Source: Kigaku Club

Duan Yongping: Even if I claim to have a lot of business experience, I only felt that my understanding of investment was better after many setbacks.

I asked Buffett what you can't do when investing. He told me: don't go short, don't borrow money, and most importantly, don't do anything you don't understand.

Over the years, I have lost hundreds of millions of dollars in investments. Every sum was lost in violation of Lao Ba's teachings, and all of the money I earned was earned where I really understood.

Mistake 1: Shorting Baidu lost 150 to 200 million US dollars

Duan Yongping: Hehe, I've lost money several times. Most of them can be forgiven, but one time was extremely foolish; I went to Baidu for a short time. My previous investment performance was very good. I was a bit fluttering; I really thought I was amazing.

At first, I still wanted to have fun, but later they didn't accept losing, and finally they were crushed and surrendered. All accounts lost a lot of money, about 150 to 200 million US dollars, and one of them hasn't been able to turn around until now.

The most unfortunate thing is that this mistake has consumed all of our cash reserves, and the opportunity cost is huge. Otherwise, I would be able to help everyone make more money during this financial crisis.

And most unfortunately, this mistake happened after Buffett told me not to go short. Now you know what the consequences of not listening to the old man are, right?

What is gratifying is that the overall performance over the past 3 years has been pretty good. I'm really thankful that the financial crisis gave me a chance to reverse.

This isn't actually my worst investment, though, because it's simply outright speculation. There won't be any more examples of this in the future. Opportunity costs are high, and losing a little money is trivial.

Netizen: What was Duan Zong's reason for shorting Baidu at the time? What were your thoughts at the time to make this decision? What should we learn from this?

Duan Yongping: First, short selling is wrong.

I did see some things that Baidu wasn't right at the time; in fact, Baidu later dropped very low because of this stuff (if I could keep empty until then, I could actually make a lot of money). However, I did overlook some important conditions favorable to Baidu, such as the policy environment. All in all, short selling is speculative; I shouldn't do it.

Reflection: You make a mistake if you have extra cash in your hands. Like Ba Lao, you probably had more free money after NetEase made 100 times more money, and there were no good investment goals.

Second, I think investing is too boring. You can try the fun of shorting. Shorting is an exciting game where you prey on each other. Probably also after this time, I memorized the principle of not shorting.

Voted again on 2022.2.4$ProShares UltraPro Short QQQ ETF (SQQQ.US)$, the total amount is small. Don't be petty; overcoming human weaknesses is not an easy task.

Mistake 2: The gas index UNG lost xx million

Duan Yongping: I've mentioned a few things before; here's an addition I haven't mentioned. I bought an ETF last year, called$United States Natural Gas (UNG.US)$It is an index linked to natural gas.

When I bought it, the price of natural gas was only about 3 yuan, and the long-term cost of natural gas was about 6 yuan or more. I don't think the price of anything can stay below the cost price for a long time, so I went and bought a bunch of UNG.

Later, after careful research, it was discovered that UNG was not linearly related to natural gas, and the time loss was still huge, so I felt that I was wrong. But I'm still a little reluctant to sell it because I've already lost money.

Then, if you remember the mistake, change it. No matter how much the cost is, the principle is the smallest cost, and in the end, you make up your mind to lose money.

Hehe, all the accounts I have managed have lost more than 250,000 in total, but if I hadn't made up my mind to sell at the time, I would have been able to lose about 4 times the original loss so far. And the price of natural gas is 50% higher now than when I bought UNG.

This mistake was mainly due to not knowing enough about the investment target (the overall profit situation was very good at the time, and there was a lot of cash in hand). You must not be careless in the future.

Duan Yongping: Remember Lao Ba's words: If you don't plan to take stock for 10 years, why would you want to take 10 days? I just figured out this sentence and sold all of the UNG I had in my hands at a loss. If I hadn't sold it at the time, I would have lost 6-7 yuan per share until now, and the total amount is probably over 100 million yuan.

Of course, there is another sentence of my own, which is: if you find a mistake, you need to fix it as soon as possible; no matter how expensive it is, the cost is probably the smallest.

Reflection: “If you find a mistake, you need to fix it as soon as possible. No matter how expensive it is, it may be the smallest cost.” Discovering problems and correcting them are quicker than normal people.

Mistake 3: Fresh Choice

Fresh Choice is an American restaurant company that was once listed on the NASDAQ. At the peak of its development, it owned a total of 58 restaurant chains in California, Washington, and Texas, and had a certain market influence, especially in California.

