Based on Wang Xing (王星), 那些滚雪球的人 (Those Who Roll Snowballs)
Those Who Roll Snowballs profiles successful Chinese investors and distills their methods into actionable frameworks. The title references Buffett's metaphor: "Life is like a snowball. The important thing is finding wet snow and a long hill." The book examines how Chinese investors have adapted Western investment principles — and developed original approaches — for the unique dynamics of China's A-share market.
Core thesis: There is no single correct way to invest. Successful Chinese investors span value investing, growth investing, and quantitative approaches — but they all share discipline, independent thinking, and rigorous risk management.
The book profiles three categories of investors:
Key insight: A-shares are among the most inefficient major markets in the world due to retail dominance, information asymmetry, and policy-driven volatility — creating opportunities for all three approaches.
Profile characteristics:
Typical metrics:
| Metric | Threshold |
|---|---|
| PB ratio | < 1.0 (or < 0.7 for aggressive deep value) |
| PE ratio | < 10x |
| Dividend yield | > 4% |
| Market cap | > 5B RMB (avoid micro-caps) |
| Debt-to-equity | < 0.5 |
Key adaptation for A-shares: Deep value investors in China pay special attention to SOE reform catalysts. A state-owned company trading at 0.6x book with a reform catalyst can rerate 50-100% in 12 months.
Profile characteristics:
Selection criteria:
Profile characteristics:
Target profile:
| Metric | Range |
|---|---|
| Revenue growth | > 30% YoY |
| Earnings growth | > 40% YoY |
| Industry growth rate | > 20% annually |
| PE relative to growth | PEG < 1.5 |
| Market cap | 5B - 100B RMB (sweet spot for growth) |
Profile characteristics:
| A-Share Characteristic | Impact on Value Investing |
|---|---|
| Retail dominance (80%+ volume) | Creates deeper mispricings; emotional extremes are more extreme |
| Policy-driven cycles | Government policy can create/destroy value overnight; must monitor policy risk |
| SOE ownership structure | Controlling shareholders may not prioritize minority shareholder returns |
| 10% daily price limits | Prevents flash crashes but creates multi-day momentum cascades |
| Limited short selling | Overvaluation can persist longer; value traps are more common |
| Rapid economic transformation | "Cheap" companies may be cheap for structural reasons (sunset industries) |
Traditional margin of safety (buying below intrinsic value) must be augmented in A-shares with:
Policy margin of safety — Is the company aligned with government priorities? Companies in disfavored sectors (e.g., education tutoring after 2021 crackdown) can lose 80%+ regardless of valuation.
Governance margin of safety — Does the controlling shareholder have a history of related-party tunneling? Share pledging? Accounting irregularities? Governance risk is the #1 value trap in A-shares.
Liquidity margin of safety — Is the stock liquid enough to exit? Small-cap value traps with thin volume can trap capital for years.
Structural margin of safety — Is the industry structurally declining? China's economy is transforming rapidly; "cheap" old-economy stocks may be value traps if their industries are being disrupted.
| Sector | Why It Works | Risks |
|---|---|---|
| Banking (银行) | Consistently cheap (0.5-0.8x PB), high dividends, state-backed | NPL risk, interest rate reform |
| Insurance (保险) | Embedded value discount, growing middle class | Regulatory changes |
| Utilities (公用事业) | Stable cash flows, policy-protected pricing | Low growth ceiling |
| Real estate (地产) | Cyclically cheap at troughs | Policy risk (three red lines), structural decline |
| Cyclicals at trough | Steel, coal, chemicals at cycle bottoms | Timing the cycle is difficult |
Growth investors profiled in the book focus on three mega-trends:
Trend 1: Consumption Upgrade (消费升级)
Trend 2: Technology Localization (国产替代)
Trend 3: Healthcare & Aging (医疗健康)
| Sell Signal | Description |
|---|---|
| Revenue deceleration for 2 consecutive quarters | Growth story may be ending |
| Margin compression without explanation | Competition intensifying or costs rising |
| Key executive departures | Often the first sign of trouble |
| Industry regulation tightening | Government policy can kill growth sectors |
| Valuation exceeds 3x PEG | Even growth has limits |
| Better opportunity elsewhere | Opportunity cost matters |
The book profiles several quant investors who use factor models. Effective factors in A-shares:
| Factor | Description | A-Share Efficacy |
|---|---|---|
| Value (低估值) | Low PE, PB, PS | Strong long-term, but long periods of underperformance |
| Small-cap (小市值) | Market cap < 10B RMB | Historically very strong in A-shares; declining post-2017 |
