Today I share my views on investing in the third category of assets (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 properties: it can generate cash flow.

We can see its fundamental logic using simple arithmetic that even elementary school students understand.

If an asset can generate 100 yuan of free cash flow each year and can 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 gives us 4000 yuan.

If the current market price of this asset is only 40 yuan, then obviously, as an investor, I can directly spend 40 yuan to buy this asset, and 40 years later, I can get a hundredfold return just from its cash returns. If we add its asset value, my return would be even more impressive.

Therefore, the key and the most important factor in investing in this type of asset are all centered around the discounted total of future free cash flows generated by this asset.

In this regard, several predecessors have set clear examples for us, which I have also shared in my previous articles.

Chronologically, they are: Philip A. Fisher, Warren Buffett, and Charlie Munger.

In Fisher's era, there wasn’t as clear a concept as Buffett’s and Duan Yongping’s of “buying stocks is buying companies.” However, his lifelong belief was to buy good companies and hold them as long as they do not deteriorate, which essentially follows the same principle. His investment philosophy later became one of the important sources of Buffett’s ideas.

The two most famous classic cases of Fisher achieving a hundredfold return are Texas Instruments and Motorola.

For Texas Instruments, he bought in 1953 and held until 2004. Over these 51 years, Texas Instruments brought him over 1500 times return.

For Motorola, he bought in 1957 and held until 1996. Over these 39 years, Motorola provided him with over 200 times return.

We are even more familiar with the cases of Buffett and Munger.

The Washington Post, American Express, See's Candies, Berkshire Hathaway, Hershey, these are some of the classic investments by these two predecessors that reached or exceeded a hundredfold return.

If we include other investments that did not reach a hundredfold but exceeded thirtyfold, 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 time frame and cases are relatively shorter than those of the above masters, so I haven't listed him here.

The reason these predecessors could achieve such returns from these assets is fundamentally about returning to the company's fundamentals, assessing whether the business model and corporate culture can sustain profitability, whether it can continuously generate substantial free cash flow, and continue to grow for decades.

Then, based on this foundation, simply buy when the market severely underestimates their value.

After that, as long as the fundamentals of these assets do not change, there is no discovery of better assets, and their prices are not excessively high, these predecessors would continue to hold, letting the power of time and compounding work.

We often say there are many good stocks in the U.S. market, but in fact, the A-shares also have companies that have provided investors with a hundredfold return since their listing through cash dividends (reinvestment) plus stock price appreciation.

Gree Electric, Fuyao Glass, Luzhou Laojiao, Yili Shares, Yunnan Baiyao, Shanxi Fenjiu, Kweichow Moutai, Wanhua Chemical, Pian Zai Huang……

These are typical in the A-share market.

(Note: I list these A-share stocks not to suggest investing in them, nor do I believe they can provide a hundredfold return in the future; this is merely a retrospective examination of historical data as an example.)

However, whenever we talk about these stocks, public commentary is rarely judged from the perspective of corporate culture, business models, or free cash flow, but rather from attractive, trendy perspectives such as “sexy,” “windfall,” and “trend” to grab attention and gain traffic.

Such attractive and traffic-gaining judging methods are not investment.

Since there is such a clear standard and logic, why can’t the vast majority of us achieve it?

One reason is that the vast majority of us just want to get rich overnight and do not want to gradually become wealthy;

The second, and more important reason: understanding a company, knowing its corporate culture, business model, and comprehending its future free cash flow is extremely challenging——just as Duan Yongping said, understanding a company is equivalent to completing a college degree.

It’s so difficult, how many people are willing to spend time and effort?

Therefore, in the end, the vast majority of people want to take shortcuts, leading them to engage in activities that resemble investing but are actually gambling.

Thus, can the vast majority of ordinary people achieve this and obtain a hundredfold return from such assets?

No, it is not possible.

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