Some quick words from Min: meaningful relationships are invaluable. Over the past 2 years, I have been fortunate to collaborate closely with Zhouzhou Cui, an exceptional investor. Together, we have been treasure hunting for new ideas, building Everest, and most importantly, enjoying the journey. Now, let's hear what Zhouzhou wants to share:
Recently, Min invited me to write an article for Everest’s website and, in a typical Everest way, Min said, “Anything that you want to write about.” As a firm believer in free culture, I wish my previous views hadn’t been so strong because it’s much easier to write on an assigned topic.
After much thought, as a veteran (started in October 2022) in Everest, I will try to do three things to help you know me and most importantly, to understand what Everest has gone through over the past few years.
Some of my personal background,
Everest’s way, and
How does Everest’s way come into being.
You might have noticed that I am clumsily imitating Charlie Munger's classic writing Vice Chairman’s Thoughts – Past and Future. In this classic, Munger had tried to do three more things:
Explain, to some extent, why Berkshire did so well,
Predict whether abnormally good results would continue if Buffett were soon to depart, and
Consider whether Berkshire’s great results over the last 50 years have implications that may prove useful elsewhere.
These three things take time.
But I think, with Everest’s way and some good luck, I will have the privilege to do that decades later.
Back to December
Back to December 2020, when I was a sophomore in college, I was taking a course called Behavioral Finance. The teacher asked each of us to open a stock trading account and engage in trading. Back then, all my money was invested in fixed-term financial products, so I borrowed money from a close friend to make my first trade. At the time, a certain movie was being heavily promoted, so I bought shares of its distributor, China Film Group. However, within just a few trading days, I had already lost 15%. As a stock rookie, the flash-like loss speed forced me to quickly sell the shares because of the fear and anxiety (Looking back, thanks to my fear and anxiety). Anyway, it sucks when I must pay my friends for that sudden 15% loss with my own monthly living expenses.
“And then the cold came, the dark days when fear crept into my mind” (Back to December by Taylor Swift).
I never watched that movie afterward (I guess you know why).
Key lesson learned No.1: Never use leverage. It will erode your peace of mind and healthy financial condition.
It was also in this Behavioral Finance course that I was first introduced to the Efficient Market Theory (EMT). I realized that if I wanted to earn some money based on some public information, I was always late to the party. Moreover, as a young man recently studied some game theory, I also quickly realized that this so-called EMT was just a real-life example of the prisoner's dilemma. I was very puzzled as to why such a simple theory took so much time to explain and why it could win the Nobel Prize. Then, after more than one year of my own ups and downs in investing, I was gradually attracted to value investing via some famous investors in Xueqiu (A Chinese stock forum) and some high-quality WeChat Official Accounts, which all lead to Warren Buffett. As a typical liberal arts student, I have a natural tendency to read the raw materials, which is Warren Buffett’s shareholder letters.
And when I first read the lines below, I had the answer for the EMT question above: You are either an EMT believer or a value investing believer, you just can’t be both.
"We select our marketable equity securities in much the same way we would evaluate a business for acquisition in its entirety. We want the business to be (1) one that we can understand, (2) with favorable long-term prospects, (3) operated by honest and competent people, and (4) available at a very attractive price. We ordinarily make no attempt to buy equities for anticipated favorable stock price behavior in the short term. In fact, if their business experience continues to satisfy us, we welcome lower market prices of stocks we own as an opportunity to acquire even more of a good thing at a better price” (Chairman’s letter 1977 by Warren Buffett).
Key lesson learned No.2: Forget about EMT. Regardless of its correctness, it is no doubt highly misleading. An EMT believer, afraid of all kinds of inefficiency, will always focus on others’ opinions, movements and even feelings, and neglect what really matters, i.e. the business itself.
In the second half of 2022, after a short internship in a REITs IBD program, I found that I was still interested in investing, so I decided to find an internship in secondary market investment. I established three criteria: 1) I must be paid to cover my living cost; 2) I can learn something instead of doing some dirty work like PPT drafting and data cleaning and 3) I prefer lean team instead of too many bosses. And I found Everest (Thanks to the referral of Yusong Chen, a previous Everest’s intern). Looking back, these three criteria, to some extent, exactly cater to Everest’s investment criteria: 1) positive free cash flow; 2) growth in knowledge and 3) reasonable management, and these three above can contribute to attracting more talents, which is a key moat for asset management institution. Wonderful coincidence!
“In the end, you will become the person you were meant to be. 反正最终你会成为你本该成为的那个人” (Duan Yongping’s interview in Zhejiang University in Jan 2025).
Key lesson learned No.3: Choose, do not change. It applies to applying jobs, making friends, getting married and, let’s not forget our living stuff, i.e. selecting companies and entrepreneurs to take care of our money (If you call that “Value Investing”).
So, the story begins.
