How to Identify True Leading Stocks?

The term "leading stock" (龙头股) is deeply ingrained in the minds of investors—whether institutional or retail, in finance or industry. Yet, its meaning varies: some think of Kweichow Moutai, others of Tesla, Huawei, or Tencent. Visiting companies, I often see slogans like "Industry Leader" or "Municipal Leading Enterprise." Even local governments promote "building leading enterprises."

Some ask: "Is this topic even worth discussing?"

Absolutely.
In fact, it’s critical. Many failures in trading leading stocks stem not from poor execution but from misunderstanding their essence. Even famous investors and self-proclaimed "leading stock experts" often trade pseudo-leaders.

Thus, we must clarify: What defines a true leading stock?

I. Authentic vs. Fake Leaders

What’s the core of leading-stock strategies?
Some say "entry/exit timing," but I disagree. Timing is secondary; selecting the real leader is paramount. Trading a fake leader—no matter how skilled—defeats the purpose. The strategy hinges on trading the true leader (whether buying high or low). If the stock isn’t a leader, it’s not a "leading-stock strategy."

Selecting the right leader is foundational. As the saying goes: "Without the skin, where would the fur adhere?" Identifying the true leader is the "skin"; trading techniques are merely the "fur."

II. The "First Principle": Core of Leadership

Leading stocks embody the "First Principle" (第一性), which has three layers:

1. Pioneering (率先)

Example: Who was China’s first astronaut?
Most know it’s Yang Liwei. Few recall the second or third. This is "firstness" as being earliest.

2. Ranking (最性)

In a math exam:

• Xiao Ming: 99 (1st)

• Xiao Zhang: 90

• Xiao Li: 85
  Here, "first" means top rank—the "highest."

3. Perfection (极致)

In a language exam:

• Xiao Ming: 100 (perfect)

• Xiao Zhang: 99

• Xiao Li: 98
  While both are "first," 100 implies flawlessness—like Buddhist "perfect completeness."

In stocks: If Stock A rises 9% on a bad day and Stock C rises 10% on a good day, both are "daily leaders," but 10% also reflects limit-up constraints (it could’ve risen more without restrictions).

Conclusion: The Three Pillars

1. Pioneering (earliest)

2. Ranking (top position)

3. Perfection (limitless potential)

A true leader integrates all three.

III. Application to Leading Stocks

A leading stock must exhibit the First Principle. Ideally, all three layers are present, but at least ranking ("top") is essential.

Case: Jidong Equipment (Xiongan Concept Leader)

1. Pioneering: First to rebound and break the limit-up.

2. Ranking: Highest gainer in the Xiongan sector.

3. Perfection: Sealed 10% limit-up for breakthroughs.
   
   

Six-Word Rule

Pioneering, Top Rank, Perfection.

Use this to scrutinize self-proclaimed "leading-stock traders." Many are just trading strong stocks—not true leaders.