Analysis of Duan Yongping's 100x Return Investment Strategy in NetEase and Implications for Current Chinese Investors

Duan Yongping invested in NetEase at approximately $1 per share in 2002, eventually gaining over 100x returns, becoming a classic case in China’s investment history [1][2][3]. At that time, NetEase faced delisting risks due to the bursting of the internet bubble and financial fraud allegations, with its stock price dropping to a low of $0.64 per share. However, through research, Duan Yongping found that NetEase had about $2 in cash per share and huge potential in its game business [1][2][5]. He strictly followed the three investment principles learned from the Buffett lunch: no shorting, no risky leverage, no investing in what you don’t understand [3][4][5], combined with his deep understanding of the game industry (he has relevant industrial background), and held NetEase stocks for 8-9 years, witnessing the release of the company’s value [1][5].

The current Chinese investment environment has a complex investor structure with a high proportion of retail investors and a strong speculative atmosphere [8]. Duan Yongping’s strategies of concentrated investment, emphasis on business models, and long-term holding are still applicable [8][9][10].

1. Importance of the Circle of Competence
   : Duan Yongping’s background in the game industry enabled him to identify NetEase’s true value, indicating that investors need to establish and focus on their own circle of competence and avoid blindly following hot trends [3][5][8][10].
2. Margin of Safety and Contrarian Investment
   : NetEase’s cash reserves were higher than its market value at that time, providing a natural margin of safety. Duan Yongping’s contrarian investment decision during market panic was the key to success [1][2].
3. Value of Discipline
   : Strictly adhering to investment principles (no shorting, no leverage) helped him avoid risks, and the long-term holding strategy fully amplified his returns [3][4][5].

• Risks
  : The extreme situation of NetEase’s investment (cash > market value) is difficult to replicate, and Duan Yongping’s industry advantages are not available to all investors; the current market supervision changes frequently, so strategies need to be adjusted in combination with the new environment [1][2][3][5].
• Opportunities
  : Applying Duan Yongping’s principles can help investors overcome short-term speculative psychology, avoid leverage risks, focus on long-term value investment, and improve investment stability [8][9][10].

Duan Yongping’s success in investing in NetEase stems from his deep understanding of the industry, strict investment discipline, and grasp of the margin of safety. His three investment principles (no shorting, no risky leverage, no investing in what you don’t understand) still have guiding significance in the current Chinese market, but investors need to flexibly apply them in combination with their own circle of competence and market changes.