Baijiu stocks experienced a modest rebound this morning. A friend messaged me saying that liquor stocks were rising and suggested I take a look. When I checked, baijiu stocks weren't surging dramatically, but compared to the small-cap sectors that had already started pulling back after market open, the performance looked quite decent. After all, everything is relative.
As for whether Duan Yongping's purchase of Moutai triggered the entire baijiu sector rally, I personally remain skeptical. Why do I say this? Duan hasn't just started buying Moutai today - he's been purchasing and holding Moutai for over a decade. During this period, the dividends have significantly reduced his cost basis. While they say buying and holding are unrelated, I think cost basis still matters psychologically. If my cost basis for Moutai were 100 yuan, I'd certainly feel more relaxed holding it compared to having a 1,500 yuan cost basis.
Moreover, Duan didn't only buy Moutai at 1,400 yuan - he's purchased at higher prices too. My interpretation of his recent purchase is that he probably has another sum of RMB on hand, and holding Moutai is certainly better than keeping cash deposits. Besides, Moutai's current price isn't particularly high, with a dividend yield around 3%, which beats bank deposits just on dividend income alone. This might be his rationale, though I could be projecting my own assumptions.
For investors of Duan's caliber, they probably don't need to chase rapid wealth growth anymore, which explains why they can maintain composure and hold onto quality stocks. For ordinary retail investors like us, we generally don't value dividends or appreciate companies with steady growth rates. Instead, we dream of getting rich overnight and doubling our principal immediately.
Looking at today's gains, among premium baijiu stocks, Jiannanchun Laojiao led with a 4.2% increase, followed by Shanxi Fenjiu at 2.59%, Kweichow Moutai Co.,Ltd. at 2.24%, and Wuliangye at 1.85%. If Duan's Moutai purchase drove the baijiu rally, why wasn't Moutai the top performer?
So what caused the baijiu rebound? I believe it's normal market fluctuation. These stocks have declined significantly, and given uncertainties in other sectors, premium baijiu offers relative certainty compared to other assets. This certainty manifests in dividend yields and future earnings expectations. At minimum, this round of baijiu adjustment should be smoother, unlikely to see earnings cliff-drops, making premium baijiu more attractive.
From a full-year perspective, the baijiu sector hasn't gained much this year, failing to outperform major indices like the Shanghai Composite. Among the three major indices, even the worst-performing Shanghai Composite is up 15.32% this year. Among the Big Four (Moutai, Wuliangye, Jiannanchun, Fenjiu), Jiannanchun Laojiao performed best with an 11.18% gain, while both Kweichow Moutai Co.,Ltd. and Wuliangye are actually down for the year.
What's the outlook for baijiu stocks going forward? I personally think there's potential for small-caps to transition back to large-caps. Premium baijiu stocks are trading at valuation discounts, and while earnings face some volatility and pullbacks, they remain relatively stable compared to many other industries. Moderate valuation repair in Q4 to stabilize the broader market seems feasible.
Regarding growth prospects for next year and beyond, I still think it depends on earnings recovery. Short-term performance relies on valuations, but long-term success ultimately depends on fundamentals. For those holding baijiu stocks, patience remains key. My previous statement about expecting good results by 2030 comes with a caveat - you need to buy and hold sufficient quantities. If your position is too small, even when opportunities arise, the impact on your overall portfolio will be limited.
Investment targets and strategies mentioned are personal investment notes only and should not be considered investment advice. Investing involves risks, and caution is advised when entering the market.