The logic is broken
1/6, the stock big V is different from the fund manager
In terms of stock investment, I have two roles, one is "self-media author" and the other is "private fund manager", although both are average, but may be more able to appreciate the difference between these two roles than the average person.
A popular stock big V author, they usually have the following characteristics:
Clear and unambiguous
The arguments are clear and easy to understand
The words spoken, that is, the archway that was erected, must go to the black in one way, and if it is wrong, you can find the logic of the circle back (the circle can only pretend to be amnesia)
A fund manager who can survive for a long time usually has the following characteristics:
Their views are always vague, probabilistic, and conditional;
Their thinking is always complex, jumpy, and even self-contradictory
Their actions are always volatile and often self-denying
In particular, the third difference is particularly critical: a big V admitting that he is wrong is fatal; while a fund manager who cannot admit his mistake in time will be wiped out by the market sooner or later.
The view of stock investment and the actual operation are completely different things, Buffett's letter to shareholders, more is the communication with shareholders, as a communication master Buffett, and the investment master of Buffett, there is a difference, buffett's many views are described too absolutely, in order to facilitate dissemination, but not his complete investment system.
Investment is full of changes, the so-called "unchanging to respond to changes" is just a "mortal immortal" type of fantasy, those who go all the way to the black, will always encounter "Waterloo" at a certain moment, the real survivors, have a common feature:
They can accommodate two completely opposite logics in their brains in order to discontinue or change their investment strategies at any time.
2/6, where will you be wrong in the future?
Investment logic is the direct driver of your stock buying.
For value investors, good fundamentals and reasonable valuation are only necessary conditions for investment, and there are more companies that meet the conditions, so there are usually some direct factors, such as new product launches, capacity expansion, channel carding completion, etc., prompting you to make a decision to open or increase positions.
But that's not enough.
Agree with a logic, as long as you think it makes sense, but to invest according to a logic, you must find the "anti-logic" of this logic.
For example, in the industrial trend, the downstream demand has exploded, the production capacity of enterprises has expanded significantly, and the income and profit will grow in the next one or two years, which is the investment logic that all investors like.
But this logic has a hidden "anti-logic", because the boom belongs to the whole industry, the leading orders are too late to do, infiltrating into the second- and third-tier enterprises, those small enterprises that have previously struggled on the edge of death have regained their vitality, some enterprises have expanded production wildly, some enterprises have expanded their advantages in some segments, and the concentration of CR3/CR5 head enterprises has declined, which are common phenomena in the high-prosperity industry.
It is conceivable that after two years, this industry will fall into overcapacity, coupled with the advantages of some second- and third-tier companies to establish market segments, the leading advantages will be challenged, and the competitive landscape of the whole industry will become worse.
This phenomenon has appeared many times in the previous mobile phone industry chain, communications and other industries, and is currently being carried out in some links of lithium batteries, photovoltaics and semiconductors.
Many people think that this is two years later, now it is too early to consider, but as the proportion of institutional investors is getting higher and higher, the efficiency of market pricing is getting higher and higher, almost all of them will be in advance in the industry's most prosperous time to interpret the "killing valuation", stock prices stagnant or even falling, every quarter is good to the explosion of the financial report when the announcement, is the day when each band peaks. On the surface, it is a financial report game, but in fact, the market prices the trough of the future industry in advance.
In any investment logic, there is a corresponding "anti-logic":
The "anti-logic" of the research and development of new products is the failure of research and development;
The "anti-logic" of the launch of blockbuster new products is poor sales, or although the sales are good, they affect the sales of old products;
To expand production capacity, its "anti-logic" is that the yield rate is delayed in reaching the standard;
Leaning on large customers, its "anti-logic" is the loss of operational autonomy, the sharp increase in receivables, and even the ups and downs of performance
……
So the "anti-logic" sums up: both to know why to invest, but also to know the most likely "where the mistakes" are in the future.
3/6, the logic of price increases
Any business decision of the enterprise has a certain risk and the possibility of failure, a "reverse logic" of investment logic, that is, the common failure reasons for the decision, to find this "failure reason", you must understand the causes and consequences of the decision.
Taking our favorite consumer goods "price increase" logic as an example, many investors see signs of price increases in the company, they think that the performance will increase significantly, but "price increase" is a very complex business behavior, even if the price of Moutai will affect consumption, but not necessarily affect sales. Therefore, the "anti-logic" of the price increase logic is not as simple as the failure of the price increase affects sales.
