"Focus on Big Deals" Investment Philosophy: Select High-Quality Stocks for Long-Term Stable Returns

The “Focus on Big Deals” investment philosophy is essentially a

. By analogy with Didi drivers choosing high-quality orders, it emphasizes that investors should:

1. Select high-quality targets
   : Choose “big deal” companies with strong moats
2. Wait patiently for opportunities
   : Focus on waiting for reasonable prices within your circle of competence
3. Hold long-term
   : Avoid the “small deal” mindset of high-frequency trading
4. Think in terms of subtraction
   : Clarify investment criteria to reduce decision complexity

Based on an analysis of high-quality companies like Apple (AAPL) and Microsoft (MSFT), “big deal” companies should have the following characteristics:

• Strong profitability
  : Apple’s net margin is 26.92%, Microsoft’s is 35.71% [0]
• Stable cash flow
  : Apple’s free cash flow is $98.77 billion, Microsoft’s is $71.61 billion [0]
• Low financial risk
  : Microsoft’s debt risk rating is low-risk; Apple’s is relatively higher but manageable [0]

• Industry leadership
  : Apple’s market capitalization is $4.04 trillion, Microsoft’s is $3.52 trillion [0]
• Diversified revenue sources
  : Apple’s iPhone revenue accounts for 50.4%, services for 26.2%; Microsoft’s cloud services and enterprise software dominate [0]
• Continuous innovation capability
  : Both companies continue to invest in cutting-edge areas like AI and cloud computing [0]

• Reasonable valuation
  : Current P/E ratios are 36.39x for Apple and 33.53x for Microsoft, which are reasonable relative to growth potential [0]
• Long-term growth trajectory
  : Apple’s 5-year cumulative return is 268.95%, Microsoft’s is 198.53% [0]

From the chart analysis:

• Apple’s 5-year annualized return
  : 29.48%, cumulative return:263.89%
• Microsoft’s5-year annualized return
  :24.16%, cumulative return:195.11%
• Both companies significantly outperform the market average

###2. Risk-Adjusted Returns

• While short-term volatility exists, long-term risk is relatively manageable
• Apple’s current annualized volatility:32.56%, Microsoft’s:24.57%
• Strong resilience during economic cycles

###3. Significant Compounding Effect

• Full play to compounding effect through long-term holding of high-quality companies
• Avoid transaction costs and timing errors from frequent trading

• Market cap >$50 billion to ensure industry position
• ROE>15% to reflect profitability
• Net margin>15% to show competitive advantage
• Stable growth in free cash flow
• 5-year revenue and profit CAGR>10%

• Clear industry leadership
• Sustainable and understandable business model
• Honest and capable management
• Deep and sustainable moat
• Comprehensible within the circle of competence

• Set target buying price range
• Avoid chasing highs; wait for market panic or temporary company difficulties
• Focus on DCF valuation vs market price differences
• Consider interest rate environment impact on valuation

• Buy in batches within reasonable price range
• Avoid full position at once; reserve funds for uncertainty
• Adjust positions based on company fundamental changes

• Set minimum 3-5 year holding period
• Avoid frequent trading due to short-term volatility
• Focus on company fundamentals rather than stock price fluctuations

• Regular (quarterly) fundamental assessment
• Track whether moat is eroded
• Monitor management strategy execution
• Follow industry competitive landscape changes

Dimension	“Big Deal” Strategy	“Small Deal” Strategy
Number of investments	5-15 high-quality companies	30-50 diversified stocks
Research depth	Deep research, thorough understanding	Broad coverage, limited depth
Holding period	3-10 years long-term	Several months to2 years relatively short-term
Trading frequency	Low: <5 transactions/year	High:20-50 transactions/year
Risk control	Quality-based risk management, stock selection focused	Diversification-based risk management, quantity focused
Return characteristics	Steady growth, compounding effect	Higher volatility, mean reversion

• Avoid overconfidence
  : Remain humble even with in-depth research
• Control emotional impact
  : Don’t panic during market crashes; don’t be greedy during bull runs
• Stick to circle of competence
  : Don’t invest in unknowns; focus on holding what you understand

• Record investment decision logic
• Regular review and summary
• Learn from mistakes

• Single stock position not exceeding20% of total assets
• Avoid over-concentration in highly correlated industries
• Maintain moderate diversification to应对 black swan events

• Regularly assess position weights
• Adjust positions based on fundamental changes
• Avoid excessive deviation from target weights due to price fluctuations

The “Focus on Big Deals” investment philosophy seems simple but actually requires great

. By selecting high-quality companies, waiting patiently for reasonable prices, and holding long-term to share growth dividends, investors can achieve steady wealth growth through compounding.

The key to this strategy is

—reducing the number of investments, reducing trading frequency, reducing emotional interference—to improve the quality and success rate of investment decisions. Just like Didi drivers focusing on high-quality orders, investors should focus on high-quality “big deal” investment opportunities and reap the compounding dividends of time through long-term holding.

[0] Gilin API Data