The crypto circle sees growth with the left eye and sustainability with the right eye

Regarding company valuation,

I’ve already discussed growth potential,

and sustainability.

Now I want to talk about some differences between sustainability and growth potential,

or give examples of different industry combinations,

because what I discussed earlier is more theoretical.

Regarding sustainability,

generally, industries that don’t change too quickly,

are considered to have better sustainability,

for example, industries where technological change isn’t too rapid,

and there are no disruptive competitors entering.

Another factor is consumer change,

which shouldn’t be too fast,

so that demand doesn’t suddenly disappear,

or consumer preferences shift elsewhere,

which is not acceptable.

Let me give an example,

like gaming companies that may have strong growth potential,

if they release a hit game,

they could see a tenfold increase in a year.

But after one or two years,

or three years,

people might lose interest,

prefer other games,

and their profits and revenue could plummet.

Such companies are typical of poor sustainability,

but with strong growth potential.

So when valuing,

if you only see good growth potential,

without considering sustainability,

you might end up losing a lot of money on investments,

this is what is called the growth trap.

Most growth companies,

can only grow for about three years,

by the fourth or fifth year, problems arise,

and their stock prices may crash.

Therefore, when assessing growth potential,

you need to look with one eye at growth,

and with the other at sustainability.

Conversely,

platform companies in the gaming industry are very good,

like NetEase and Tencent.

Once they create a platform,

Company A can develop good products,

sign agreements with them,

and place those products on their platform,

which has a large user community and various other resources.

Having these resources,

they can pick the best products,

and monetize them.

This gives them good sustainability,

and their growth potential may also be decent.

When choosing stocks,

try to avoid gaming companies,

regardless of how popular their games are,

or how they project future development directions.

Although they may be winners this year,

they might not be next year,

the industry is like a solid silver plate with flowing water,

so it’s better to buy platform stocks.

This is also why NetEase and Tencent are top stocks,

because both their growth potential and sustainability are excellent.

So, you need to understand the nature of the industry.

Use both growth potential and sustainability as your two eyes to find companies,

don’t rely on just one,

as that can lead to problems.

Additionally, some companies have decent growth potential and excellent sustainability. These companies are generally good,

Moutai is an example,

why does it have good growth potential? Not because the baijiu industry is growing rapidly.

I mentioned this in the growth potential segment before,

its external growth isn’t very strong,

the baijiu market isn’t expanding significantly,

it’s more stable,

and internal growth is relatively good.

Moutai’s market share is less than 1%,

so it can continue to grow,

everyone wants to drink Moutai,

and it has plenty of room for growth,

so its growth potential is good,

and its sustainability is also excellent.

People all enjoy drinking baijiu,

and won’t easily switch tastes.

Even if people stop drinking baijiu,

it would take many years for that to happen.

Perhaps in a hundred years, people might prefer wine,

and in the next hundred years, they might go back to liking baijiu,

it’s hard to say.

Because for thousands of years, people have been drinking baijiu,

and alcohol has addictive and dependent qualities,

so its sustainability is very high.

Will Apple phones still exist in 100 years? I dare say probably not,

maybe not even in 50 years.

No matter how advanced Apple phones are now,

in 20 years, Moutai’s sales will likely be higher than today,

not lower.

So don’t be fooled into thinking that a new industry or a currently popular product is necessarily good,

many products that were once popular are no longer around.

Microsoft used to be dominant,

and PCs were booming,

but what about now? Many DVD and VCD companies,

like Panasonic making TVs, where are they now? As long as a product can be manufactured in factories,

its sustainability isn’t very high,

older brands and products tend to last longer,

especially those with a brand and history,

because such things are hard to copy,

newly produced items are easier to replicate.

So Moutai is a typical example,

with good growth potential and strong sustainability,

when both are good,

it’s often a top stock.

Another type is companies with poor growth potential but good sustainability,

these companies change slowly,

technological change is minimal,

consumer preferences don’t shift much.

But they don’t have much growth either,

such companies are still acceptable,

like daily necessities companies,

fast-moving consumer goods,

such as Procter & Gamble,

these companies are also decent.

I’ll just give you a quick overview,

when selecting companies,

you can look with two eyes,

one for growth potential,

which directly relates to future profits and cash flow,

and the other for sustainability,

how many years they can operate,

whether demand will decrease,

whether they will be disrupted,

whether they have a moat,

this is the key point.

So I use these two terms to give you a concept,

you should be aware of this,

this will be very helpful for valuation and stock selection.