# An Old Stock Investor from an Investment Bank Shares His Story: He Bought 50,000 Shares of Industrial and Commercial Bank of China at 5178 Points 5 Years Ago and Held Until Now—How Much Has He Made? The Dividends Alone Are Terrifying

(Source: A-shares Collection)

How to Choose Stocks for Value Investing?

First, select industries with sustainable growth.

The industry should be able to grow continuously and have a large enough market, such as consumer goods and healthcare. Extend the cycle to 20 years, then to 50 years—demand in these industries keeps increasing. Healthcare benefits from human health needs, while consumer goods can at least benefit from long-term inflation.

Second, choose competitive companies.

Select industry leaders. Within the same industry, differentiation can be significant. Some companies from ten years ago have grown larger and their stock prices have risen, while others have performed worse and been eliminated. Look for industry leaders with technological advantages and strong branding that can dominate the market.

Hengrui Medicine is a prime example of a high-quality stock!

Today, we will do a small data calculation. Everyone knows that Industrial and Commercial Bank of China (ICBC) has a very large market cap—today it’s 21,171 billion yuan, with a circulating market cap of 16,015 billion yuan. If you had invested 50,000 yuan in ICBC stock five years ago and held it without selling, what would your return be today? Let’s take a look.

Year 1: On December 22, 2015, ICBC’s closing price was 4.67 yuan. 50,000 / 4.67 ≈ 10,700 shares, with a residual of 31 yuan. So, at this point, your securities account holds 10,700 shares, with 31 yuan cash remaining.

Year 2: On July 8, 2016, dividends were paid: 2.333 yuan per 10 shares.

Dividend income: 1,070 * 2.333 = 2,496.31 yuan. The closing price on July 8 was 4.29 yuan. Buy 500 more shares. Now, the account holds 11,200 shares, with 382.31 yuan cash.

Year 3: On July 11, 2017, dividends of 2.343 yuan per 10 shares.

Dividend income: 1,120 * 2.343 = 2,624.16 yuan. Closing price: 5.06 yuan. Buy 500 more shares. Now, 11,700 shares, cash 476.47 yuan.

Year 4: On July 13, 2018, dividends of 2.408 yuan per 10 shares.

Dividend income: 1,170 * 2.408 = 2,817.36 yuan. Closing price: 5.36 yuan. Buy 600 more shares. Now, 12,300 shares, cash 77.83 yuan.

Year 5: On July 3, 2019, dividends of 2.506 yuan per 10 shares.

Dividend income: 1,230 * 2.506 = 3,082.38 yuan. Closing price: 5.67 yuan. Buy 500 more shares. Now, 12,800 shares, cash 325.21 yuan.

As of today, December 22, 2019, ICBC’s closing price is 5.94 yuan. The value of holdings: 12,800 * 5.94 = 76,032 yuan, plus cash 325.21 yuan, totaling 76,357.21 yuan.

Thus, the five-year return on ICBC stock is: (76,357.21 - 50,000) / 50,000 ≈ 52.71%.

Average annual return over five years: 52.71% / 5 ≈ 10.54%.

How to achieve a higher success rate in market “bottom-fishing” as generally believed?

1. Follow the overall market trend and buy at the bottom of individual stocks.

When the market is trending upward or in a bull phase, except for a few stocks falling due to company-specific reasons, most stocks respond to the market trend. This increases the probability of successfully bottom-fishing. This is also one reason why oversold rebound stocks perform well during market rallies—because the overall trend is favorable, and stocks tend to follow the tide.

2. Classic chart patterns or formations.

Examples include W-bottoms, head and shoulders bottoms, triple bottoms. History doesn’t repeat exactly, but it often rhymes. Certain classic patterns have been proven repeatedly in history, and their appearance significantly increases the probability of a market bottom, making bottom-fishing highly successful.

3. Multi-cycle resonance for a major bottom.

The biggest feature of doubling stocks is cycle resonance. Take the recent example of Chuangye Environmental Protection, which tripled. Although benefiting from new district policies, why is only Chuangye Environmental Protection so strong? Technically, its daily, weekly, and monthly charts all show golden crosses, indicating multi-cycle resonance. This is the natural condition that helps it stand out among many benefiting stocks. Historically, many doubling stocks exhibit this pattern.

4. Stock trend upward, and buy on pullbacks.

When a stock’s main trend is upward, the lows and highs keep rising, indicating that corrections are temporary and the trend will continue. For example, Kweichow Moutai’s dips are good entry points. But be cautious: once the trend reverses, exit promptly.

Bottom-fishing signals:

1. Volume. Anything can deceive, but volume cannot. When indices start rising on increased volume—above previous declines—it indicates funds are bottom-fishing. This is the most direct signal to enter. Volume must be sustained.

2. Head and shoulders bottom. Usually appears at market lows. After consecutive new lows, the price rebounds. When the rebound ends and the price stops making new lows, and begins to rise above previous lows (the neckline), it’s a good bottom-fishing opportunity.

