📖Duan Yongping
Capital Allocation Assessment
Evaluate management's capital allocation skills.
The most important skill for a CEO is capital allocation. Evaluate how management deploys capital — do they create or destroy value with their decisions?
🏠 Everyday Analogy
📖 Core Interpretation
In Capital Allocation Assessment, Duan Yongping focuses on the gap between price and value. Returns come from paying less than what a business is worth, not from guessing short-term market moves.
💎 Key Insight：Capital allocation is the CEO's most impactful decision.
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❓ Why It Matters
Ignoring valuation turns even good companies into poor investments. Overpaying compresses future returns and leaves little margin when assumptions are wrong.
🎯 How to Practice
Estimate intrinsic value with conservative assumptions, set clear buy ranges, and act only when price offers a meaningful discount with acceptable downside.
⚠️ Common Pitfalls
Confusing a low price with true cheapness
Using one metric without business context
Overly optimistic assumptions that erase margin of safety
📚 Case Studies
1
Tencent Regulation and Gaming Freeze (2018)
China froze new game approvals, hitting Tencent’s core business and causing a steep share price decline and broad pessimism.
✨ Outcome：Duan maintained a long‑term view on Tencent’s ecosystem and network effects; the stock recovered as approvals resumed and business normalized.
2
Berkshire Hathaway Purchase (2006)
Duan applied his ‘simple is better’ approach by buying Berkshire Hathaway, focusing on Buffett’s track record, business quality, and capital allocation, without overanalyzing macro forecasts or short-term earnings.
✨ Outcome：Long-term holding appreciated significantly, reinforcing his conviction in concentrated, high-quality, understandable investments.
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