The first thing to do is to distinguish between industrial and consumer goods. The "price increase" of industrial products, as long as a paper price increase letter notifies customers, is usually an event-driven investment logic, but consumer goods are not so simple and direct, most of the goods will not directly increase prices, but there are various alternative methods:
1, upgrade the packaging, new packaging new price, old packaging old price but gradually reduce the supply, most of the liquor is this price increase;
2, cancel or reduce the terminal promotions, before the "buy two get one free", now do not send, equivalent to price increase;
3, the main promotion of higher price products, reduce the marketing support of low-end products, which is a relatively mild price increase;
4, do not increase the terminal price, but increase the batch price to the dealer, or reduce the rebate, and then by optimizing the number of dealers, without reducing sales while ensuring the interests of dealers.
The reason why there are so many "tricks" is because the goals of "price increases" are also different and can be divided into two types:
One is the continuous operation of essential consumer products (especially food and beverages, daily necessities, etc.) in order to enhance profitability.
The frequency of upgrading of this type of product itself is low, the scale effect generated by the market space is not obvious, and only by continuously raising prices can we ensure sufficient profits to strengthen competitiveness.
Most of the price increases in the former category belong to this kind, and whether the price increase can be sustained is the embodiment of brand power.
Another bulk durable and non-essential consumer product (automotive, electronics, home appliances, clothing, home, etc.), this type of product is driven by new products, can continue to develop new products, under normal circumstances do not need direct price increases, the overall price increase is usually the inflation period to transfer the pressure of upstream materials.
The last three types of price increases all belong to this category.
Therefore, "price increase" is only a business event, whether the above business intention can be realized through price increases is the real logic of investment, and different logics correspond to different "anti-logic".
4/6, the anti-logic of the logic of consumer goods price increases
1. The anti-logic of upgrading the new packaging
Liquor upgrading can not only drive revenue and profits, but also promote brand image upgrades, which is the core growth logic of brand liquor.
Then, its "anti-logic" is that the new packaging of new flavors is not accepted or improper pricing, resulting in core customers turning to other brands, or encountering strong competitors at the same price, or entering a price band that its brand image cannot support, the result is that there is no market, coupled with the decline in sales of old products, which is ultimately reflected in the performance of the double decline in revenue and profit, inventory rise, and upgrade failure.
Historically, Wuliangye and Luzhou Laojiao have both suffered blind price increases. In recent years, due to the consumption upgrade of liquor and the blank price band left by the continuous price increase of Moutai, most of the new product upgrades have been successful, but in the future, if the price of Moutai is stagnant and the consumption upgrade is slowed down, the probability of the industry deducing "anti-logic" will be greatly increased.
2. The anti-logic of "reducing promotional" price increases
Terminal direct promotion usually appears in very competitive categories, so the risk of canceling promotions is very large, unless most brands act uniformly, or CR2's leading brands launch, this phenomenon usually only occurs in the industry-wide raw material price increase, and the sustainability is questionable.
The price increase driven by raw materials, usually the increase is difficult to cover the rise in costs, the impact of "price increase" on performance is not the present, but after the price of raw materials falls, the products that are difficult to raise the price successfully will of course not restore the original price, at this time, it can promote the rise of profits. Grammy, after each wave of materials rises and falls, it is the time when the profit growth rate rises.
Therefore, the anti-logic of such price increases is that the price increases reduce terminal sales, resulting in excessive inventory in the whole industry, and when the pressure on upstream material prices is reduced, it triggers a larger-scale promotional wave in the whole industry.
3, the main push high-priced products of the anti-logic
This business behavior is more common in mobile phones, similar to liquor, risk or "anti-logic" is also the limited user acceptance of high-end products, wasting marketing resources, Xiaomi mobile phones have had the experience of high-end failure before.
It may also create a psychological shadow on the high-end market, and the next strategy is more conservative, which is also part of the counter-logic.
4. The anti-logic of only mentioning the batch price
Although its impact on corporate finances is the same as that of price increases, strictly speaking, it is not a price increase, more similar to the change of channel policy, and if it is done well, it can ensure that revenue and profits can be improved while optimizing dealers.
Therefore, its risk or anti-logic also lies in the dealer's anti-phagocytosis, resulting in channel turmoil, so once it fails, it is the failure of the entire marketing system, and its loss is far more than the first three categories. Especially when the industry boom declines, the probability of failure is higher, and Gree's channel reform is a typical case (of course, it is not over, and failure cannot be asserted).
