Is the value investing philosophy feasible in China's A-share market?

For example, influenced by value investing principles, many investors embrace the 'stock market dog-walking theory'—a metaphor describing the relationship between the economy and the stock market as akin to a person walking a dog: economic development resembles the dog walker strolling at a steady, forward-moving pace—occasionally faster or slower, but rarely reversing (i.e., negative growth), exhibiting relatively low volatility and high predictability; whereas stock market performance resembles an energetic, restless pet dog—pausing, dashing ahead, then doubling back—highly volatile, yet ultimately, sooner or later, returning to its owner’s side. This 'dog-walking theory' reflects a mean-reversion mindset—a deterministic description of stock market trends over the long term. Such long-term inevitability underpins various long-horizon investment strategies. Yet when investors attempt to apply this long-term certainty in practice, they frequently confront numerous contingent factors that delay mean reversion—often until most investors exit their positions at a loss. This evokes the famous quip by economics titan John Maynard Keynes: 'The market can stay irrational longer than you can stay solvent.' For instance, to sidestep large price fluctuations, many value investors try to avoid volatility by selecting so-called 'excellent companies' for long-term holding—believing this approach will help them weather market cycles. In reality, however, this method demands extraordinary patience to yield returns. Consider Kweichow Moutai: with the benefit of hindsight, we know it delivered outstanding long-term returns. But what if we had held it from the outset? Examining Moutai’s historical price chart reveals that an investor buying at the 2007 peak would not surpass that high again until 2015. Using a simple buy-and-hold strategy to achieve decent returns would thus have yielded nearly zero return over those eight years—meaning no profit whatsoever during that entire period. From this perspective, buy-and-hold does not guarantee short-term returns—and sometimes, that 'short term' stretches surprisingly long. (Source: Wind) Of course, success stories do exist: Dahua Technology, a leading company in the security and surveillance sector, faced heightened pressure during periods of technological sanctions against Chinese firms—especially those in surveillance tech. Nevertheless, Dahua consistently pursued its 'broad-security' strategy, deepening its expertise in video IoT. Between 2014 and 2018, its revenue achieved a compound annual growth rate of 34%. Judging by R&D capability, industry standing, and financial health, Dahua is fundamentally a high-quality enterprise. Policy-related headwinds triggered excessive market pessimism—creating ideal opportunities for value investors to accumulate shares steadily. In Q1 2019, as the security industry rebounded, Jingtian Asset Management—having conducted thorough due diligence on Dahua—initiated a new position in the company’s stock and continued adding to it at subsequent quarterly lows. By Q3 2019, Dahua’s gross margin and net margin had both recovered, with gross margin hitting a five-year high—cementing its status as one of the top-tier leaders in the security sector. Public data shows Jingtian held Dahua for over two years (Q1 2019 to Q1 2021), during which Dahua’s share price doubled. A textbook case of buying low and selling high—delivering substantial gains for Jingtian on this investment.

Stock splits genuinely boost share prices—but not for the reason you think.

Other highest-priced stocks in the S&P 500 include Booking Holdings (BKNG), trading around $2,300; AutoZone (AZO), around $2,040; Chipotle Mexican Grill (CMG), around $1,600; and Mettler-Toledo International (MTD), around $1,350. A classic rationale supporting stock splits is that they make shares more accessible to individual investors—or employees—who might otherwise find high-priced stocks prohibitively expensive. For example, consider a company with a $2 billion market capitalization, 1 million shares outstanding, and a share price of $2,000. After a 1-for-10 split, it would have 10 million shares outstanding, each priced at $200, preserving the same $2 billion market cap. Pre-split, each existing shareholder would receive nine additional shares for every one they held. An investor previously willing to invest only $200 could now purchase one share—and face a maximum per-share cost of $200 instead of $2,000. Companies desire a diversified shareholder base comprising both institutional and retail investors—whose influence on markets and individual stocks has grown markedly in recent years. Yet this logic has diminished in relevance today compared to just a few years ago. Most brokerages now allow investors to purchase fractional shares—i.e., 'slices'—of individual stocks. Fidelity permits customers to buy thousands of U.S. stocks and ETFs starting from just $1. Robinhood users can even acquire one-millionth of a single share. An investor can effortlessly buy $200, $1, $10, or $54.31 worth of a $2,000 stock. A Fidelity spokesperson noted that last year, 2.3 million accounts used fractional-share trading. Moreover, many investors gain exposure via index-tracking ETFs—which already enable them to hold baskets of stocks at prices far below the aggregate cost of the underlying securities. At one time, stock splits may have disadvantaged investors who paid per-share commissions (rather than per-trade commissions). But in today’s zero-commission trading era—now widely adopted by brokerages—this disadvantage has essentially vanished. Options trade in lots of 100 shares, so options contracts on high-priced stocks can be extremely costly. Over the past two years, retail participation in options markets has exploded—potentially amplifying this effect. Yet this matters more for companies like GameStop than for giants like Amazon or Alphabet. Lower share prices make Amazon or Alphabet more likely candidates for inclusion in price-weighted indices such as the Dow Jones Industrial Average. Though still speculative, Apple joined the Dow in 2015—just one year after executing a 1-for-7 split. Since its 1980 IPO at $22 per share, Apple’s stock has undergone five splits. Adjusted for splits, its IPO price amounts to merely $0.10 per share.

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Milestone Asset Management acquired 9,753 shares of Sherwin-Williams valued at approximately $3.15 million in Q3. Analysts maintain a Moderate Buy rating with a $382 price target following strong earnings.

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