Bros, $NVIDIA(NVDA.US) skidded again today, and $Tesla(TSLA.US) is the same, while $Apple Inc.(AAPL.US) is holding steadier. Looks like the night market will be stagnant again tonight. For those of you trapped in losing positions, why not just spill the tea and wait for it to break even first!
" type: "Topics" locale: "en" url: "https://longbridge.com/en/topics/39264839.md" description: "🔥📊90% of people who trade stocks are actually wrong from the very first step: they never really understand what kind of 'business' they are buying. Many study K-lines, watch the news, guess policies, thinking they are investing. But if you look at Warren Buffett's way of thinking, you'll find his first step is never about price. He only asks one question: What kind of business is this, really? In Buffett's framework, there are essentially only three types of companies. Great businesses. Ordinary businesses. Terrible businesses. If you get this first step wrong, almost all subsequent effort becomes futile. Many people lose money..." datetime: "2026-03-14T15:05:34.000Z" locales: - [en](https://longbridge.com/en/topics/39264839.md) - [zh-CN](https://longbridge.com/zh-CN/topics/39264839.md) - [zh-HK](https://longbridge.com/zh-HK/topics/39264839.md) author: "[辰逸](https://longbridge.com/en/profiles/16318663.md)" --- > Supported Languages: [简体中文](https://longbridge.com/zh-CN/topics/39264839.md) | [繁體中文](https://longbridge.com/zh-HK/topics/39264839.md) #Bros, $NVIDIA(NVDA.US) skidded again today, and $Tesla(TSLA.US) is the same, while $Apple Inc.(AAPL.US) is holding steadier. Looks like the night market will be stagnant again tonight. For those of you trapped in losing positions, why not just spill the tea and wait for it to break even first!
🔥📊90% of people who trade stocks are actually wrong from the very first step: they don't even understand what kind of 'business' they're buying. Many people study K-lines, watch the news, guess policies, thinking they're investing. But if you look at Warren Buffett's way of thinking, you'll find his first step is never about price. He only asks one question: What kind of business is this, really? In Buffett's framework, there are essentially only three types of companies. Great businesses Average businesses Terrible businesses If you get this first step wrong, almost all subsequent effort becomes futile. Many people lose money not because they bought at a high price, but because they bought the wrong 'business' from the start. First, the great businesses The most obvious characteristic of these companies is that it's very hard for others to steal their customers. The reasons could be brand, technology, distribution channels, network effects, or economies of scale. Their moat isn't a wall; it's more like a river that keeps getting wider. When competitors want to enter this market, it's not impossible, but the cost is very high and the time required is very long. These companies also have a very important ability: they can raise prices. When costs rise, they can raise prices. When the economy is bad, they can still raise prices. Customers complain, but they still buy in the end. What does this mean? It means their profits aren't easily eroded by inflation. Another very attractive feature of these businesses: They don't require constant massive capital investment. Most of the money they earn can be kept. So you'll see several very stable signals: Low capital expenditure Stable, high return on capital over the long term Consistently growing free cash flow What's even more interesting is that these businesses often aren't extremely dependent on management. As long as management doesn't make major mistakes, the company itself will keep moving forward. So when you encounter this kind of company, the strategy is actually very simple: Buy when the price is reasonable, or even slightly cheap. If the price is 10% to 20% below intrinsic value, many long-term investors will start building positions. After buying, you don't need to watch the market every day. Because the most important thing for this kind of business isn't trading, it's time. The longer the time, the more obvious the power of compounding. Next, the average businesses Most listed companies actually fall into this category. They have some competitive advantage, but the moat isn't that deep. There are quite a few competitors in the market, but not just anyone can easily replace them. These companies can usually grow, but growth often requires continuous investment. For example: Expanding production capacity Opening new stores Increasing advertising Investing in R&D In other words, a large part of the money they earn has to be reinvested just to maintain growth. This leads to one result: The company's return on capital is usually average. There is cash flow, but it's not particularly impressive. Another key difference: These companies are highly dependent on management. If the management team is excellent, the company can perform very well. If management is mediocre, the company often becomes just average. So when facing this kind of company, the investment strategy must be completely different. I won't buy it at a 'fair price'. I will only consider buying when it's very cheap. For example, when the price is 30% to 50% below intrinsic value. Because in this kind of business, the money you make often doesn't come from the business itself, but from: Buying it cheaply enough. When market sentiment is high and valuations are pushed up, I'm more likely to sell instead. The logic is simple: Buy cheap, Sell dear. Finally, the terrible businesses Many investors lose money over the long term by constantly falling into this type of company. They usually have several very obvious characteristics. First, no real moat. Low barriers to entry; anyone can get in. Second, extremely fierce price competition. You make money today, tomorrow someone might squeeze you out with a lower price. Third, they require continuous massive investment. Equipment upgrades Capacity expansion Huge capital expenditures This leads to a seemingly paradoxical situation: The company's revenue grows fast, but shareholders don't make money. Because all the money earned gets reinvested. The return on capital for these companies is often very low and highly volatile. Cash flow is also frequently unstable. The cruelest part is: Even with excellent management, this kind of business might not improve. Because the problem isn't with management, but with the industry structure. So for these companies, my strategy is very simple: Avoid them. No matter how cheap they look. No matter how euphoric the market sentiment is. Avoid them. Finally, sharing a very practical order of judgment. In the future, when you research a company, don't look at the stock price first. Ask yourself three questions first: Does this company have a real moat? Does the money it earn need to be constantly reinvested? Is its return on capital stable over the long term? If all three answers are good, you might have encountered a great business. If only some parts are good, it's most likely an average business. If all three answers are bad, it's probably a terrible business. Real long-term investing isn't about constantly searching for the 'next big winner'. It's about continuously putting capital into the best businesses. Over time, compounding will do the rest for you. If you could only choose one type of business to hold long-term, which would you rather own: A company that grows very fast, Or a company with an extremely deep moat, but stable growth?