| Momentum (动量) | 6-12 month price momentum | Works but requires careful risk management; sharp reversals |
| Quality (质量) | High ROE, stable earnings | Increasingly important as market matures |
| Low volatility (低波动) | Lower historical volatility | Provides downside protection |
| Reversal (反转) | Short-term mean reversion (1 month) | Strong in A-shares due to retail overreaction |
Score = w1 × Value_Score + w2 × Quality_Score + w3 × Momentum_Score + w4 × Size_Score
Where:
Value_Score = z_score(1/PE) + z_score(1/PB) + z_score(dividend_yield)
Quality_Score = z_score(ROE) + z_score(earnings_stability) + z_score(ocf/ni)
Momentum_Score = z_score(12m_return - 1m_return) # skip most recent month
Size_Score = z_score(-log(market_cap)) # negative because smaller = higher score
w1 = 0.30, w2 = 0.30, w3 = 0.25, w4 = 0.15
| Rule | Detail |
|---|---|
| Rebalancing frequency | Monthly or quarterly |
| Portfolio size | 30-50 equal-weighted positions |
| Turnover constraint | < 30% per rebalance (reduce transaction costs) |
| Sector constraint | No single sector > 20% |
| Liquidity filter | Average daily volume > 10M RMB |
| ST/delisting filter | Exclude all ST, *ST, and stocks with delisting risk |
| IPO filter | Exclude stocks listed < 6 months |
| No discretionary override | Execute the model output exactly |
Used by quality-value investors profiled in the book:
Good business (好生意):
Good management (好管理):
Good price (好价格):
For investors who focus on cyclical sectors:
Phase 1: Cycle Trough Identification
- Industry capacity utilization at multi-year low
- Spot prices below marginal cost of production
- Bankruptcies and consolidation in the sector
- Stocks trading at high PE or negative earnings (paradoxically bullish)
Phase 2: Early Accumulation
- Buy leaders at or below book value
- Small positions; expect further downside
- Check balance sheet strength (survivors win)
Phase 3: Confirmation
- Spot prices begin to recover
- Earnings turn from negative to positive
- PE drops rapidly as earnings ramp
- Add to positions
Phase 4: Peak Recognition
- Record earnings, low PE (paradoxically bearish)
- Industry announces capacity expansion
- Analysts raise targets aggressively
- Begin selling into strength
Phase 5: Exit
- Sell remaining positions before earnings peak is confirmed
- The market prices in the decline before it shows in earnings
- Do not wait for "confirmation" — by then the stock is already down 30%
Regardless of investment style, all profiled investors share these risk principles:
| Principle | Implementation |
|---|---|
| Never use leverage you cannot survive | Maximum margin: 30% of equity; prefer no margin at all |
| Position sizing is risk management | No single position > 10% at cost; 15% at market value maximum |
| Preserve capital in bear markets | Reduce equity exposure to 30-50% when market PE > 80th percentile |
| Know your exit before entry | Write down: "I will sell if [specific condition]" before buying |
| Separate conviction from stubbornness | Re-evaluate any position down 20%; if original thesis is broken, sell |
| Correlation awareness | Holding 10 bank stocks is not diversification |
Value investors:
Growth investors:
Quant investors:
The profiled investors share common psychological traits:
Independence of thought:
Emotional regulation:
Continuous learning:
Patience:
The book introduces a concept of anti-fragile investing for A-shares:
Market Peak: Euphoria → "I am a genius"
Overconfidence → increase leverage, concentrate
Early Decline: Denial → "It will bounce back"
Anxiety → check prices every hour
Mid Decline: Fear → "Should I sell everything?"
Capitulation → sell at the worst time
Market Bottom: Despondency → "I will never invest again"
Depression → avoid all market information
Early Recovery: Skepticism → "This is just a bear market rally"
Hope → tentatively return
Mid Recovery: Relief → "I survived"
Optimism → rebuild positions
Approaching Peak: Excitement → "This time is different"
Thrill → cycle repeats
The profiled investors break this cycle by:
Value investor mistakes:
| Mistake | Description |
|---|---|
| Value traps | Buying cheap stocks that deserve to be cheap (sunset industries, poor governance) |
| Ignoring policy risk | A stock at 5x PE is not cheap if the government is about to regulate the industry |
| Premature buying | Buying cyclicals too early in the downturn; "catching a falling knife" |
| Anchoring to historical valuations | Just because a stock was 20x PE before doesn't mean it should be again |
| Ignoring management quality | Bad managers can destroy book value over time |
Growth investor mistakes:
| Mistake | Description |
|---|---|
| Overpaying for growth | Buying at 100x PE because "it will grow into the valuation" |
| Confusing revenue with profit | Many growth companies never achieve profitability |