In addition, some durable goods with gift attributes, such as high-end liquor and tonics, can directly raise prices, and the core logic of this type of price increase is that dealers can also earn the price difference between hoards and be more motivated. But this also brings a more serious "anti-logic", that is, the "demand bubble" caused by dealers hoarding goods, once the bubble bursts, companies will find that they are facing a mountain of channel inventory, price reduction can not increase sales, but also affect the brand image, can only spend several years to digest channel inventory, resulting in business difficulties, and even cash flow fracture. The most classic case is the failure of the price increase of East Ejiao.
5/6, anti-logic signals and fundamental stop loss
Buffett can change the board of directors, he can buy a company, he can do a series of mergers and acquisitions, but you only have one way to do it — sell it.
The core role of the counter-logic is "stop loss" - of course, it is not the price stop loss that sells after falling as much as it falls, but the fundamental stop loss signal.
The three principles of selling are: expensive, broken logic, find better. The so-called "anti-logic" selling is to set a clear signal of "logic broken" before investing.
But the actual investment is not so precise, the stock price is always deducing logic and anti-logic at the same time, such as the price increase driven market, the upward trend of the stock price, reflecting that more and more investors recognize this "price increase" logic, but the decline between them is also more and more investors recognize the "anti-logic".
If "anti-logic" becomes the consensus, the stock price must have fallen into an inhuman form, and losses cannot be avoided, so the fundamental stop-loss signal is not a direct jump from 0 to 1 of "anti-logic", but a point in the transition pattern of "0.1, 0.2, 0.3...".
The price increase logic of liquor needs to track the sales of new products, it is best to quantify, and once it is not as expected, it is necessary to suspend this investment.
When the "anti-logic" signal appears, usually the stock price has fallen for a while, at this time, we must not hesitate because of the decline in valuation, "logic broken" represents the decline in future performance, and its valuation may fall more and more expensive.
The fundamental stop loss effect of "anti-logic" is like "investment insurance rope", when you feel that you are in a protected state, you can expand your investment horizons and try some opportunities with higher odds.
For example, in the second half of 2020, I mentioned the logic of Sany Heavy Industry's cycle becoming long, and many readers did not agree, because this typical strong cycle industry is unlikely to become a growth industry, and the depression of the construction machinery industry afterwards also proved this.
But from another point of view, investment not only depends on the probability of logical realization, but also on whether the probability of the logic is small has been "effectively priced", the cycle becomes long Once the logic is realized, the upside is counted in several times, if the stock price is still very low, it is a high-odds opportunity.
Therefore, the focus of this investment decision is not on the probability of logic versus "anti-logic", but whether the "anti-logic" has a clear signal (such as high-frequency data on the month-on-month decline in sales of excavators in a single month), and, once the signal appears, the possible position of the stock price, what is the maximum loss you may have.
Only when you are soberly aware of the future "anti-logic" from the beginning, you will carefully choose the bid price so that the "anti-logic" begins to deduce, and there is still a profit or less loss when the stop loss is made.
Institutionalization leads to the pricing efficiency of A shares is getting higher and higher, everyone knows to make money from the opportunity of certainty, resulting in "certainty of the inner volume", coupled with hesitation after seeing the opportunity, until the logic is determined to be willing to enter, resulting in high buying costs, certainty not only no opportunity, but all pits.
To break the "inner volume", there must be a very choice. Don't be afraid of "anti-logic" uncertainty, don't skimp on your imagination when logic has just emerged and the stock price is still at the bottom; when anti-logic signals appear, no matter how attractive the valuation, don't hesitate to cut off all illusions.
6/6, if you don't know what is "doing wrong"
In fact, in daily life work, we can all prepare two sets of opposite logic in the brain:
In the morning, when the weather is overcast, you will bring a light umbrella in your bag, even if it does not rain, it will not take up space. "Rain/No Rain" is two sets of opposing logics that exist in your brain at the same time.
In the plan submitted to the boss, in addition to a set of master plans, you will also have a contingency plan for changes in some of these factors, which also has two sets of opposite logics.
But in terms of investment, many people will show the spirit of "one way to the black", when they can't hold on, look at the cases of "perseverance to the end and finally make a lot of money" in the chicken soup of those investments.
Investors always show "blind confidence" in the direction they know little, and can only show appropriate caution in areas that they are very familiar with.
If you don't know what "doing wrong", there is no point in insisting.
First published on the "Thought Stamp (ID: sxgy9999)" WeChat public account, it tells the concept and method of value investment.