In 2003, Duan Yongping noticed the company. At that time, Fresh Choice's business conditions were not good, the stock price continued to fall, and the debt ratio was very large.

However, Duan Yongping learned through research that although Fresh Choice's stock price is only 1.5 US dollars, its cash flow per share is about 0.6 US dollars.

Duan Yongping felt that with this kind of development, the company would only need more than two years to recover its costs. As a result, he successively purchased 1.04 million shares of this company and became the company's largest shareholder, accounting for 27% of the shares. In October 2013, Fresh Choice announced that Duan Yongping became one of the company's seven directors.

However, after Duan Yongping joined the board of directors as the largest shareholder, he discovered that there was no way to communicate smoothly and freely with other directors and management. Faced with the decline in the company's performance, Fresh Choice management has taken a series of measures, such as increasing the price of products and increasing the speed of market expansion.

Duan Yongping has been running the business for many years and clearly knows that these measures are all very foolish and quick suicides, which will accelerate the company's decline.

He tried very hard to change these decisions. He was unable to clearly explain his views to other directors, and the other directors didn't understand Duan Yongping's deep skills in product marketing. Other decisions were made before Duan Yongping joined the board of directors.

Under management's misdirection, Fresh Choice's debt became heavier, and product price increases caused turnover to drop rapidly. Within just a few months, cash flow changed from positive to negative.

As a result, Fresh Choice went bankrupt, changed shareholders, and was delisted by NASDAQ. Duan Yongping lost more than 1 million US dollars.

The loss of more than 1 million US dollars is not an unbearable figure for Duan Yongping. “I am donating more than just this amount.” He said that his expectations for this investment were not to make money; he just wanted to get into a “sparrow” with all the essentials to see how the American company actually works. It's considered a tuition fee.

However, this failure also made Duan Yongping realize that the company's investment value is not only closely related to corporate management, but is also profoundly affected by the board's ability to make decisions.

Therefore, when making value investments, you must fully understand an enterprise. You must not only understand the company's managers, but also pay attention to the directors' backgrounds and their decision-making and governance style.

Perhaps it was this experience that made Duan Yongping's later investments begin to focus on the leaders in the enterprise and the corporate culture derived from the leaders.

Mistake 4: Investing in Delta doesn't sleep well

Netizens: Why are you not optimistic about the aviation industry$Delta Air Lines (DAL.US)$?

Duan Yongping: From the perspective of buying = holding or holding = buying, buying an airline at the time was actually tantamount to selling Apple to buy an airline, even though I used the recent surplus of cash.

Seems like a bad decision in terms of 10 years or more. However, out of curiosity, I took a close look at the reason the old bus was bought, and it seemed quite reasonable, so I bought 1% of Dal (Delta Air Lines), which was just fun. Maybe under the pandemic, I'll have some time to take a look.

Compared to before the last restructuring, several major airlines are now actually somewhat quasi-monopolistic, so in the foreseeable future, the business model will also be quite good.

The investment in air ports is huge, making it difficult for new competitors to enter. Also, the purchase shows my confidence in humanity's victory over the virus.

Duan Yongping: It's rare that I can't sleep well because of the investment. It's really not practical to hold an airline; there are always things I can't think through. The uncomfortable part of owning an airline is that I don't know which side time is on.

The feeling of owning Apple is completely different; I don't mind how the stock price falls. Fortunately, most of my parts are Apple rather than airlines. OK, take a small gamble and be willing to lose. Respecting Lao Bade's ideas, I also looked for an opportunity to withdraw.

Duan Yongping: At last, Delta was emptied at a point in time. Indeed, as Lao Ba said, this business may have changed. Buying stocks means buying a company. The airline business may struggle for quite some time; it's not something I can figure out.

Netizen Q: I remember that the price is $28 after the liquidation is completed. Time costs are the most precious cost.

Duan Yongping: Yes, we also made about tens of millions more in Delta, which is more fortunate than Lao Ba. But I think the old bus is right; we must resolutely sell it when it is time to take action.

Reflection: Buffett struggled in the aviation quagmire for 30 years, admitting losing and clearing the position. Duan Yongping, who has always been faint, also had trouble sleeping. You still need to clearly understand the boundaries of your circle of abilities.

Duan Yongping: Actually, my greatest asset is the mistakes I've made, and so has Buffett.

“The only thing I'm sure of is that we'll all keep making mistakes in the future”.

edit/lambor