Yang Delong is the Chief Economist of Qianhai Open Source Fund and a director of the China Chief Economist Forum
Recently, the market has repeatedly fluctuated above 3000 points, 3000 points as an important pass has a strong support, once the market falls below 3000 points, the national team may increase the intensity of entering the market, so as to play the role of supporting the bottom, 3000 points as the historical bottom, more and more deeply rooted in the hearts of the people, so now the space around 3000 points down is limited, and the upward space is relatively large, so from the perspective of investment is a better time to layout.
Value investors prefer to seek opportunities when they fall, rather than buying up, rather than buying down, and the essence of investing here is to buy great companies at a reasonable price and hold them for the long term. However, great companies are recognized by the market most of the time, and it is quite difficult to get a reasonable price or an undervalued price, so investors need to take cash in their hands and wait patiently for the market to fall to get a good price, so real value investors prefer the decline of the market, especially if there is a continuous decline, Warren Buffett once said that the stock market crash is a gift from God to value investing, which is what it means. For example, in 1989, the Wall Street market was quite sluggish, there was Black Monday, Coca-Cola's stock price fell by 75%, and the vast majority of investors chose to flee, but Buffett chose to buy against the trend, this time Buffett invested $1.3 billion, and by 1998, Coca-Cola made Buffett earn ten times the income, so if you want to learn real value investing, you should learn to look for opportunities in the fall.
The essence of value investing is to choose a good industry and a good company, and then wait for a good price, but a good industry and a good company are generally expensive, and a good price will only appear after a continuous decline. After nearly three years of decline in the current A-share market, many stocks have fallen by more than 50%, and some have even fallen by 60%~70%, which is the time to get a good price. Of course, pick up a magnifying glass and look for some good companies that really have long-term investment value and can ride through the economic cycle. The fundamentals have changed, or in a period of slower economic growth, companies that can't survive can't be touched, even if the stock price has fallen to a fraction. Li Lu, a well-known value investor, once said that in the twenty-six or seven years of my investment career, every few years will encounter a once-in-a-century crisis, as an investor, I have not experienced a few times when my net worth fell by 50%, and the big collapse often creates some investment opportunities, and eventually you will find that the most money you make in your life comes from here, but you don't know it at the time.
During the May Day period last year, I went to Omaha to attend Buffett's shareholder meeting, and Buffett regretted that he did not make a timely move when the U.S. stock market plummeted in early 2020, and he said vividly: At that time, I saw the market plummet, and the Dow Jones index fell below 20,000 points, and Munger and I sat there and did nothing, and as a result, we missed an excellent opportunity to buy the bottom, if we could buy the bottom at that time, many stocks rose 3~5 times, and it was just three days. It can be said that investment is to invest in a crisis, which is also a phrase that is often said, that is, investment can obtain excess returns in times of crisis. Warren Buffett has been very successful in value investing, he has always believed that investors should buy undervalued stocks, and he values the company's financial position, including cash flow, profits, Dividends and other indicators, Buffett emphasizes long-term investment, long-term holding of high-quality stocks, avoid short-term trading, he believes that stock price fluctuations are often temporary, and the value of an excellent company in the long term will be recognized, Buffett also emphasized that investors should invest in areas they are familiar with, rather than blindly following the trend, he believes that only in the field they are good at can they make wise investment decisions.
Warren Buffett emphasizes the need to look for excellent management, the company's management is a very important factor, Buffett tends to invest in companies that have excellent management leadership, these companies can maintain good operations and continuous growth, many of the companies Buffett invests in require the company's management to be honest, integrity is sometimes more important than ability, investors should avoid impulsive trading, should not be affected by market fluctuations, but should remain calm and patient. Warren Buffett has always emphasized that investing is a long-term process that requires patience and perseverance, and many investors prefer to be impulsive and miss out on opportunities in market volatility. The hardest part of value investing is not stock selection, but holding shares. For the vast majority of people, Warren Buffett, the god of stocks, personally helps you choose stocks, and personally tells you that the stock is no problem, and it will definitely make a lot of money in the future, and they can't hold it, because for the vast majority of people, it is difficult for them to resist the temptation of short-term trading and frequent trading, and the real value investors are always a very small number of people with strong determination and patience. Warren Buffett attaches great importance to the margin of safety when making investments, and the stocks that Buffett buys have something in common, that is, the margin of safety, which means that when buying stocks, the trading price is much lower than its real price, so that investment losses can be avoided, and even if some unexpected risks occur, the risk is reduced because of the margin of safety. Warren Buffett advocates conducting in-depth research on the industry, and on the basis of understanding and analyzing the industry, looking for and buying companies with development prospects and competitive advantages. Investing without research is like driving with your eyes closed, which is also what Warren Buffett said at the shareholder meeting.
Warren Buffett emphasizes the need for focus and persistence, he is not a proponent of broad diversification, but focuses on a few areas and focuses on research, he sticks to his investment philosophy, and firmly believes that as long as the investment lasts for a long time, you can get stable returns. In conclusion, Warren Buffett's investment philosophy is based on the principles of value investing and long-term investment, focusing on the company's financial status and the ability of management, while also emphasizing that investors should remain calm and patient. These are considered to be the rules that successful investors should follow. Value investors should invest with the thinking of industrial investment, buying and selling stocks is to buy and sell the company's equity, and share the business results in the process of creating value in the company. Correctly evaluate the value of the company is the most important part of value investment, value investment is not always held, it is necessary to buy low and sell high, buy when the company is undervalued, sell when overvalued is the right way, think that value investment is to hold long-term immobility is the biggest misunderstanding of value investment, so value investment should return to the original intention, emphasizing the consistency of stock investment and industrial investment.
On May 4 this year, Buffett's shareholders' meeting will be held in Hamha's hometown, and I will also go to the United States for the sixth time to participate in Buffett's shareholders' meeting, and listen to Buffett's insights with nearly 40,000 investors from around the world. In the long run, value investing is the magic weapon to win long-term investment, Buffett's partner Munger has left us, but Munger's thoughts are always there, in the shareholders' meeting without Munger, how Buffett will feel, and how he will answer investors' questions is also what we are more concerned about. Munger once said before his death that smart people will bet heavily when the opportunity is given, and always stay still at other times, which also gives us a great inspiration, when the market falls irrationally, many high-quality stocks are greatly discounted, that is, when the opportunity is given by God, we must overcome fear and dare to layout, so as to obtain excess returns. Sitting with Warren Buffett this year to answer investors' questions is also his designated heir, and the two fund managers will also answer investors' questions, and will share with you at that time, whether Greg Abel can fully take over Buffett's mantle, continue to carry forward value investing, and continue to create Berkshire Hathaway's growth miracle, let's wait and see.
