A comparative analysis of some investment targets by Xiaomi

$XIAOMI-W(01810.HK) After reading some theories, I now feel that both bullish and bearish investors on Xiaomi have their own reasons.

1. Why is Xiaomi not a good investment target?

Because for investments, good investment targets have certain characteristics, such as those in rapidly developing industries like the shovel sellers during the gold rush, General Electric in the electricity industry decades ago, Dell in the computer industry, and Jensen Huang in today's AI wave. As long as the industry grows, they can make money.

Or businesses that are extremely simple, simple enough to expand infinitely, almost impossible to go bankrupt, and with little competition, like Coca-Cola. Open a map, and there's a profit. Brand and cost advantages make it hard for competitors to survive and grow.

Or those with strong exclusivity, like local stone materials. Due to extremely high transportation costs, people mostly buy local stone materials, giving them some pricing power.

Or industries so unique they have almost no competitors, and Wall Street has long ignored or been unwilling to pay attention to, like the funeral industry or waste management in the past. No analysts were willing to conduct on-site investigations or write analysis reports on these.

Now look at Xiaomi—it’s clearly not one of these types Wall Street likes. In fact, many of its product lines are in fiercely competitive red oceans. What’s even harder is that the market has higher expectations for top performers. You could say the margin for error is extremely low, requiring one business miracle after another to prove itself.

2. Why is Xiaomi a good investment target?

On the flip side, companies that can emerge from harsh competition and achieve one business miracle after another continuously prove their solid fundamentals and capabilities.

Looking at market data optimistically, while no company can sustain high growth forever, there are indeed many companies that have experienced sustained high growth, and their stock prices have risen 10-fold or more. Xiaomi should have a chance to complete this curve. Who wouldn’t want to hold a 10-bagger? Moreover, many high-growth companies experience rapid growth for 3–5 years. For Xiaomi, rapid growth has only been 2 years so far, including this year. Combined with fundamental information, there should still be potential.

3. So, is Xiaomi worth investing in?

From the perspective of conventional investment categories, Xiaomi faces a harsh environment, fierce competition, and a low margin for error, making it unsuitable for investment. But from a fundamental perspective, its user base, products, and financial data continue to exceed expectations, making it indeed suitable for investment.

It suddenly occurred to me that the best question doesn’t have a constant answer but is a principle that continuously tests itself.

Perhaps companies that constantly create miracles are miracles themselves. So-called miracles are things ordinary people find hard to understand, like how Xiaomi expanded from smartphones to cars and then became a sales champion, strengthening its fundamentals in a red ocean. From a metrics perspective, it doesn’t matter if it’s a black cat or a white cat—as long as it catches mice, it’s a good cat. Whether it’s values, methodology, or marketing IP, the principle is very simple: focus on fundamentals. If the fundamentals are improving, it’s worth attention and investment.

Perhaps investing isn’t just a transactional process but also a journey of continuously researching and understanding targets, learning about investments. Compared to simply finding a good sword, the cultivation of becoming a qualified swordsman—increasing one’s experience and judgment—is also important.