I am now increasingly inclined to track a project or a company for the long term and hold onto it.

Here, long-term holding does not mean holding onto it without selling; rather, it means that as long as I recognize its development direction and construction progress, as long as its price is not excessively high, and as long as there are no significant hidden dangers in its fundamentals, I will not be too concerned about short-term price fluctuations and will continue to hold its tokens or stocks.

Among the three "as long as" conditions mentioned above, the first and second are subjective views of the investor, which are often open to interpretation and difficult to judge as right or wrong.

However, I increasingly feel that the third one follows objective rules that can be learned, especially from a wealth of classic cases, from which valuable experiences and lessons can be drawn. Once I discover significant hidden dangers in a project's fundamentals, regardless of its current price or trend, or how impressive its other factors may appear, I will not hesitate to sell off the project's tokens or stocks.

In the past two weeks, a member of an investment group strongly recommended a book titled "Classic Cases of Value Investment: China Evergrande." The author is Zheng He Qisheng, and it was published by Tsinghua University Press in 2019—three years before Evergrande officially collapsed in 2022.

This group member recommended this book at this time hoping that everyone could review the problems in Evergrande's growth process as a counterexample and learn investment lessons from it.

Regarding Evergrande, I mentioned it in a previous article and also wrote about a short-selling report released by Citron Research at that time. This event is detailed in the book, which lists several points from the Citron report and Evergrande's rebuttal.

After Citron released that famous report, several investment banks closely tied to Evergrande (including JPMorgan, Deutsche Bank, and UBS) came out in support of Evergrande.

Only Lyon Securities expressed a viewpoint that now seems quite insightful: it believed that the market should not focus on "what aspects Evergrande is being questioned about," but rather "why Evergrande is being questioned." Lyon Securities argued that Evergrande's business strategy was overly aggressive, pushing operational and financial limits, making it an easy target for short-sellers.

At that time, Evergrande was still at its peak, but Lyon Securities was not blinded by its superficial glamour; instead, it pointed out Evergrande's key issue directly: excessive aggressiveness, pushing to the limit. In simple terms, Evergrande had very obvious problems regarding its debt.

When I read this paragraph, I recalled what Duan Yongping said in that investment Q&A book about "common sense," emphasizing that businesses should operate "within their means," and how he would exclude companies that do not conform to common sense and are not operating within their means.

He particularly emphasized the debt risk of companies, even estimating the "purchase" price of a company more cautiously than the average investor, incorporating the company's debt into the cost.

Among all the listed real estate companies domestically and internationally, to my knowledge, apart from his early investment in Vanke, he seems not to have touched any other real estate companies. Moreover, he only held Vanke for a short period before selling it. He believed he could only see the value of Vanke at the time he sold it.

Using this method to look at the Evergrande case makes it even clearer.

Objectively speaking, from many aspects, Evergrande is quite excellent, but its fundamental problem is that in pursuit of rapid expansion, it recklessly leveraged itself and fell into a debt trap.

This is an example of operating outside one's means.

In fact, this problem is visible to everyone. But the key is, when everyone can see that a company has fallen into a deep pit, how many people will peel away the shiny exterior and still firmly believe in common sense and operating within one's means?

In this book, the author's viewpoint is that for real estate companies, a debt ratio like Evergrande's is normal, which does not affect the investment value of real estate companies. The author even cites examples of the best XX company having a debt of XX.

In other words, in the author's view, the entire industry is like this, so it is not a problem. The entire industry is operating outside its means and violating common sense, so it is not the industry that has a problem, but rather common sense that is problematic, and operating within one's means is outdated.

(The real estate industry discussed here does not include state-owned real estate enterprises with a special status.)

The debt issue is one aspect of common sense and operating within one's means; in fact, there are many other factors that companies must respect as common sense and operating within one's means—such as treating consumers with integrity and honesty.

Among the new car-making forces, there is a company I once admired very much. This company has created miracles across various fields, but recently, when I saw more and more expressions from the founder of that company in promotional contexts, I did not see an attitude of integrity and honesty towards consumers, but rather opportunism.

I wonder why it has changed like this?

If I compare it to the journey Evergrande went through in the book mentioned above, the possible reason I can think of is:

Could it be that in pursuit of rapid expansion, to seize the so-called opportunities, and to bet on their future, they have taken a path that is outside their means and does not respect common sense?

If a company continues to develop in this manner, its outcome is likely to be grim.

If an industry continues to develop in this manner, the outcome for that industry is also likely to be grim.

Disrespecting common sense and not operating within one's means, no matter how dazzling and brilliant it may seem at the moment, is only temporary; the final outcome will inevitably follow the laws of common sense development.

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