我为什么买GE

Why I bought GE

> By Duan Yongping · his NetEase blog (nteswjq.blog.163.com, now closed; read from web archives) · 2010-03-29 · [Original link](http://nteswjq.blog.163.com/blog/static/1269981201022971051185/) ([archived](https://web.archive.org/web/20100410232710/http://nteswjq.blog.163.com:80/blog/static/1269981201022971051185/))

I've kept saying I'd talk here about a few of my own examples when I had the chance, but I never knew which one to talk about.

Actually I've touched quite a few stocks over these years, some losing, some winning, but there's not one I felt 100% from the start I'd definitely make big money on. Whichever I bought, I always felt somewhat uneasy, heh.

After thinking it over, I feel GE may be the most characteristic of me.

When I first started running companies, the one I liked most was probably Panasonic. Later I gradually became somewhat disappointed with Panasonic, especially after visiting Panasonic headquarters in Osaka, where I really felt Panasonic had some problems, and gradually I stopped mentioning Panasonic much. (When I have time later I can also talk here about how the Panasonic visit felt.)

Around that same period (it should have been before going to Panasonic), we began reflecting on ourselves more and more, hoping to build and strengthen our own corporate culture. I think I was studying for an EMBA at CEIBS at the time, and also brought some CEIBS courses into the company.

The book that impressed me most in that period was the autobiography by GE's previous CEO, Welch. In that book I saw the powerful role corporate culture plays in building a good company, and was left with an extremely deep impression of GE's strong corporate culture.

Later I read Welch's later book Winning, and learned further how they built their corporate culture.

From then on I also spent a lot of time understanding and thinking about GE: why GE is a century-old company, why GE's board always manages to pick a good CEO, why more than 170 CEOs of the Fortune 500 come from GE, and so on.

Back then I actually did pay attention to GE's stock, but felt the price wasn't cheap (around 40, I think), so I stopped paying attention to the price.

From the fall of Lehman in September '08, the impact of the financial crisis grew bigger and bigger, and the whole market was jumping at shadows. By November I saw the panic in the whole market getting worse and worse, and I thought this was probably the "fear" Buffett talks about coming, that is, my turn to be "greedy".

At first I didn't have a particularly clear target; I just felt there were bargains everywhere in the market, but I didn't know which were safe; every one seemed to have big problems, as if every company might go under. What I thought about most then was how to mobilize all the resources I had to seize this once-in-a-lifetime opportunity.

By February, GE had broken below 10. By then Lehman, AIG, Citigroup and many companies connected with subprime had gone bankrupt or were on the edge of bankruptcy, there was more and more negative news about GE, and many people on Wall Street were saying GE would be the next Lehman.

I knew that in its good times GE earned more than two dollars a share; even if it were a bit worse later, after the crisis it would surely earn at least 1.5 dollars a share. If I gave it a P/E of 12–15, it should be a stock over 20 no matter what. So when GE got to around 10 I'd already started buying some, but hadn't yet made up my mind to buy big. Until one day, when GE fell to around 9, I saw a speech by Jeff Immelt. I've forgotten his exact words; the gist was that he thought GE's image had been damaged and it was all his fault. GE would adjust its business structure over the next few years and bring the finance company's share of the whole company down to below 30%. He also reaffirmed that GE as a whole was safe and healthy, and so on.

Of all the companies in trouble at the time, GE seems to be the only one I saw come out, admit its mistakes and examine how to respond. That's probably where differences in corporate culture show, isn't it?

GE is a huge company. I did try to see clearly what businesses GE has and to analyze the strengths and weaknesses of all its business models, but found it very hard. I could see some very good models, and also some not-so-good ones.

In the end, the deciding factor that made me resolve to go in heavily was still my understanding of GE's corporate culture. I believed the financial crisis wouldn't destroy GE's strong corporate culture; GE's problems were only caused by some past strategic mistakes and could certainly be corrected given time. The mistakes of great companies are often once-in-a-millennium investment opportunities (heh, some people also call this speculation).

Once I'd figured it out, things were simple. For a while after that I was busy buying GE almost every day, constantly finding ways to pull together resources, buying from around 9 down to 6 and then up to just over 10, and I think I bought some more even after 12–13 (some of the money was moved over later from other stocks). I only stopped once GE's share price was higher than Yahoo's. At one point I thought of using margin, but then felt the principle of not doing wrong things couldn't be broken, so I dropped it.

Looking back, among the stocks I bought last year GE wasn't the one that rose the most, but it really was the one I bet most heavily on, made the most on and worried about least. The reason can only be that my understanding of GE's corporate culture in the end helped me make a very important decision. Maybe it was just luck?

Actually when I bought Vanke and Skyworth back then I seem to have had a similar feeling.

Let me mention Skyworth while I'm at it, since a blog friend asked why I bought Skyworth.

Skyworth is in the same industry as us, so we know more or less what kind of company they are. Because of its structure, I've always personally thought Skyworth is the healthiest company in China's color TV industry. Although some things happened back then, the company's most basic things didn't change because of it. When we bought Skyworth, its market value seemed to be under 2 billion (I don't quite remember; some say just over 2 billion). However I thought about it, it seemed cheap, so I bought. We stopped when we were ten thousand shares short of 5%, because buying more would have required an announcement, so I very much wanted to talk with Wong Wang-sang before announcing, afraid he'd think I was coming to grab his little patch of land, heh. In the end, because it wasn't convenient at the time, we didn't buy any more. Only two weeks ago did I call Boss Wong to thank him and say hello and so on.

For Skyworth, I didn't have a very clear idea of how much it was worth, and I don't know their current business in detail, so after it went up I've been gradually reducing my holding; now there's probably less than 20% of my peak holding left. I think the people buying now may understand Skyworth's value better than I do; the money from here on should be theirs to make.

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