Think Like Buffett? Build Your Own Moat Using East Money Stock Data

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Do you want to learn Buffett’s investment wisdom? This article will teach you a practical method that turns Buffett’s abstract concept of an “economic moat” into concrete data analysis steps. You only need to use the free stock data provided by East Money to complete it.

In the Chinese stock market, a systematic analysis approach can help you stand out.

• Statistics show that more than 80% of trading activity comes from retail investors.

After reading this article, you will learn how to systematically evaluate a company using East Money’s three major functions — “F10 Profile,” “Financial Analysis,” and “Industry Comparison” — and build your own investment watchlist.

Key Takeaways

• Buffett’s “moat” concept can be transformed into specific data through financial statement analysis.
• East Money’s F10 Profile, Financial Analysis, and Industry Comparison tools allow you to systematically assess companies.
• When evaluating a company, focus on the three core dimensions: profitability, solvency, and growth capability.
• Building a personalized investment strategy requires creating a screening list, combining valuation metrics, and formulating an action plan.
• The key to investment success lies in discipline, achieved by diversifying and dollar-cost averaging to reduce risk.

Defining the Moat: Three Core Financial Metrics

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Buffett’s “economic moat” sounds abstract, but you can turn it into concrete numbers by analyzing financial statements. Think of it as conducting a health check-up on a company, with the focus on the following three core metrics. Together, they reveal whether a company possesses a long-term competitive advantage.

Profitability: Examining Earnings Efficiency

A company with a wide moat must first be a master at making money. You need to check whether it can consistently generate high returns on capital. The indicators Buffett values include:

• Stable high gross margins
• Strong free cash flow conversion rates
• Return on Invested Capital (ROIC) significantly higher than its cost of capital

Return on Equity (ROE) is a key metric. However, note that standards vary widely across industries. For example, the average ROE in the soft drink industry can be much higher than in food processing.

Therefore, when evaluating, you must compare the target company against the average level of its own industry.

Solvency: Assessing Financial Health

Even if a company is great at making money, an unstable capital structure can cause it to collapse instantly. Strong solvency means the company has sufficient cash to handle emergencies and support operations.

You should focus on “operating cash flow.” A healthy company should maintain positive and steadily growing operating cash flow over the long term. Take Kweichow Moutai as an example: in 2022, its operating cash flow was approximately $5.35 billion, up 27.2% from the previous year. This shows that its core business generates a continuous stream of cash and enjoys extremely robust financial health.

Growth Capability: Judging Future Expansion Potential

A great company not only makes money now but can continue expanding in the future. You need to determine whether the company can reinvest capital efficiently at high rates of return.

You can examine its historical revenue and net profit growth rates. For instance, Kweichow Moutai has achieved compound annual net profit growth rates of 15% over the past 5 years and 19% over the past 10 years, demonstrating a solid long-term growth trend. In contrast, some tech sectors may experience explosive growth in the early stages, only for growth to slow significantly later. When assessing growth, you should look for “sustainable” and “high-quality” growth.

Hands-On Practice: Mining East Money Stock Data

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Theoretical knowledge is the foundation, but real learning comes from practice. Now, we will put theory into action. This section will guide you step by step to conduct a complete “moat” analysis of a company using East Money’s free tools.

We will use the well-known baijiu company Kweichow Moutai (600519.SH) as an example throughout the entire analysis process. Please follow the steps below and personally uncover the business secrets behind the data.

Navigating the F10 Profile: Quick Overview of Core Information

When you encounter a new company, the first step is to quickly understand its basics. East Money’s “F10 Profile” function is like a detailed company resume and the best tool for forming an initial impression.

You can easily find the “F10 Profile” in the navigation bar on any stock page. It compiles key information such as core business, share structure, executive introductions, and operational analysis.

Operation Tip: After entering Kweichow Moutai’s stock page, click “F10 Profile” at the top. First, focus on the “Operational Analysis” section under “Company Overview.” It clearly explains how the company makes money.

Through the F10 Profile, you will discover that Kweichow Moutai’s business is extremely focused. The vast majority of its revenue comes from a single product line — a direct reflection of its powerful brand moat.

This table tells you two things: first, Moutai’s core competitiveness is highly concentrated in premium baijiu; second, its market is primarily domestic, leaving enormous expansion potential internationally. This provides important clues for your subsequent growth assessment.

Deep Dive into Financial Analysis: Insight into Long-Term Trends

After gaining a basic understanding of the company, the next step is to dig deeper into its financial data to verify whether it possesses the “moat” characteristics we defined earlier. Switch to the “Financial Analysis” page — this is the heart of all data analysis.

On the “Financial Analysis” page, focus on the long-term trends of the following key metrics:

1. Key Indicators: Here you can find Return on Equity (ROE). Look for companies that have maintained ROE above 15% for 5 to 10 consecutive years. For Kweichow Moutai, you will see its ROE has consistently stayed above 25% — a very strong profitability signal.
2. Profitability: Check gross margin and net margin. Companies with moats typically have strong pricing power, allowing them to maintain high and stable gross and net margins over the long term.
3. Cash Flow Statement: Examine net cash flow from operating activities. This figure should remain positive long-term and ideally grow in line with net profit. This means the profit the company earns is real cash, not just accounting numbers.

