A-Shares Value Investing: Practical Transformation of Independent Thinking and Contrarian Thinking

The core of value investing lies not in discovering undervalued stocks, but in establishing a sustainable cognitive system and decision-making framework. In the current market environment, Kweichow Moutai (600519.SS) fell from 2055 yuan at the start of 2022 to 1414 yuan at the end of 2025, a cumulative drop of 31.19%[0], while Gree Electric (000651.SZ) rose by 10.07%[0] over the same period; the Shanghai Composite Index only increased by 8.62%[0]. These data reveal the volatile characteristics of the A-Shares market and highlight the importance of independent thinking.

• The essence of contrarian thinking is to buy when the market is panicking and sell when it is greedy. Taking Kweichow Moutai as an example, in December 2025, the price of Feitian Moutai jumped four times in one day to 1580 yuan per bottle[4]. Such short-term fluctuations are often over-interpreted by the market. Independent thinkers can distinguish between short-term noise and long-term value.

• Margin of Safety Quantification Practice
  :
  • Use multiple valuation methods (DCF, PE range, net asset premium) to establish a value range
  • Build positions in batches when the price is significantly below intrinsic value (e.g., strike zone)
  • Set a hard stop-loss line based on assets (e.g.,跌破净现金一定比例)[1]

Traditional causal thinking easily falls into the linear trap of “because A, so B”. Correlation thinking focuses on multi-factor cointegration relationships:

• Macro-Industry-Company Three-Dimensional Linkage
  :
  • Macro: Focus on policy cycles (e.g., 2025 Special Action to Boost Consumption)[4]
  • Industry: Analyze competitive landscape and concentration changes
  • Company: Conduct in-depth research on financial reports for over 5 years, track ROE and free cash flow trends

• Case Insights
  :
  Moutai currently has a PE of 19.68x, ROE of 36.48%, and net profit margin of 51.51%[0]; Gree has a PE of only 7.10x and ROE of 22.62%[0]. Purely looking at valuation, Gree is cheaper, but it needs to be judged comprehensively by combining industry attributes (consumer defense vs. discretionary consumption) and competitive landscape.

Investment Decision = Success Probability × Return Magnitude - Failure Probability × Loss Magnitude × Opportunity Cost

• Practice Points
  :
  • Establish multi-scenario analysis (optimistic/neutral/pessimistic) for each investment opportunity
  • Only act when the expected value of the bet is positive and the magnitude is sufficient
  • Reduce tail risks through moderate diversification (5-10 companies in different industries)[1]

• Industry Cycle
  : The liquor industry is currently in a “bottoming stage, with sluggish sales but month-on-month recovery”[4], and bottom signals are clear
• Valuation Cycle
  : Moutai fell by 18.40% in 3 years and 24.50% in 5 years[0]; Gree rose by 24.92% in 3 years and fell by 32.74% in 5 years[0]
• Sentiment Cycle
  : In 2024, “the market is punishing irresponsible fund managers”[3], and active equity funds are being questioned

:

• Research and layout when the industry is pessimistic (e.g., current liquor sector valuation is at a historical low)[4]
• Be alert to risks and gradually reduce holdings when the industry is optimistic
• Treat market crashes as opportunities to increase positions and market frenzy as opportunities to reduce holdings[1]

Chen Guangming pointed out: “Value investing is sometimes like growing crops—sow seeds, wait for growth and harvest in sunlight and rain.”[2] This reveals a core cognition: investment is not a game against the market, but growing together with enterprises.

:

1. Patience
   : Wait for the right opportunity instead of frequent trading
2. Discipline
   : Strictly implement the investment checklist to avoid emotional interference
3. Openness
   : Keep learning and expand the circle of competence
4. Humility
   : Admit cognitive limitations and敬畏 the market

• Clarify your cognitive boundaries: what you understand and what you don’t
• Build a stock pool for in-depth research instead of chasing market hotspots
• Record investment notes, detailing the basis and reflections for each decision[1]

• Read widely on business, history, and psychology books
• Conduct vertical (historical comparison) and horizontal (peer comparison) research on excellent enterprises
• Maintain curiosity about new things but don’t rush to invest

1. In-depth Research → 2. Build Valuation Model → 3. Wait for Strike Zone → 4. Batch Position Building

[1]:

1. Stock price is far higher than intrinsic value
2. Discover better investment opportunities
3. Company fundamentals deteriorate

• Price stop-loss as an auxiliary discipline: a hard bottom line in extreme market sentiment
• Logic stop-loss as the core discipline: decisively exit when the buying logic is falsified
• Moderate diversification: avoid fatal blows caused by a single judgment error[1]

Before each buy, sell, or review, strictly check each item according to the list:

• [ ] Is the company’s fundamental outlook continuing to improve?
• [ ] Is the moat deepening or shallowing?
• [ ] Are there any changes in industry trends?
• [ ] Is there still a margin of safety in valuation?
• [ ] Are there better investment opportunities?