3. Rounded bottom. At market lows, the bearish momentum gradually weakens, and bullish forces slowly emerge—not suddenly, but gradually. This pattern is common but hard to judge. It features very small but steadily rising candlestick bodies.

Bottom-fishing principles:

1. The gain/loss ranking should be roughly olive-shaped, with maximum gains and losses around 3%. Most stocks are slightly up or down.

2. Don’t add positions without profit. Near major bottoms, the common belief is “as long as volume supports, a rebound is inevitable.” This is true: increased volume leads to rising prices. But the volume you wait for is often created by others bottom-fishing—waiting passively is pointless. Remember: participate in volume surges at the bottom, don’t wait passively.

3. Start big, then small. Have a clear view of the overall trend and industry, act decisively.

4. Bottom-fishing position should not exceed one-third; buy in three tranches.

Basic K-line knowledge: memorize diligently, know entry points, understand exits.

Hammer Candle

Features: The hammer has a long lower shadow and a small real body near the top of its range. If it appears in a downtrend, it signals a potential end to the decline. If it appears after an upward move, it may indicate the upward trend is ending. This is called a hammer.

Hammer Trading Strategy

The hammer signals a strong potential reversal. If it appears after a series of declining red candles, it suggests a market bottom. Investors can cautiously look for bullish signals and gradually increase positions once confirmed.

Inverted Hammer

Features: The inverted hammer has a long upper shadow and a small real body near the bottom of its range. If it appears in an uptrend, it signals a possible end to the rally. If after a downtrend, it indicates the downtrend may be ending. This is called an inverted hammer.

Inverted Hammer Strategy

In a rising market, the sudden appearance of an inverted hammer warrants caution, as a top may be near. When it appears, consider shorting or reducing positions, and wait for clearer signals before increasing.

Engulfing Pattern

Different from hammer and inverted hammer, the engulfing pattern involves two candles. In a downtrend, a strong bullish candle that completely engulfs the previous bearish candle signals a potential bottom—called a bullish engulfing. Conversely, in an uptrend, a large bearish candle that engulfs the previous bullish candle signals a possible top—called a bearish engulfing.

Engulfing Pattern Recognition

1. There must be a clear trend before the pattern.

2. The pattern consists of two candles, one bearish and one bullish.

3. The second candle’s body must completely engulf the first, but not necessarily the shadows.

Trading Strategy

Bullish Engulfing: In a downtrend, a large bullish candle that engulfs the previous bearish candle signals a potential bottom. Consider entering long. Confirm trend reversal before increasing positions.

Bearish Engulfing: In an uptrend, a large bearish candle that engulfs the previous bullish candle signals a potential top. Consider shorting. Confirm trend reversal before increasing short positions.

【Continuation Patterns (also called Unilateral Patterns)】

Unlike reversal patterns, continuation patterns suggest the trend will persist after the pattern completes. Often seen before or after major news releases, forming sustained upward or downward trends. During such patterns, follow the trend and avoid contrarian trades expecting reversals or pullbacks.

Unilateral Uptrend Pattern

Trading Strategy: In a strong upward trend, small pullbacks often occur, characterized by a few small bearish candles after several large bullish candles. These small corrections are often doji or small candles. After these, the trend is likely to continue upward. The success rate exceeds 80%.

Unilateral Downtrend Pattern

Trading Strategy: Similarly, in a strong downtrend, after several large bearish candles, small bullish candles or doji may appear. These are good entry points for short positions.

Winning in the market starts with winning over yourself.

In life, we often follow our feelings, but in investing, sometimes we must go against our instincts. The reason top investors beat the market is that they first conquer themselves—acting rationally rather than blindly following intuition.

Famous fund manager Brian Posner said: “If a stock makes me want to sell it, I can be very sure it will be a good investment.” Similarly, Christopher Davis of Davis Funds learned to invest when feeling “terrified.” He explains: “The higher the perceived risk, the lower the stock price, which actually reduces the real investment risk. We like low prices caused by pessimism.” (Large funds can do this, ordinary retail investors should never try bottom-fishing casually.)

Warren Buffett: Be fearful when others are greedy, be greedy when others are fearful.

Buffett repeatedly emphasizes his investment secret: “Be fearful when others are greedy, and greedy when others are fearful.” The most important thing in stock investing is not selling well but buying well. As long as you buy at a low enough price, you can sell profitably at almost any time—profit margins vary, but the principle remains. The key is avoiding buying too high and selling at poor timing, which can turn profits into losses. The best buying opportunity is after a crash. Buffett says: “I always start looking during times of fear. If I find attractive investment targets, I start buying greedily.”

In times of fear, buy the dip—don’t just think about it or plan it; truly act. Beating the market means beating the crowd, and first beating yourself—overcoming instinct and reaction is the hardest part. That’s why few investors can consistently outperform the market over the long term.