there is no country in the world that likes the Chinese people, they put their earnings into practice. Money is a religion, and China is a big market of 1.4 billion, and our middle class is about 400 million. This is the largest middle class in the world, and it breeds huge opportunities. In theory, this market can also create a huge snowball.
Investment is a market that seeks common ground while reserving differences, or it can also be a market where hundreds of rivals compete. If there is anything I said incorrectly today, please forgive me. Thank you all!
This article comes from Private Equity Ranking Network
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