It is the dream of any value investor to identify a bunch of stocks that can yield a ten-fold return in a decade or less.
But achieving that is not easy, to say the least.
If one looks at the Hong Kong market, less than 30, out of a total of more than 2,000 listed entities on the local bourse, were able to reward their investors with such return.
That means a probability of just 2 percent.
The real challenge is this: not only do you have to pick the right stock, you also need to have the patience to hold for 10 years.
Vitasoy International Holdings (0345.HK), a leading soy milk producer in Hong Kong, saw its share price surge over 30 percent after announcing a set of strong interim results.
The company’s sales rose by 22 percent and net profit soared by 30 percent in the six months ended September 30.
In a few trading sessions after the result announcement, Vitasoy’s share price spiked to a record high of HK$32.7, yielding a cumulative ten-fold return compared to its HK$2.88 price a decade ago.
Even highly popular top mainland liquor brand Kweichow Moutai Co. (600519.CN) failed to match Vitasoy’s share price performance over a ten-year period.
A ten-fold return over 10 years means the compound annual growth rate has to be least 25 percent. The compound rate of return achieved by legendary investor Warren Buffett over the long run is about 20 percent, as a comparison.
Vitasoy’s gain has not come easy. It ventured into mainland market back in the early 1990s. But it had been long plagued by rampant knock-offs and different consumer tastes.
Things began to turn around in the last couple of years, as more mainland customers began turning to soy milk for health reasons, and they are willing to pay more for trustworthy brands.
Also helping is Vitasoy’s establishment of a nationwide distribution network after years of work.
Interestingly, one of its products, the Vita Lemon Tea, has become a hit drink, especially among Chinese youngsters.
Vitsoy was founded by Lo Kwee-seong in 1940. His two brothers Lo Tang-seong and Lo Fong-seong founded separately Café de Coral and Fairwood, which are both now leading fast-food restaurant chains in Hong Kong.
Impressively, all these three counters have become multi-baggers one after another.
The common attributes of these three companies include their focus on the mass market, their ability to keep reinventing themselves and their perseverance during tough times.
This article appeared in the Hong Kong Economic Journal on Nov 30
Translation by Julie Zhu
[Chinese version 中文版]
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