Five key factors of value investment-yexi livenmoore

Five key factors of value investment

Looking back on my investment career, the big money I make never comes from transactions, but from waiting.
The big money was never made in the buying or the selling. The big money
Was made in the waiting

Yexi livenmoore

1) buy stocks when others are panic and sell stocks when others are ecstatic.

2) indulge in investing in games and seeking for victory.

3) willing to learn from past mistakes;

4) sensitive to risks based on common sense;

5) believe in your own beliefs;

6) using both the left and right brains requires mathematical computation, a logic investment philosophy, and the ability to determine the advantages and disadvantages of a management team based on subtle clues, you must be able to study the situation from the overall level instead of sticking to the details and have a sense of humor, modesty, and common sense;

7) it is the most important thing to be able to survive market volatility without changing your decision-making and investment process.

Importance of Value

Rational behavior is very important. Now the price is very important, and the value is more influential than ever before.

As a standard investor, instead of "Managing" the stock portfolio, it is part of buying an enterprise. The main goal is not to exceed the index, but to achieve stable and reasonable performance.

The best way is to buy shares at an appropriate time at a price lower than the company's net worth.

Early Training

The survey targets not the stock market, but the true architecture and connotation of each enterprise. Routine procedures such as business activities, visits to manufacturing facilities and storefronts, and surveys of suppliers, major customers and even competitors. However, we tried to remove the tires. Check the steel frames and lead blocks.

Opportunity Type

Pure value opportunities, such as companies with clearly underestimated values or well-managed companies at the bottom of the industry cycle; opportunities caused by special events, such as enterprise restructuring or investment conversion; bankruptcy, merger or merger.

Positive attitude, non-professional investors

They handle investment opportunities on their own; they are confident and independent, but humble in their attitude towards market decision-making; they listen to many suggestions on the market, but do not blindly follow, because they still rely on their own research to provide the final answer.

Pragmatic

Value investors invest in enterprises based on specific ideas (a bottom-up idea. The tools and methods used by value investors are time-tested. The correct investment mentality is the most important asset that any value investors should possess.

Precise value investment

Value investment is not a technology, but a philosophy and a way of life.

These patient thinkers will use all resources for decision making and judgment, but will never rely on any single resource. They research and work on their own. Value investors believe in their abilities, intuition, and philosophy. Their investment style is an extension of their strong personality.

Mental Model: ideal enterprise + ideal price = long-term full reward

Objective: To purchase solid enterprises at low prices and earn appropriate post-tax compensation for a long period of time.

Zhiyi xingnan: balance between investment arts and Investment Science-the former is like evaluating an enterprise management team or identifying an ideal investment target, and the latter decides to pay the price based on the enterprise value.

Value investors are investment analysts

Buffett, a successful investment career, does not need the highest IQ, unusual corporate vision or internal news. All we need is the sound thinking architecture of the Decision-Making Program and the emotional control capability to avoid the collapse of the architecture.

Three common features: 1. Strict emotional discipline; 2. Solid Investment Decision-making architecture; 3. independent thinking and innovation research.

Five Elements of value investment architecture

Challenges always occur at the execution level.

If the foregoing conditions are true, the company should be "unpopular" or not favored by the market.

The architecture of value investors to evaluate investment objects can be summarized into the following five key issues:

1. Is it an ideal enterprise operated by a savvy person? 2. What is the value of the company ?; 3. How attractive is the company's price? How much should I pay? 4. How likely is the most effective catalytic event? 5. Determine the purchase price. How much safety margin do I have?

First, for Enterprise Evaluation, value investors must consider all aspects that are sufficient to influence the value of the enterprise, including the industry-related issues of the enterprise. For example: the company's competitive position in the industry is stable.

2. value investors conduct reasonable value evaluations and estimate the reasonable value of an enterprise through some values (such as normalized free cash flow, decomposition value of an enterprise, sale value or asset value. The reasonable value provided by the value evaluation can be used to estimate the target price, so as to measure the potential of the current stock price.

Third, the price assessment allows investors to understand the current value of the stock market for the company. Price assessment can provide reasonable payment prices.

Fourth, the identification and effectiveness of catalytic events can link the current stock price with the reasonable value investors expect. The most promising effective catalytic events include: division of the company, termination of a department, new management team, or continuous internal catalytic events, such as corporate culture.

Fifth, if the catalytic event is ineffective or delayed, the security margin analysis before the investment is very important.

Investment opportunities

Buffett: we should take it easy. Before investing, we must wait for "correct pitching ".

Investors must be cautious when evaluating investment opportunities and learn the key points.

