In the second half of 2020, when the core asset market was hot, he took the initiative to close the subscription of his funds and refused the high influx of new funds. But he also did not empty stocks away from the stock market at a time when he could clearly perceive the valuation of core assets at a historically high level, but repeated the experience of Buffett in 1998 when Coca-Cola was valued at more than 70 times.
How do you evaluate the rights and wrongs of your investment under the test of extreme market conditions in the past three years? How do you look forward to the future investment opportunities in A-shares? This investor, who has more than 20 years of investment experience and excellent long-term performance, is hidden in the stock market and the bustling market, is not driven by external pressures such as marketing and net worth, and is loyal to his "observation of human nature", shares his views on investment and wealth for readers.
You can endure the rise, but you can't get out of your own investment system
In the past three years, I have chosen to resist hard, invest in "reducing skills" as much as possible, and do simple things that I can judge. If I had rewind the clock to three years ago, I would probably have chosen the same way.
Three years ago, the pandemic led to a large number of central banks, the world entered an era of negative interest rates, and the valuation system of capital markets was chaotic. We have judged the risk of core asset bubbles, but based on concerns about the risk of currency depreciation, we have chosen to avoid asset depreciation by "fighting a hard and dumb battle". In fact, despite the Fed's choice to raise interest rates, the bulk of the trade is priced in dollars, and the world still faces a significant inflation risk. It is difficult to judge the changes in the macro environment of this world, and in the case that it is impossible to make a clear judgment in the future, it is still a relatively feasible and reliable strategy to hold the best target.
Holding anything comes with risk, whether it's stocks, real estate, or cash. The risks of holding currencies for the long term are self-explanatory, and in the short term, currencies such as the Thai baht and other Southeast Asian currencies in 1997 and the current yen can also depreciate rapidly. Therefore, there are many risk factors to consider when selling stocks to hold cash.
In recent years, the core asset bubble has burst, value stocks have been silent for several years, many so-called value investors have been discouraged, and value investment seems to have been abandoned by the market. In fact, true value investors don't care about market likes and dislikes. Doing your own thing and holding the best assets you can judge doesn't mean you're making money every year, but if your investment system is right, waiting should be an indispensable part of it, and this waiting time is often beyond the limit that most people can bear.
What has done better in the past three years is that it has not deviated from its own investment system. In fact, once you get out of the investment system, it is difficult to come back, and you will not even know yourself as you walk. Many people can't stand stocks not making money for a long time, and once the stock stops rising, they will go around looking for opportunities and do things that go against their own investment system. Especially when you step out of your own investment system and are "rewarded" by the wrong market, it is a dangerous thing, because deviating from the investment system can make you zero in and erase years of investment results. It's nothing to experience a few pullbacks in your life, but if you destroy your own investment system, the problem may be more serious. After this test, I feel that my understanding of investment is more mature, and the investment system is more reliable.
The ups and downs of the market don't make me restless. I often say that investment should be "blind with a big heart", "big heart" is to repeatedly think about looking for companies with huge growth potential, stocks with twenty or thirty times upside, and "blind" is to turn a blind eye to the short-term ups and downs of the market.
For example, in 2012, when I started to invest in a leading liquor company, the company's profit in the previous year was only 8.7 billion yuan, and I noticed that the Shanghai cigarette factory that produces Chinese cigarettes pays 780 billion yuan in profits and taxes a year. In time, it will inevitably pay 100 billion yuan in taxes for the country every year, and it will be able to achieve 100 billion yuan of profitability itself. In this way, the company's market value will grow to at least two or three trillion. Under the double increase in profit and valuation, the company will have twenty or thirty times the upside.
Once you have set a long-term investment goal, you need to be "blind" and turn a blind eye to short-term market ups and downs. The liquor faucet has risen nearly 300 times in the past 20 years, and the "foolish loyalty" to the long-term target can prevent you from selling out investments that may change your fate, but allow you to enjoy the largest long-term gains. It is not smart to miss out on a tenfold and hundredfold growth company for the sake of several tens of percent adjustments.
