Many investors pay more attention to the financial reports of companies and are good at analyzing the fundamentals of companies from a financial perspective. Xueqiu's ten-year confidant "Years of Cold, Knowing Songbai" has gained the attention of many golfers by interpreting value investment from a financial perspective.
What new insights does financial analysis give us to investment opportunities?On December 17, at the 2023 Snowball Carnival, Zhang Jieyu, head of Yuanchuan Investment Commentary, and Li Yuhui, manager of Jingheng Investment ** and popular user of Xueqiu, brought an in-depth dialogue to share high-probability value investment from a financial perspective.
Zhang Jieyu (left), head of Yuanchuan Investment Commentary, and Li Yuhui, manager of Jingheng Investment and a popular user of Xueqiu, "Sui Han Zhi Songbai".
Evaluate the value of a company from two dimensions: turbulence analysis and valuation
Zhang Jieyu:How to judge the level of financial analysis?
Li Yuhui:I once divided the level of financial analysis into three levels, the first is that the theoretical level is very high, but in the actual investment application, you can't lose less money or make more money;The second level is the master of financial anti-fraud, who uses these methods to avoid some risks, and even make money by shorting;The third level is that on the basis of the second level, in addition to avoiding risks and barriers, it can also make profits.
Zhang Jieyu:What is the core indicator that can evaluate the value of a company in its financial statements?
Li Yuhui:The first dimension is volatility analysis, which breaks down ROE into three aspects, namely profitability, turnover rate, and output capacity, and the multiplication of these three dimensions equals the return result.
The second dimension is valuation, generally speaking, Buffett's cash flow is used to discount DCF, DCF also has three important factors, continuous cash flow, whether it can grow in an orderly manner, and the level of discount value. From the perspective of the capital pricing model, the key is the beta value, the level of the company's beta value depends on the operating leverage and financial leverage, the leverage is high, the profit uncertainty is large, the discount rate is high, and the valuation will be low.
Zhang Jieyu:How to improve the success rate of assessing the accuracy of financial statements?
Li Yuhui:First of all, we must have a certain financial foundation, secondly, we must respect common sense, and finally we must try to seek truth from facts, be rational, respect facts, and look at specific data.
The sustainability behind the profit is even more important.
Zhang Jieyu:Relative to the average profit of the entire industry, the higher the excess profit margin of the enterprise, the better the enterprise?
Li Yuhui:This is true in terms of results, but excess profit margin or net profit margin can only reflect the result, and this result can be due to many reasons.
For example, a company that is very hot this year has greatly exceeded expectations every time its financial statements are released. I think there is one metric that is important, this company only has 130,000 employees, but the GMV has reached half of that of a large factory, indicating that the same employee may contribute more than 10 times the profit of his peers, which may be more critical and important than other indicators.
Zhang Jieyu:So the excess profit margin is just a consequence, and financial analysis is more important to find the cause, and to see if the cause is sustained, right?
Li Yuhui:I think looking at efficiency and turnover is a more effective method.
Zhang Jieyu:What is the role of financial statement analysis and field research?
Li Yuhui: When researching a company, finance is a good starting point, which allows me to understand the data and the logical relationship behind the data more rationally and comprehensively, and the on-site research can get some perceptual and supplementary things.
The "four good" method increases the winning rate
Zhang Jieyu:What exactly is a ** with a high win rate?
Li Yuhui:To sum up, first of all, I am a probability-first investment system, based on which the "four good" should be "four good", with a higher probability and a high winning rate.
First, it is necessary to have good people and good management, including a good equity structure and a good incentive mechanism for middle and senior management.
Second, to have a good valuation, 80% of the earnings and stock price are determined by profits, and less than 20% are determined by valuation changes.
Third, a good business model, including cash flow, brand power, cost, scale advantage, technology, etc.
Fourth, whether the good industry environment, background, and policy are beneficial.
Zhang Jieyu:What is the order of the four "good"?
Li Yuhui:People are definitely in the first place, value is created by people and management, and valuation is placed in the second place.
Zhang Jieyu:What is the difference between your observation** and the high probability **, and what are the principles for choosing an observation position?
Li Yuhui:Since the "four good" is ideal, the reality is often only three or two good, so use a smaller ** to deal with, for example** is not very suitable now, just buy a little first, and wait until ** is suitable to increase the position.
Zhang Jieyu:Why do you firmly do the allocation of the real estate industry?
Li Yuhui:In the short term, the impact of valuation is far greater than the fundamentals, but it does not mean that the wrong company must be chosen, I am optimistic about this year's real estate, I think the target of the choice, from the perspective of alpha, may not be wrong, but this year's negative beta of the industry is too strong. Judging by the results, the strategy is wrong, and maybe next year may be better.
There are uncertainties in this industry, the first is not knowing how much inventory is left in each city, and the second is that consumer discretionary is more difficult to grasp the exact time, and I think it may bottom out next year.
Build combos, build offense and defense
Zhang Jieyu:How did you set up an offensive and defensive system?
Li Yuhui:My personal characteristic is probability first, for example, if you want to try to balance between yield and drawdown, you must do a combination, and the purpose of doing a combination is to reduce the correlation between ** within the portfolio, so I will take into account liquidity and combine different industries and different classifications. There are A-shares, Hong Kong stocks, state-owned enterprises, private enterprises, some take on defensive roles, some provide liquidity, like a midfielder, when I need to attack, I can quickly change shares.
I bought a lot of high-dividend stocks at the beginning of last year, both from the perspective of the general economic environment and from the perspective of valuation, which are less attractive than before, so at this stage I am less defensive and more offensive.
Zhang Jieyu:Are you a more classic contrarian investment idea?
Li Yuhui:Yes, I'm traversed by reverse.
Investing is like a marathon
Zhang Jieyu: At present, the market has exceeded expectations for a long time, do you think the spirit and will required to survive are similar to those of long-distance marathon running?
Li Yuhui: In fact, many people say that investment is a marathon, I think only after you have really experienced it will have a deep experience, it has obvious help to health, in addition to the physical changes will promote mental changes, when you keep reaching your goals, after overcoming yourself, you will become more confident, more optimistic, more positive, and the ability to resist pressure will also be enhanced. The first 32 kilometers of the marathon mainly rely on basic and scientific training, and the last 10 kilometers rely on will. In today's market, the valuation of most of the short term is brought about by emotional fluctuations, which requires a good psychological state and strong cardiopulmonary function as support.