Value investors should have specific solutions for every investment opportunity, whether it is for a boom cycle operator, a company division opportunity or a rapidly growing enterprise.

Identify opportunities-what causes this opportunity?

Investment is a game that requires different tools, different styles, and different opportunities. An appropriate judgment of the type of investment opportunity is often a prerequisite for success, because the opportunity type will determine the methods and tools adopted by investors.

Seven types of investment:

1. Common | slow growth refers to the company's income growth situation which is roughly the same as that of the overall economy. About 1%-9%.

2. Rapid growth: the company's annual revenue growth rate is above 10%.

3. Driven by specific time; it refers to the enterprise with high quality and undervalued values, preparing for complicated decomposition, financial restructuring, segmentation, or enterprise restructuring. These events may bring the value of the company to life.

4. boom cycle; its business performance is usually similar to the overall economic cycle structure. Large fluctuations in revenue. In-depth research on the fundamentals and long-term trend changes of individual industries can often find appropriate investment opportunities.

5. Temporary recession; its performance is usually due to "Incorrect" reasons and temporary recession. The reason may be a complicated structural reason, or a negative catalyst that is not part of the economic fundamentals, which leads to a misunderstanding of the market's value judgment.

6. Mixing and value traps. Hybrid opportunity refers to a variety of potential opportunities that coexist at the same time. For example, companies that are at the bottom of a boom cycle are ready to split their enterprises. Value traps mean that, although the enterprise's value is obviously underestimated, there is no effective catalytic event or catalytic event that does not cooperate. -This is not a real investment opportunity.

Catalytic event

Catalytic events are expected events that will contribute to changes. These events will ultimately increase the value of the enterprise.

Ces-karaman: value investors are constantly looking for catalytic events. Although the focus of value investment lies in buying assets with undervalued values, how to realize most or all of the fundamental values of assets through catalytic events is an important procedure for creating profits.

The nature of catalytic events may not be the same. Some are catalytic events of "Enterprise Value" and others are "stocks. Although the stock catalytic event will drive the stock price to rise, the enterprise value will not be increased because of this event. Because the stock catalytic event does not affect the enterprise value, it cannot be called a "real" catalytic event. The changes or expected changes it represents are just the wishful thinking of the market.

Potential catalytic event

1. New management level or management focus

Events that can continue to take effect, such as cost saving, enterprise restructuring, and personnel adjustment.

2. Adopt new operation strategies

Although such changes are often subtle and hard to be noticed by outsiders, the company's positioning and product adjustments throughout the industry often have a clear and significant impact, it may create long-term shareholding value.

Investors who try to find such changes must be clear about the objects to be affected by the operating strategy. Enterprise Operation policies may target different objects. For example, you can choose between increasing income and increasing interest rates.

The purpose of an enterprise's business strategy is not necessarily to increase revenue. If capital acceleration is configured in areas with high return rates, it may also directly promote the growth of pure profits or cash flows.

First, many investors will observe the impact of investment strategies on the overall capital cost, so as to measure the reward potential. If capital can be configured in a highly profitable area, and it will not increase capital costs, or change the company's risk architecture, investors are happy to see it.

3. Develop new product strategies

The risk of enterprise operation lies in the risk of cash flow. The stickiness of the company's products and services is an important factor affecting cash flow. The so-called stickiness refers to the ability of products and services to attract repeated customers. The more customers choose products, the higher the risk of enterprise operation and cash flow, and the higher the capital cost and the lower the enterprise value. Generally, enterprises achieve this goal through advertising.

4. improve operational efficiency

There are many ways to accomplish this goal, from improving the corporate culture, or even changing the operating procedures. In this regard, the target of value investors is often the target of weak profits in specific industries, because such enterprises are most likely to suffer benefits due to efficiency improvement.

5. Reduce costs

A general cost reduction strategy is a reasonable potential catalyst unless it does not sacrifice the business benefits and future growth capabilities.

Enterprise Value may exist in many places, such as technologies, professionals, products, and training plans owned by enterprises. In fact, cost reduction is often a tool for business operators to rationalize or make up for decisions that undermine some value.

In fact, it is very difficult to distinguish between the actual benefits of enterprise resources and those that cannot make substantial contributions. "The larger the commitment, the more doubtful it is ".

6. New Financial Strategies

In order to reduce capital costs, business operators often change the debt-to-shareholder ratio on the balance sheet. The debt cost is much lower than the stock because the lenders bear a risk lower than the stock holder. However, if there are too many debts, enterprises will often be in financial difficulties.