Invest in companies that are looking for "one big profit", which is either a super brand, a great resource endowment, or a real high-tech. In the past 20 years, the mainland's industrial chain is still in the stage of ordinary industrial products, and has not yet formed the ability to "stand alone in the world", which determines that super brands and excellent resource endowments have become the concentration of big bull stocks. Optimistically, the number of companies worth investing in in the A-share market will increase much more than in the past, because the mainland's manufacturing industry continues to be iteratively upgraded rapidly, and there is a high probability that some leading companies that will dominate the world and make huge profits will emerge in a few years.
Free growth is the most valuable. Good companies will inevitably generate a large amount of free cash flow, and their growth is endogenous, and there is no need for listed companies such as banks to continuously ask shareholders for money in order to grow. Endogenous growth does not require much additional investment, and can be regarded as free of charge. Abundant organic free cash flow will make your investment extremely profitable, which is the most important criterion when choosing a company. At the end of the day, companies with strong core competencies tend to have good business models, and a good business model ensures that the company continues to generate a large amount of free cash flow.
In investment, we must first pursue certainty, and then pursue returns. Many people always want to go after 10 baggers, but forget to consider the risk, which goes against what Warren Buffett said: "No matter how much he bids, he will not hit himself in the head with a revolver with one bullet in six bullet holes." "The so-called certainty is essentially to eliminate risks, investment to learn to put risks in front, and to consider risk factors as much as possible when selecting stocks.
The profit target of 100 billion yuan of the liquor leader is about to be achieved, and the company will slowly transform from a super growth stock to a high-dividend stock, which is a beautiful thing in investment. I have a friend who bought a liquor faucet for less than 200 yuan in 2015, and the annual dividend payment has exceeded 25% of the investment funds in the past two years, plus special dividends. He has slowly desensitized himself to the stock price, and the growing generous dividends have brought him a lot of cash flow and made his life rich.
If the investment is a long voyage, it is important to find a boat that is strong enough. And you can't just choose a speedboat that can't withstand the wind and waves and is easy to capsize and sink just for the sake of speed. If you can find a ship with solid and powerful horsepower, it is of course the best, if you can't find it for a while, then it is good to stay in peace and stay on a slower but safe boat.
People often take the initiative to accept deception and even self-deception, in order to realize their dream of getting rich, without in-depth research and thinking, they point to the deer as a horse, imagine a bad company as a super bull stock, and in the end the bamboo basket is empty, and lose in disgrace. It's good to have a dream, but the probability of making a fortune is too low, so you can only turn to the gods for protection, but I don't know if you will be disliked by the gods.
The share prices of our main investment targets have also fallen in recent years, but because they have avoided many pseudo-value investment companies, the correction is much smaller than that of most other so-called core asset stocks. With the improvement of performance, the valuation level has fallen back to a safe range, and it is believed that the stock price will also hit a new high in the near future as the market recovers. Although we missed the so-called selling high and buying low, we also achieved the goal of the original strategy, and the value of the company we hold has been growing.
Cultivation determines how far the investment can go
The formation of the investment system requires a lot of cognitive frameworks to build, such as the cognition of human nature, the cognition of business, etc., if the depth and breadth of cognition are not enough, the thinking is not deep enough, it is impossible to establish a very complete investment system. Wealth is the realization of cognition, what kind of investment system can a person can form is closely related to how much investment achievements he has made in his life, if a person's investment system can withstand the long-term test of the market, especially the test of the bear market, then the market is unlikely to hurt him, and in the long run, investment will inevitably achieve great achievements.
Investment is always a person's own business, everyone's perception is different, you may not be able to earn the money that others can make, and others may not be able to earn the money you can earn. You don't have to worry about investing, for example, setting yourself a target of 15% or 20% per year. The right thing to do is to look for the best company you can understand, weigh the risk and price, make the best choice you can make, and execute that judgment, as for how much you can get in return, it depends on your vision and ability. The interesting thing is that in many cases, the reason why big bull stocks become big bull stocks is because their long-term growth far exceeds the market's expectations and constantly breaks through the ceiling of the market's perception, so only people who have the vision and patience beyond the general perception of the market can obtain this long-term excess return.
