In the past few days, it has been reported that an article published by the founder of "Blockchain Rhythm" (@Pxstar_) has gone viral online.

The title of the article is "The Answer That Duan Yongping Didn't Tell Me Helped Me Complete the Most Important Mental Leap in Recent Years" (for detailed content, see the reference link at the end of the article).

Coincidentally, I also read Duan Yongping's Xueqiu Q&A last year and, combined with my own practical operations, accumulated some of my own insights regarding the methods described by Duan Yongping.

Today, I would like to share @Pxstar_'s article and my views on some of the points made in it.

The article mainly describes the following scenario:

Six years ago (in 2020), the author asked Duan the following question:

"People around me born in the 90s no longer drink white liquor… I think this is the biggest risk for the entire white liquor industry. What do you think?"

Duan's response was as follows:

"I don't have much of an opinion; I don't drink white liquor myself, and I haven't really seen young people drinking it," and then Duan added, "I opened a bottle of Moutai and haven't finished it in a year."

If we look at Duan Yongping's response purely from a literal perspective, it completely aligns with the author's statement, with no rebuttal or explanation of (Duan's) own viewpoint:

Yes, "you" say young people don't drink white liquor, and "I" also believe young people don't drink white liquor. Not to mention young people, even "I" myself don't drink Moutai (I haven't finished a bottle of Moutai in a year).

It is easy to imagine how unhappy the author was to receive such a "perfunctory" response, so the author wrote in the article:

"So when Duan Yongping gave me this answer, I was very dissatisfied: since you know that young people don't drink anymore, why are you still buying Moutai stocks?"

Later, an event reminded the author of this past moment:

"In 2022, China's net population growth was negative for the first time, meaning that the number of deaths in China that year exceeded the number of births. This marked the real decline of China's population. At that time, this news was widely discussed, but it brought me a reverse thought: everyone has been shouting that young people aren't having children for many years, yet the population has only just begun to decline. I had early on deemed businesses targeting children, especially education and training, as sunset industries, but this data clearly tells me that Chinese children will still be in high demand for many years to come."

"This means that before this batch of children turns 18 (in 2034), the educational competition in China will not stop. In other words, even if you only start doing education and training for the college entrance examination today, you still have nine good years ahead. Nine years is enough for you to make a lot of money; Pinduoduo was only founded ten years ago."

"This made me realize something: the vast majority of things in this world do not require 'seeing to the bottom.' This epiphany is almost the biggest leap in my thinking in recent years."

The above paragraphs summarize the article.

First, let me share my opinion. I feel that the author seems to have a certain misunderstanding regarding "seeing to the bottom" and Duan Yongping's investment logic.

The core of Duan Yongping's investment logic comes from Buffett and Munger. The key to Ba-Mang and Duan's investment, or the key to measuring a company's core value, has been repeatedly emphasized in Duan's Q&A:

That is the total discounted future free cash flow of the company.

Since the core of value is the total discounted future free cash flow, generally speaking, we certainly hope that the company can operate healthily for as long as possible, so that it can continuously generate cash flow.

What kind of company can operate healthily for a long time and continuously make money?

Of course, it has a high moat and an excellent business model.

However, judging whether a company has a high moat and an excellent business model is extremely difficult. Whether it is Ba-Mang or Duan, among the stocks they have selected over decades, they have only heavily invested in about 5 to 10.

So why do they dare to heavily invest in these 5-10 stocks?

According to their own words, it is because they can clearly understand the business models of those companies, or more colloquially, they can "see to the bottom"—this "bottom" can indeed be long, possibly lasting for decades, and even after them, these companies can still continue to profit healthily.

However, such stocks are simply too few.

The reality is that a large number of companies cannot achieve this. So what should we do in this situation?

We still use the standard of total discounted future free cash flow to judge.

For example, in the case of Buffett investing in PetroChina:

Buffett himself said that PetroChina has risks that he finds difficult to grasp. Such a stock clearly does not meet the criteria of "seeing to the bottom," but why did he still buy it?

It's simple; he himself said:

No matter how big the risk, he believes PetroChina is worth 9 yuan, but the market price is only 3 yuan. At this time, should he buy? Of course, he should buy. So he bought it at 3 yuan, and as long as PetroChina can rise to 6 yuan, he will sell it, and that is enough.

Duan Yongping also has a similar case, which is buying Vanke.

He did not hold onto Vanke all the way but sold it after holding it for a while. The reason he himself stated:

He could only understand Vanke's value at the time he sold it; he could not understand Vanke's future value, so he did not touch it.

So in the entire investment process, how long this "bottom" is does not matter; what matters is whether you can judge whether the total discounted free cash flow of this company is worth buying at the current market price within the timeframe of the "bottom" you see.

That is: whether the current price of the company is far below its intrinsic value (i.e., the total discounted future free cash flow).

As long as this holds, it doesn't matter whether you can see 30 years or 3 years; it can be bought.

For example:

If I clearly believe that a company will have a free cash flow of 10 yuan in the first year, 5 yuan in the second year, and 1 yuan in the third year, at least in the next three years.

In this case, the total discounted future free cash flow of this company is at least 15 yuan.

If today the price of this company is only 1 yuan, should I buy it? Of course, I should buy.

Not only should I buy its stock, but I would also want to buy the entire company to directly access the cash flow.

As for how the company will perform in the 4th, 5th, and 6th years, it doesn't matter if I can't understand or don't have confidence in it; at worst, I can take the cash flow in the third year and close the company.

Reference link:

https://x.com/Pxstar_/status/2012728374725398570

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