• Quarterly Review
  : Not reviewing stock prices, but reviewing the company’s operating conditions[1]
• Annual Review
  : Test the effectiveness of the investment framework and continue to optimize
• Extreme Market Review
  : Test the quality of the company and the depth of research

• Continuously optimize the decision-making framework based on market feedback
• Learn from mistakes and avoid repeating them
• Maintain an open mindset and absorb heterogeneous views

As the market environment changes, value investing methods also need to evolve. Chen Guangming emphasized: “Accurately evaluating the future value in the intrinsic value of enterprises is undoubtedly the most important evolution of value investing.”[2]

Moutai is undoubtedly one of the most moated enterprises in China:

• ROE of 36.48%, net profit margin of 51.51%[0]
• Gross profit margin of over 90%, abundant cash flow
• Strong brand premium and stable pricing power

:

• Current stock price is 1414 yuan, with a cumulative drop of 18.40% in 3 years[0]
• Institutional profit forecast growth rate for 2025-2027 slows down (YoY +4.5%, -1.0%, +2.0%)[5]
• The single-day surge in Feitian Moutai prices in December 2025 reflects more channel games than fundamental changes[4]

:

• True contrarianism is not buying when prices fall, but buying at extremely pessimistic valuation levels
• Need to quantify the specific boundary of “great company with overpriced shares”[5]
• Distinguishing between “good company” and “good investment” is the core of independent thinking

Gree Electric’s Financial Data:

• PE of only 7.10x, PB of 1.56x[0]
• ROE of 22.62%, net profit margin of 17.62%[0]
• Stable cash flow and high dividend rate

:

• The air-conditioning industry has entered a mature stage with limited growth space
• Real estate downturn cycle suppresses demand
• Channel transformation and intensified competition

:

• Low valuation does not equal value investing
• Need to analyze industry cycles and enterprise competitive positions
• Distinguish between “temporary difficulties” and “permanent damage”

1. Build Circle of Competence
   :
   • Choose 1-2 familiar industries for in-depth research
   • Build a stock pool of 5-10 deeply researched stocks
   • Read financial reports for over 5 years and build a valuation model

2. Formulate Investment Discipline
   :
   • Create an investment checklist
   • Establish an investment note system
   • Set quantitative standards for buying/selling

1. Construct Complete Framework
   :
   • Improve the four-layer system of cognition, decision-making, execution, and evolution
   • Form a replicable investment process
   • Accumulate experience in different market environments

2. Improve Decision Quality
   :
   • Shift from intuitive decision-making to systematic decision-making
   • Shift from causal thinking to correlation thinking
   • Shift from short-term games to long-term cooperation

1. Establish Investment Philosophy
   :
   • Understand the nature and laws of the market
   • Form your own investment beliefs
   • Maintain inner calm amid market fluctuations

2. Achieve Sustainable Returns
   :
   • Do not pursue huge profits, but pursue replicable returns
   • Do not time the market, but profit through value creation and time compounding
   • Do not be lonely, enjoy the practice process of value investing

: Maintain rationality when the market is irrational, fear when the market is greedy, and greed when the market is fearful. This is not a slogan but an executable system.

: Not simply buying when prices fall, but identifying the divergence between market sentiment and fundamentals based on sufficient research, and placing bets when the margin of safety is large enough.

: Not a specific stock selection method, but a complete ecosystem including the four-layer system of cognition, decision-making, execution, and evolution. This system can help investors maintain consistency and discipline in different market environments.

True value investing is a “lonely practice”[1], which requires us to remain calm amid market noise and adhere to long-termism in the face of short-term temptations. As Chen Guangming of Ruiyuan Fund said: “Adhering to the value investment concept and investing in a large number of high-quality enterprises at reasonable valuations can probably share the long-term value creation of these high-quality enterprises.”[2]

The essence of investment is not to predict the future, but to find opportunities with high probability of winning among multiple future possibilities through in-depth research and independent thinking. This is the real source of excess returns.

---

[0] Jinling API Data
[1] East Money Wealth Account - “Please Avoid Chasing Hot Topics and Speculative Concepts, Follow the Principle of ‘Independent Thinking, Get Rich Slowly’” (https://caifuhao.eastmoney.com/news/20251227124739407882960)
[2] Ruiyuan Fund - “Chen Guangming: Wisdom and Evolution of Value Investing” (https://www.foresightfund.com/contents/2025/7/31-4fd9f076bd8341c5bd981de77e9eeab3.html)
[3] Securities Times - “Five Key Thoughts on Public Funds in 2024” (https://stcn.com/article/detail/1472446.html)
[4] Securities Times - “Moutai Prices Stage a Strong Comeback! Feitian Moutai Jumps Four Times in One Day” (https://www.stcn.com/article/detail/3539237.html)
[5] Tonghuahsun F10 - “Kweichow Moutai Earnings Forecasts and Institutional View Summary” (https://basic.10jqka.com.cn/600519/worth.html)