Running a Fund like Running a Real Business
At first glance, it looks like a strange title. Of course, running a fund is like running a business. Afterall, it’s all business. But a real business mainly resides in two key factors, delight your consumer and a win-win situation in your value-creating chain. You can tell why I add the word “Real”.
“Things that benefit only oneself while disregarding others usually don't last long.只让自己好不让别人好的事情，通常都不会太长久” (Tencent Zhang Xiaolong’ speech in 2019).
To be specific, Everest’s way is described below:
Everest aims to be a going concern (Inspired by Uniqlo’s founder, Tadashi Yanai) with a soul and an evergreen (Inspired by Tencent’s founder, Pony Ma) mindset. Please refer to the first page of our website.
Everest is a technological optimist, an economic optimist, and a Chinese optimist.
Everest advocates a culture of freedom. In other words, after on-board training of our research methods and syncing up of our investment taste, you’ll have every right to autopilot, which is align with CATL’s slogan: “Master the fundamentals and unleash your imagination” (练好基本功，发挥想象力). Getting paid to freely read is a luxury that we can offer in this noisy market.
Everest only has investors; there are no bosses, presidents, directors, or analysts.
Everest cultivates generalist rather than specialist. We do not confine ourselves to specific sectors. We are open to learning about various businesses. But this doesn’t mean we understand everything, our circle of competence expands slowly.
Everest tends to keep costs as low as possible to save costs for our clients. This means you will be lucky enough to try a several-day journey on a slow, green-painted train (绿皮火车) and live in inns near the factories. Please do not forget to try the delicious street food stalls and local hole-in-the-wall restaurants, our treat.
Everest lacks everything except patience. A truly good investment decision is not made without a long-term perspective.
Adequate margin of safety serves Everest well. At the end of the day, conservative investors sleep well (only with earplugs).
Everest is more than happy to be the least liked clients on our broker’s list. Inaction is what we are proud of. If you have found the love of your life, I can’t see why you must have another date.
Everest advocates “Finish today's tasks today and improve with each day's reflection.日事日毕，日清日高”, which is typical of Zhang Ruimin’s way in Haier. That’s why we have a daily-check-in system to help the team be aware of each other’s progress.
Everest prefers primary sources like IPO prospectus, annual reports, interviews and grassroots research (field trips) over secondary sources like sell-side reports. We input information and with good luck, output conclusion, occasionally, insights.
Everest likes grow-ups instead of start-ups. In most cases, we won’t take deep research in companies going public within three years and buy companies going public within five years (Charlie Munger once made a wonderful comment on IPO on 1995 Wesco Financial Corporation shareholder meeting). If you take a close look in our portfolio companies, you will find a group of founders in their fifties. These energetic young boys demonstrate being 50 is a great time to really make your mark. You might retort, "but Min is only in his 30s, why not invest Everest when Min’s like 50 years old". Well, when it comes to compounding: (1+i)^n, “n” is much important than “i” in the long term, right?
Everest likes both great business models with widen moat, or even better, broaden gulf, and amazing entrepreneurs who will let us have a WOW! moment, “This guy is a god damn value investor” (We couldn’t agree more with Warren Buffett’s famous saying “I am a better investor because I am a businessman, and a better businessman because I am no investor”). Of course, the combination of the two elements above doesn't necessarily have to be a perfect 50:50.
Everest would rather be drowned by strong free cash flow than thirsty to death by abundant reported earnings.
Everest cannot handle gigantic topics such as global macroeconomic trends. But maybe you’ll be fortunate enough to hear a little bit about it when your managers are captivated by Chinese baijiu.
Richer, Wiser and Happier
Min deliberately designed Everest’s way with one goal in mind, to offer our clients the best long-term performance.
Interest alignment is something he has always emphasized. He has set such a high bar for his clients (“25% above 8%”). I once joked to him, that if I have a start-up fund, I will adhere to Warren’s “20% above 6%”, since 6% is more like Nanjing University and 8% is no doubt a Tsinghua University standard. Afterall, with great power, comes great responsibility.
Along the way, Min is like a sponge and a learning machine, absorbing the ideas of the best entrepreneurs and investors. The list above has gone through many adaptations to achieve his goal of “Being the best”. With knowledge and habits compounding, he grows wiser every day.
Investing is not a job for Min, but a passion of his. The passion of investing inside him is amazing. The man who has found his lifelong pursuit and big picture is the happiest, in this sense, Min is undoubtedly tapping dancing to work.
Lastly, what kind of impact does Min want to have?
There are many words, but "positive" definitely ranks first.
“At The Coca-Cola Company, we know: It is creating value for the people who have entrusted their assets to us” (Coca-Cola Annual Report 1996 by Roberto Goizueta).
Best,
Zhouzhou Cui
Investor in Everest Growth Capital
15th-Feb-2025
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