7. Continuously lower tax rates

Value investors generally do not believe that tax policies can actually increase enterprise value. However, if these policies take effect for a long time, enterprises can retain more cash to shareholders.

8. reduce current capital and release cash

Non-cash current capital, the difference between non-cash current assets and non-debt portion of current liabilities, usually including inventory, and the difference between accounts receivable and payable.

As a potential catalyst, the liquidity strategy must assess the risk that enterprises may reduce the volume of goods sold due to the reduction of liquidity. In addition, it is necessary to analyze whether the inventory management system adopted by the enterprise helps to implement the current capital policy.

9. This strategy may not be advantageous in reducing capital investment and creating value

The premise is that enterprises can reduce the net capital expenditure of existing assets. The net capital investment made by the company-the net amount after the depreciation expense deduction-represents the cash outflow, which will lead to a decrease in the cash flow. These cash outflows are usually used to arrange future growth opportunities and maintain the current assets of enterprises.

10. Buy back the database and Tibetan stocks-the most popular Catalyst

In some cases, one catalyst event may lead to another catalyst event.

Value investors regard the repurchase of inventory shares as a merger activity, and the price must be correct. Borrowing shares can not only increase earnings, but also increase the return on shareholder equity.

11. The conversion from a department to an independent company or an equity separation may lead to a rise in the stock price

A department is converted into an independent company, which is a tax-free transaction. The parent company transfers the relevant business to a new independent company and then pays a special dividend to the shareholders of the new company. After conversion, the new company will be an independent listed company with the same shareholder structure as the parent company.

Before a department is converted into an independent company, it is often the first to implement equity separation, which is a relatively small-scale public listing action. The difference between the department conversion into an independent company and the equity separation is that the latter will raise funds for the parent company, and the former is not.

Transforming departments into independent enterprises has four main benefits: 1. Enterprises can re-adjust their operational focus so that some departments that do not comply with the parent company's operational specifications in terms of strategy, operation or finance, founded as a new company. 2. The applicable value evaluation architecture of the parent company and the newly established independent company may be significantly different. In this case, the shareholders usually agree that the relevant departments should be converted into independent companies. 3. newly established companies also have the opportunity to create shareholding values in the new architecture. 4. tax benefits. Both the parent company and the recipient are not taxed. Even though the parent company has obtained the financial benefit of selling assets, in addition, the recipient is not taxed, even though they have obtained dividend income.

It is divided into independent organizations and converted into independent organizations. The situation is very similar. The difference is that investors must choose which company they want to hold and cannot have both the parent company and the new company. If investors decide to own a new company, they must exchange the parent company's shares in the new company. The reason why the parent company is willing to do so is that it tries to buy back the inventory shares. Buying back the inventory shares is to use cash to buy back the stock, here is to use the new company stock as the currency, "Buy Back" the parent company stock. In this case, investors should consider the quality, value, price, and incentives provided by the parent company and new companies.

12. selling assets: selling assets can only create half of the value, and the other half is about how to use these funds.

Generally, if the company's assets create or may create compensation less than the capital cost, it is generally willing to become the target asset for sale.

Investors can calculate the current value of cash flow expected by the relevant asset to compare the cash income sold by the asset.

13. The value of the dead is often higher than that of the dead: full or partial liquidation, often an important catalyst

External catalytic event

1. Active activities of radical Shareholders

2. Industrial merger activities

These activities will provide some measure of enterprise value, and the influence of the merger activities within a specific industry depends on the reason for the application of such activities to other interbank value judgments.

Five Reasons for Enterprise Merger: economic scale, multi-angle operation, debt capacity, tax benefits, and closed value gaps or pure financial investment.

Regarding the value gap, enterprises often merge and acquire other enterprises based on a value gap presented in the market. The so-called gap often refers to the difference between listed companies and non-listed values. This difference in value is often caused by misuse of high quality assets or market misunderstandings.

Enterprises that are not good at asset management, or whose asset structures are too complex to be understood by the market, are often the objects of mergers and acquisitions.

A lot of evidence shows that the stock of a multi-angle enterprise will reflect the discount of a comprehensive enterprise. In addition, enterprises generally do not have the "best lineage" business, but are organized by many ordinary units.

Companies with significant debt capabilities often become targets of mergers and acquisitions.

With significant tax savings, value investors should pay special attention to the handling of depreciation charges and the business losses carried forward in the past. These items contribute to the cash flow of buyers because applicable tax rates can be lowered.

3. Time: Silence of external Catalysts

The premise that time can be used as a catalyst is that there is no unusual event, and the boom cycle or seasonal form of the temporary negative event is very clear.