How far an investment can go depends mainly on a person's cultivation. If you think deeply enough about human nature at the philosophical level, your life will become full, and investing will become a simple thing attached to your philosophy of life. There are a lot of extremely bright college students in the financial industry, and there are many young people who graduated from prestigious universities in the researchers I used to lead. I often remind them to pay attention to the fact that the aura of prestigious schools may not be conducive to their growth in investment, because they are more eager to come up with standard answers, more reluctant to admit mistakes, more eager to succeed than ordinary people, lack long-term patience to follow up on the investment industry, and are not willing to engage in long-term and arduous philosophical thinking. Cultivation requires mental strength, and when you encounter problems, you need to find the deep-seated causes, and many problems are in your own heart, and you must find this thorn that grows in your heart and pull it out, so that you can reshape yourself and become a better self. The way of the saint is that there is nothing outside the heart, and the answers to investment and life must be sought inward.
Romain Rolland said that "there is only one true heroism in the world, that is, after recognizing the truth of life, you still love it", so what is the truth of life? My understanding is that the so-called truth of life is the interlocking bureau formed by the joint action of human animal and cultural attributes. People who see through these will inevitably be unhappy, but they still choose to be optimistic and choose love is a more rational choice, and such a choice requires great wisdom and courage.
Warren Buffett said that the best investment is to invest in yourself, as long as a person continues to improve their ability and wisdom, to be a better version of themselves. If you do a good job in your profession, take care of yourself and the people around you, and provide value to others, then your life will be very meaningful and valuable. Invest in value and gain wisdom. Value: Life makes life more fulfilling.
Restrain your desires and don't use your wealth to shame others
The capital market has created many wealthy people, and it has also given rise to undesirable phenomena such as flaunting wealth, worshipping money, material supremacy, and even objectifying the opposite sex. But these superficial wealth and arrogance actually show their own rudeness and shallowness, and they use wealth to humiliate others while humiliating themselves. In the process of investing, we must cultivate self-aggrandizement, self-hatred, and discrimination.
Warren Buffett has a huge fortune but is able to treat others as equals. When someone asks Warren Buffett, "If you have $100 on the ground, will you pick it up?" Buffett's answer is, "Of course, it may be the starting point for the next billion dollars." The significance of this remark is to convey confidence to those investors who are still in the initial stage, and also to convey warmth to the society, Buffett's wealth is like a palace, enlightening other investors in the direction of life.
The state also needs to restrain its own desires just like individuals. Modern money is a credit currency backed by the country's creditworthiness, just as a person should not be unscrupulous to make a large number of IOUs, if any country overdraws credit for a long time and issues money indiscriminately, it will eventually have a huge and far-reaching negative impact. As a global currency, the US dollar has been a global currency for a long time after the subprime debt crisis in 2007, and it has become a helicopter-type over-issued currency after the epidemic, resulting in inflation in the post-epidemic era has almost entered a hyperinflationary style. There is a phenomenon that deserves everyone's attention: in the past, when the US dollar raised interest rates, the gold price tended to fall, but now the situation is just the opposite, and the gold price has risen at the same time as the US dollar interest rate hike, will it be because many smart investors have developed a sense of distrust of the US dollar? From the perspective of human monetary history, the vast majority of governments do not seem to have much credit in dealing with money, and perhaps human beings do not have the credit to use credit money.
Unlike most countries in the world, domestic inflation has been well controlled in recent years, and even caused worrying deflation, if you go abroad, you will find that although the dollar exchange rate has risen a lot in recent years, but in the United States, the dollar does not seem to be spent, five or six years ago a bowl of Vietnamese rice noodles in Los Angeles cost about eight dollars, and now it has risen to more than 20 dollars a bowl. This level of inflation is unbearable at home, but it has happened in the United States, where inflation has been around 2% for the past two decades. Back in China, lettuce is sold live on Douyin, and it is now picked and sold for 10 yuan and 5 catties with free shipping to home, and the RMB is very expensive. The essence of a country's currency is the country's production capacity, and the mainland's production capacity is still improving, although the renminbi has depreciated against the U.S. dollar in recent years due to the influence of the dollar tide in the exchange rate, but the purchasing power of the renminbi is very strong, and logically speaking, the renminbi may be undervalued.
Editor-in-charge: Zhu Yumeng
Proofreading: Su Huanwen
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