| Ignoring competitive dynamics | A growing market attracts competition; moat matters |
| Falling in love with the story | Great narratives ≠ great investments |
| Averaging down on broken growth | If growth decelerates, the stock may never recover to prior PE |
Quant investor mistakes:
| Mistake | Description |
|---|---|
| Overfitting | Strategy works perfectly in backtest, fails live |
| Survivorship bias | Only testing on currently listed stocks, ignoring delisted ones |
| Regime change blindness | Factors that worked in 2010-2015 may not work in 2020-2025 |
| Ignoring transaction costs | Theoretical returns erode with real-world slippage and fees |
| Overriding the model | Breaking discipline during drawdowns defeats the purpose |
Source: Quarterly financial screening
Industry: Consumer staples — household cleaning products
Company: Market leader with 35% share in a fragmented industry
Initial metrics:
Revenue growth: 18% CAGR (5 years)
ROE: 26% average
Net margin: 15% stable
PE: 22x (5-year range: 18x - 40x)
PB: 5.5x
Dividend yield: 2.5%
Business analysis:
✓ Strong brand portfolio (3 of top 5 brands in category)
✓ Distribution network: 2M+ retail points of sale
✓ Pricing power: raised prices 3x in 5 years without volume decline
✓ R&D pipeline: 50+ new products launched per year
✓ Low capital intensity: capex/revenue = 5%
Financial deep dive:
✓ Operating cash flow / Net income = 1.3x (high quality earnings)
✓ Working capital management: inventory days declining, cash cycle shortening
✓ Debt: Net cash position (no financial risk)
✓ Goodwill: 2% of assets (no acquisition risk)
✓ Revenue diversification: Top customer = 8% of sales
Management assessment:
✓ Founder-CEO, 20+ years leading the company
✓ Clean governance record
✓ Share pledge: 0%
✓ Management holds 15% of shares — interests aligned
✓ Employee stock plans for key personnel
Risks identified:
- Raw material price increases (palm oil, chemicals) → Mitigated by pricing power
- New competitors (foreign brands) → Mitigated by distribution advantage
- Consumer confidence downturn → Defensive sector, low discretionary exposure
Intrinsic value estimate:
Method 1: DCF (10-year projection, 10% discount rate) → ¥45
Method 2: Earnings power × historical median PE → 2.5 × 22x = ¥55
Method 3: Comparable companies median PE applied → ¥50
Range: ¥45 - ¥55
Current price: ¥38
Margin of safety: 15-30%
Decision: BUY
Position size: 6% of portfolio (below maximum 10%)
Entry: ¥38
Written exit conditions:
- Sell if ROE drops below 18% for 2 consecutive years
- Sell if management governance issues emerge
- Trim 50% if PE exceeds 35x
- Full sell if PE exceeds 45x
Quarter 1: Revenue +20%, earnings +23%, in line with thesis. Hold.
Quarter 2: Market drops 15%. Stock drops to ¥33.
→ Fundamentals unchanged. Add 2% more (now 8% position).
Quarter 3: Revenue +22%, margins expand. Stock recovers to ¥42.
→ Approaching fair value. Hold, do not add.
Quarter 4: Annual results strong. Stock at ¥48.
→ Near intrinsic value. Hold but watch for overvaluation.
Year 2: Stock reaches ¥58 on market enthusiasm. PE at 38x.
→ Trim 50% of position at ¥58. Lock in gains.
Year 3: Stock corrects to ¥44. PE at 25x. Growth still 18%.
→ Re-add to full position.
Year 5: New foreign competitor gains 10% market share.
Company's revenue growth decelerates to 8%.
ROE drops to 19% (still above threshold but declining).
Management response is unclear.
Decision: Sell remaining position at ¥52.
Total return: ~85% over 5 years (average annual ~13%)
Plus dividends: ~12% cumulative
Total: ~97% gross return
Post-mortem: Good process. Entry at discount, disciplined additions during
correction, trimmed on overvaluation, sold on deteriorating competitive position.
Record in journal for future reference.
"找到湿的雪和长长的坡，然后让时间做你的朋友。" — Find wet snow and a long hill, then let time be your friend.
"在A股做价值投资，你需要比巴菲特多一项能力：读懂政策。" — To practice value investing in A-shares, you need one more skill than Buffett: the ability to read government policy.
"便宜不是买入的理由，便宜且好才是。" — Cheap is not a reason to buy; cheap AND good is.
"成长股最大的风险不是估值高，而是增长不及预期。" — The biggest risk in growth stocks is not high valuation but growth missing expectations.
"量化投资的核心不是模型，而是纪律。" — The core of quantitative investing is not the model but the discipline.
"投资风格没有优劣，只有适合不适合。" — Investment styles are not superior or inferior; they are simply suitable or unsuitable for the individual.
"护城河在中国同样重要，但你需要加上一条：政策护城河。" — Moats matter in China too, but you need to add one more: the policy moat.
"在这个市场上活得久，比赚得多更重要。" — In this market, surviving long is more important than earning much.
"最好的投资者都是最好的学习者。" — The best investors are the best learners.
"不要用一种方法去评判另一种方法的投资者。价值投资者不应该嘲笑趋势投资者，反之亦然。" — Do not use one method to judge investors of another. Value investors should not mock trend followers, nor vice versa.