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Many fellow enthusiasts have noticed,

I often say that,

The core idea of value investing is to buy good companies at a reasonable price,

and hold them for the long term.

There is a very interesting story behind this statement.

In January 1972,

Warren Buffett was preparing to acquire 100% of the shares of See’s Candies,

At that time, See’s Candies’ book net assets were about $7 million,

annual net profit was about $2 million,

The first offer was $40 million,

Because there was still $10 million on the books,

the seller’s actual asking price was $30 million,

corresponding to a PE ratio of about 14.5 times,

and a PB ratio of about 4 times,

For Buffett, who still adhered to Graham’s traditional value investing philosophy at the time,

this was hard to accept,

He was only thinking of buying at 50 cents on the dollar,

Even at a 1x PB ratio, he found it difficult to accept.

It was Munger who took Buffett to visit the See’s Candies store in California,

and found that there were many customers,

and the brand loyalty was very high,

Munger said: "Rather than spend a small amount to buy a lousy company,

it’s better to buy a good company at a fair and reasonable price."

Eventually, they negotiated to $25 million,

a PE of 12.5 times,

which made Buffett “reach a price worse than death” to close the deal.

In the days that followed, the investment in See’s Candies brought Buffett over $8.3 billion in returns.

This classic deal also marked Buffett’s shift from the “Graham-style low-price penny stocks” philosophy to the “buy good companies at reasonable prices and hold long-term” growth stock investment philosophy.

Buying good companies at a reasonable price and holding them long-term,

This phrase is very familiar and highly regarded among fellow enthusiasts learning value investing.

There is a lot of content contained here,

how much is a reasonable price,

what kind of companies can be considered good companies,

how long to hold for it to be considered long-term,

and so on.

Expanding on this could take all day.

Here, I will only discuss one point: why good companies should be held long-term.

Because it needs to be long-term,

Let’s look at the ultra-long-term return breakdown chart of US stocks over more than 100 years.

Over a 100+ year history, US stocks have achieved an almost 10% compound return,

mainly due to profit growth contribution and dividend contribution,

with relatively less contribution from valuation changes.

Breaking down the S&P 500 returns from 1900 to 2024,

its 9.8% compound return includes,

profit growth at an annualized rate of 5.1%,

dividend growth at 4.0%,

and valuation changes at 0.5%,

which means over half is from profit contribution,

about 40% from dividends,

and the contribution from valuation appreciation is very limited.

This fully illustrates why good companies need to be held long-term,

and why those big V’s in A-shares who bought Kweichow Moutai stocks early on are all holding without selling,

whether it’s the 2015 stock market crash,

or the high point of 2021 at 2600,

they all hold on without selling.

Because they clearly understand,

these are just fluctuations,

compared to the intrinsic value of the company,

the company’s future profits,

and dividends,

valuation changes won’t significantly impact their long-term returns.

As long as listed companies can maintain sustained profit growth over a long period,

and relatively stable dividend income,

then this investment is the most successful in the long run.

I wonder, fellow enthusiasts, after reading this story,

will you still choose to do short-term timing trades? Or will you choose to grow slowly with a good company,

and become wealthy gradually? If you have held Moutai for more than 18 years,

would you choose to sell at the low point in 2013 or at the high point in 2021?