Why investors should pay heed to Duan Yongping

September 13, 2016 11:06
Duan Yongpin was the winner of Ebay’s auction for lunch with Warren Buffett. Photo: gegegu.com

OPPO and Vivo are two fast-rising handset brands, fourth and fifth, respectively, by global sales -- but who has heard of Duan Yongping?

Duan, 55, is the man behind these successful ventures.

Born in Jiangxi province, he graduated from Zhejiang University with a degree in wireless electronics engineering.

In 1991, he founded Subor (Xiao Ba Wang in Chinese), whose main product is a copycat of Nitendo’s Famicom.

More than 20 million units have been sold, according to reports, exceeding Famicon sales.

It's said that Subor has become part of the collective memory of those born in the 1980s and 1990s.

In 1995, Duan left Subor and founded BBK (Bu Bu Gao) and started to make VCD and DVD players.

The company has become a famous OEM manufacturer for overseas brands by harnessing R&D talent and cheap labor in Dongguan, Guangdong province.

By 2001, BBK had become the world’s largest DVD manufacturer.

By introducing a partnership program into BBK, Duan incentivized his managers and cashed out his shares at the same time by gradually cutting his stake to 17 percent from 70 percent.

He remains its honorary chairman.

By 40, Duan had made enough money and moved to the US to retire.

He chose America because his wife worked as a freelance reporter for Time and Newsweek.

With too much free time, Duan began learning about stock investing.

He came across a book about Warren Buffett and found his concepts, such as one should buy companies which are undervalued and that one understands, extremely agreeable and impressive.

He read everything he could find about Buffett and then a golden opportunity came along in 2000 when the internet bubble burst.

A large number of Chinese tech companies were having difficulties amid the bust, including the number two mainland game company NetEase.

Duan was one of those approached by NetEase for funding.

After doing some research and applying Buffett’s valuation theory, Duan decided NetEase stocks was a great bargain given that the firm had a solid operation and was generating a cash flow of US$2 a share compared with a share price of just 80 US ents.

Duan put in US$2 million into NetEase.

The stock soared to US$70 in less than two years. He still holds some Netease shares which are effectively worth 1,000 times his purchase price after factoring in stock splits.

He also made a huge profit from his investments in Apple and Vanke and admitted that stock investment generated far more wealth for him than running his own businesses.

In 2009, he couldn’t resist the huge opportunities in the smartphone industry and hence returned to Dongguan to build his own handset making firms.

Using a combination of low pricing and collaboration with mobile carriers, his OPPO and Vivo phones quickly became popular in lower-tier Chinese cities and overseas markets such as Eastern Europe, South America and Southeast Asia.

OPPO and Vivo shipments reached 22.6 million and 16.4 million units, respectively, in the second quarter, making it the fourth and fifth largest brands worldwide, according to IDC data.

The combined volume was roughly the same as that of Apple.

Being a successful entrepreneur and investor, Duan has been proved right, which is why his next move should be closely followed.

This article appeared in the Hong Kong Economic Journal on Sept. 12

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist