Is it normal to look down on Moutai?

Someone commented that, companies like Moutai with annual revenue of over 17k yuan and profits of several billion yuan are not worth paying attention to, and instead, some people buy unprofitable trash. The A-share investors are truly surreal.

First of all, let me clarify that I am not a holder of A-shares, and I have never looked down on Moutai. I have always said that Moutai is a good company, with a strong brand moat—if you've read many of my articles about Moutai, not the kind of "either praise or criticize blindly" Moutai fanboys, you can draw this conclusion.

But a good company, a highly profitable company, does not mean you should buy it at its current price, because investing is about expectations for the future. I have repeatedly said that I don’t buy Moutai mainly because I have many better options, and secondly, because I won’t invest in industries that are inevitably declining in the long term. Even if this brand remains competitive in a declining sector, I wouldn’t buy it. The reasoning is simple: money is limited, and I can’t allocate enough to better targets, so why look for gold in a shitty sector?

Many people have been saying that the more Moutai’s price drops, the happier they are; the more it falls, the lower its P/E ratio, and the more attractive its future dividends become—especially in a market environment with such low interest rates, where else can you find such a good financial product?

But have they considered a premise here—that is, whether it can maintain such high revenue and profit in the future? If it can’t, then the current P/E ratio has no reference value. Because the P/E ratio is stock price divided by earnings per share. For a consumer goods company with "almost definite upper and lower limits" on its P/E ratio, if earnings decrease, the stock price will fall. No matter how profitable this company is compared to others, it’s useless.

As for its cash balance of over 100 billion yuan, that’s excellent. Not only is it better than most peers, but even compared to the entire A-share market, it’s outstanding. Holding any company with such a cash reserve is a king’s move. But again, the point is, stock price is compared to its own past and future, not to other companies or stocks, because its valuation exceeds 1.7 trillion yuan. If the entire high-end liquor consumption scene continues to decline, will it increase costs to maintain revenue and brand? If so, its profit margin will drop significantly—that is, it won’t be as "high-margin" anymore. Then it either can’t distribute as many dividends, or its cash reserves won’t be as large. At that point, would you still think, "It has so much cash on hand, even if it drops, it has cash as a bottom support"?

So, returning to the title, looking down on Moutai must be problematic. Who could create such an excellent company? Even if Moutai tried to replicate itself now, it would be impossible because that’s the result of perfect timing, geography, and human harmony. But acknowledging its excellence, and at the same time not optimistic about this sector or not buying its stock, can coexist. I don’t think it’s a good idea to buy just because it has fallen; because it’s on a path that doesn’t seem to have much future.