---
title: "The performance is great, but why wouldn't I buy Tencent above 600 yuan!"
type: "Topics"
locale: "en"
url: "https://longbridge.com/en/topics/36440929.md"
description: "Investment is about making decisions on the balance between price and value. Even a good company needs a good price at this level. Brother Cai would never buy Tencent$TENCENT(00700.HK) at over 600 yuan. This is not a denial of the company; on the contrary, it is the highest recognition of Tencent: it is so good that it doesn't need to prove itself by chasing highs, so good that we must measure its price with the strictest ruler. Brother Cai's investment framework is simple, just three principles: first, pursue an almost risk-free annualized return of over 15% under the condition of an ultra-high moat (core targets)..."
datetime: "2025-11-17T16:06:07.000Z"
locales:
  - [en](https://longbridge.com/en/topics/36440929.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/36440929.md)
  - [zh-HK](https://longbridge.com/zh-HK/topics/36440929.md)
author: "[友谊第一比赛第二](https://longbridge.com/en/profiles/794333.md)"
generator: "portal-rs"
---

# The performance is great, but why wouldn't I buy Tencent above 600 yuan!

Investment is about making decisions on the balance between price and value. Even great companies need a good price.

At this level, Brother Cai would never buy Tencent$TENCENT(00700.HK) above HKD 600.

**This is not a denial of the company. On the contrary, it is the highest recognition of Tencent:** It is so good that it doesn’t need to prove itself by chasing highs. It is so good that we must measure its price with the strictest ruler.

Brother Cai’s investment framework is simple, just three principles:

**First, pursue near-risk-free annualized returns of over 15% under ultra-high moats (core holdings), such as Tencent below HKD 300 and Moutai below HKD 1,000;**

**Second, in weak moats (fundamentally stable swing trades), use higher risk premiums to target potential returns of over 30% annually.**

**Third, use Graham’s valuation method for cigar-butt stocks, diversify holdings with ultra-high risk premiums, and target potential returns of doubling within the year.**

Current Tencent doesn’t fit any of these three.

**1\. First, look at its macro position in the market.**

What is Tencent today?

It is the third-largest constituent stock of the Hang Seng Index, with a weight almost equal to Alibaba in the top spot. **Tencent is the Hang Seng Index itself.**

![Image](https://pub.pbkrs.com/uploads/2025/e3617a534a9ddfb66398f24880041c4c?x-oss-process=style/lg)

What does this mean?

It means its stock price is deeply tied to the Hang Seng Index—they rise and fall together.

How much has the Hang Seng Index rebounded from its low over the past year?

**Over 35%. This is a huge rally.**

![Image](https://pub.pbkrs.com/uploads/2025/d099677afba33e87ccdb8f0f89e11d17?x-oss-process=style/lg)

The market is like a rubber band stretched too far. After accumulating massive momentum in the short term, it needs to breathe and digest valuations.

Expecting the Hang Seng Index to continue rising non-stop from such highs is unrealistic.

**When the Hang Seng Index’s “beta” starts to flatline or even pull back, Tencent, as a core constituent, will be dragged down by this macro gravity, no matter how strong its “alpha” is.**

You can’t expect an aircraft carrier to speed like a speedboat on calm seas.

**This is the underlying logic of capital flows:** When the valuation gaps in the entire market are filled, incremental capital will hesitate and start looking for new, lower ponds.

The stage for Tencent—the Hong Kong market—has a looming ceiling.

This is not Tencent’s fault, but it is a reality we must face.

**2\. From an opportunity cost perspective**

Second, let’s do the coldest opportunity cost calculation.

Investment is essentially a multiple-choice question. Money placed here means giving up potential returns elsewhere.

Tencent’s earnings last week were indeed impressive: gaming stabilized the core business, video and advertising surged, and cost-cutting measures led to profit releases exceeding expectations.

![Image](https://pub.pbkrs.com/uploads/2025/c046e7a84b459239566e19f873dbcbd2?x-oss-process=style/lg)

But the market is efficient. All these positives have already been faithfully reflected in its stock price, which has multiplied from lows of HKD 200+ to HKD 600+.