One or two years of excellent data may be coincidental. A true moat needs time to prove itself. When analyzing, always extend the time horizon to at least 5 years, preferably 10 years, to see a company’s genuine and lasting operational capability.

Using Industry Comparison: Confirming Industry Leadership

A company may perform excellently, but where does it stand within its industry? Is it a clear leader or just riding the industry wave? East Money’s “Industry Comparison” function helps you answer this question.

This feature allows you to compare the target company horizontally with its main competitors using the same financial metrics.

1. Find the Entrance: At the bottom of the “Financial Analysis” page, you can usually find links to “DuPont Analysis” or “Industry Comparison.”
2. Select Comparison Metrics: Compare Kweichow Moutai with other listed baijiu companies. Choose core metrics such as gross margin, net margin, and ROE.
3. Analyze Results: You will clearly see that many of Kweichow Moutai’s profitability metrics significantly exceed both the industry average and major competitors. For example, its gross margin above 90% is unmatched in the entire industry.

This step is the final link in verifying a “moat.” If a company not only has excellent financial data on its own but also far outperforms peers in direct comparison, the probability that it possesses a wide moat is very high. At this point, you have completed a full analysis process from initial understanding to in-depth validation.

Integrating Analysis: Building Your Personalized Investment Strategy

You have now learned how to analyze a single company. It’s time to integrate these insights into your own investment strategy. This process will help you cut through the noise of market information and make more rational decisions.

Building a Moat Stock Screening List

After completing an in-depth analysis of a company, do not rush to buy. First, add it to a watchlist. This list will become the foundation of your future investment decisions. Using the companies you have analyzed on East Money, create a core watchlist of 5 to 10 potential stocks.

The purpose of a watchlist is long-term tracking, not frequent trading. It helps you overcome impulsive emotional decisions.

In addition to manual recording, you can also use professional tools to manage your list. Different tools have different focuses; choose according to your needs.

Combining Valuation Metrics: Buy Great Companies at Fair Prices

Buffett’s famous saying is: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” No matter how good a company is, buying it too expensively can still lead to losses. Therefore, you need to learn how to assess its value.

The most commonly used valuation metric is the Price-to-Earnings Ratio (P/E). It measures how much investors are willing to pay for each dollar of earnings. Another metric is the Price-to-Book Ratio (P/B), which measures the multiple of stock price to the company’s book value.

Using Kweichow Moutai again as an example, observing its historical P/E shows that its valuation is not constant.

The chart tells you that Moutai’s P/E once peaked above 47x in 2020 and has since fallen back. Comparing the current valuation to its historical range is a practical way to judge whether the price is “reasonable.” More advanced investors may also use a Discounted Cash Flow (DCF) model to estimate intrinsic value.

Formulating an Action Plan: From Watching to Actual Position Building

When you find a company in your watchlist with excellent fundamentals and a reasonable price, it’s time to create an action plan. Remember, the key to investment success is discipline.

1. Diversify: Never put all your capital into a single stock. Allocate funds across several moat companies in different industries to reduce risk.
2. Dollar-Cost Averaging: Do not invest all funds at once. Set a buying plan, such as purchasing in batches over three to six months, to average your cost basis.
3. Execute Trades: When you decide to build a position, you need a reliable tool to execute. For example, you can use a digital asset platform like Biyapay to convert your funds to USD and transfer them to your licensed Hong Kong brokerage account for investment.

Building a portfolio is only the first step. You also need to review it regularly, adjust according to market changes, and stick to a long-term holding strategy — letting time become your best friend.

You have now learned how to turn Buffett’s wisdom into concrete actions. Using East Money’s publicly available data, you are fully capable of building a professional personal investment system based on “moats.”

Now, don’t just bookmark this article. Open the East Money website immediately, pick a company you are familiar with, and complete an analysis exercise yourself. Real ability comes from practice. As Charlie Munger said:

Those who keep learning will keep rising in life.

This exercise is just the first step. In the future, you can explore more advanced quantitative analysis methods, such as:

• Performance Attribution
• Machine Learning Applications

FAQ

Is this analysis method only suitable for large blue-chip stocks?

No. This method applies to listed companies in any industry. You can use it to analyze small- and mid-cap companies. The key is to find companies with long-term stable financial characteristics, regardless of size.

How often should I re-evaluate my holdings?

It is recommended to review your holdings’ financial reports at least quarterly. A company’s moat can change due to competition or management decisions. Regular tracking helps you spot potential risks early.

Do companies with moats have no investment risk?

No. Every investment carries risk. Even companies with wide moats can face industry decline, policy changes, or overvaluation risks. Proper capital management and diversification are still essential.

What if a great company’s price stays expensive for a long time?

“Waiting” is an important strategy in investing.

You can keep it on your watchlist and patiently wait for market fluctuations to offer a better entry point. Alternatively, look for other equally excellent companies with more reasonable valuations.