We are now facing a behemoth with a market cap nearing HKD 6 trillion.

Assuming that over the next five years, Tencent can maintain 15% annual profit growth with its invincible ecosystem and excellent management—this is already a very optimistic and remarkable assumption.

Then, in five years, its profits will roughly double.

If we give mature-stage Tencent a reasonable P/E of 20x, its market cap will also double. This means that buying at the current price and holding for five years would yield an annualized return of about 15%.

Note that this 15% is based on an ideal assumption of “everything going smoothly”—no major black swans, growth targets perfectly achieved. **It requires stable game licenses, sustained prosperity of the Weixin ecosystem, steady progress in fintech under regulation, and successful overseas expansion.**

When you weigh this 15% “idealized” expected return against the potential risks (geopolitics, industry regulation, new business disruptions), is the risk-reward ratio still attractive?

**For me, no.**

Retail investors have limited capital. On Brother Cai’s radar, there are stocks with much higher expected returns than Tencent at current prices. For example, some leaders in industries with highly oligopolistic supply, undergoing industry consolidation, and with market caps of only tens of billions—they have a much easier path to tripling in three years than a HKD 6 trillion Tencent doubling.

This isn’t to say they are better than Tencent, but that at current odds, they are more attractive.

**Moving money from high-certainty 15% expected returns to assets with higher potential returns—this is the rational choice of opportunity cost.**

3\. Having said that, Brother Cai must emphasize again: not buying Tencent above HKD 600 does not equal being bearish on Tencent.

On the contrary, in Brother Cai’s investment framework, Tencent is a “core ballast” asset—the kind you can scoop up with a bucket when the market panics.

**Its moat is bottomless:**

Weixin’s billion-plus daily active users are the water and electricity of the digital world. This near-monopoly on social graphs and relationship chains cannot be disrupted by any newcomer, no matter how much money or tech they throw at it.

Its management team is the internet industry’s top “warriors,” with unparalleled strategic patience and product instincts.

**Such a company should not be chased when the crowd is cheering and its stock hits new highs, but greedily bought when the market abandons it and it falls into the abyss.**

Think back to 2022, when everyone feared Tencent would be broken up by the visible hand, and its South African major shareholder endlessly sold, driving the price down to HKD 200+. That was the “sweet spot” for the brave.

Buying then earned you not just the company’s growth, but also the market’s emotional recovery from extreme pessimism, valuation repair, and a double Davis double play. **That was the right way to invest in Tencent: left-side positioning, heavy bets.**

Now, after it has multiplied from the bottom, chasing it on the right side—where is your margin of safety?

**You’re just making the last leg of trend speculation—the most dangerous and uncertain part of investing.**

4\. Finally, back to the simplest principle: **Tencent is a great company with a great team, but the current price is not great.**

This is my iron rule.

In Brother Cai’s investment criteria, there is no “because it’s Tencent, we can ignore the price.”

**Every asset has a price. Beyond that price, its investment value plummets.**

Current Tencent is like a priceless treasure auctioned at a price far exceeding its intrinsic value. I admire it, I study it, I even cheer for its every progress—but I won’t spend real money to buy it now.

**I’ll wait patiently for the market to panic again, for it to return to a price so cheap I “can’t sleep without buying.”**

Maybe that’s HKD 400, maybe HKD 300—who knows?

The market always gives us chances—provided we have cash and patience.

So, for Tencent above HKD 600, I choose to stand aside.

As Peter Lynch said: **“Never pay for growth,” unless the price offers enough margin of safety!**

$Alibaba(BABA.US) $Meta Platforms(META.US) $XIAOMI-W(01810.HK)

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## Comments (3)

- **新用戶_Noah · 2025-11-18T03:50:07.000Z**: Xiaomi bro
- **一步错步步错 · 2025-11-17T23:56:39.000Z**: Analyze Alibaba
- **H哥 · 2025-11-17T16:23:36.000Z**: Brother Cai, analyze the current Alibaba


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> **Disclaimer: This article is for reference only and does not constitute any investment advice.**