Embrace Alpha
When** loses beta
In this year's market, the median rise and fall is positive, but most investors, whether institutional or small and medium-sized, are losing money, exposing a problem that was previously covered upMost investors used to make almost all of their beta money, either the well-known white horse tickets or the major indices, just because A-shares fluctuate greatly, if you are lucky, you may have excess returns for several consecutive years, and you feel that it is not difficult to make money, but there are excess returns this year, and you feel that it is not difficult to make money, and as a result, you will be beaten back to the prototype this year.
WhileIf you want to make money this year, you must either dig up some unpopular targets that few institutions pay attention to, or choose the right time to sell high and buy low.
To put it simply, this year's earnings are coming from Alpha.
Will there be beta returns for A-shares in the future?At the end of the year, many people are discussing the "national fortune line", which is an upward trend formed by several historical bottoms in the month-** - that is, the ** of A-share beta.
Instead of dwelling on whether there is a beta or not, think about itHow to pursue alpha income in the true sense, the so-called investment system, is actually a way to earn the alpha income you are best at for a long time.
If you want to run out of alpha, you have to have different advantages, which are ** in your external resources, but also ** in your internal ability and character.
The content of this article includes:
1. The three most common alpha returns of A-shares
2. The resources and capabilities required for these three methods
3. Character that matches these three methods
Alpha No. 1: Judgment on business
For a long time, China has formed a set of views of "taking long-term value investment as the mainstream", including looking for great companies with long slopes and thick snow, holding them for a long time, making money for the company's growth, and being friends of time, etc.
Not only mainstream institutions must be called Buffett, but listed companies also require shareholders to be based on Buffett's standards (and don't want to think about what kind of goods they are), and even regulators are often guided by this, wanting to "manage the growth line price investment" of all funds, including limiting the lower limit of public offerings, limiting the turnover rate, restricting the holding part, and so on.
In the past few years, the high valuation of companies that meet this standard has also caused the tragedy of stampede shipments of institutional heavy stocks this year, making "chuck" a self-deprecating word.
The business model is not good or bad, and investment cannot only have a standard of "long slope and thick snow".There is no such thing as a perfect business, and every business has its own problems:
There are some business models that are destined to be small, even if they are done by Tencent Ali
There are some key factors for the business model to become bigger, and the company does not have it, and insisting on investment only makes the failure come later and more miserably;
There are some businesses that need to be invested non-stop, and most of the money earned has to be reinvested constantly to update machinery and equipment plants, that is, to use the money of the upward cycle to supplement the money of the downward cycle;
The problem of some asset-light businesses is that there are no barriers and they are prone to vicious competition
Businesses with certain barriers to entry are always subject to external factors beyond your control, such as national industrial policies, consumption trends, market supply and demand, upstream and downstream large customers, etc., with high profits but poor certainty
In fact, due to China's excessive involution, huge policy guidance, slowing growth and other problems, A-shares, which now seem to be "long slopes and thick snow" listed companies, are also destined to be a hard business in the future, so that investors who hope for long-term investment will have no taste and abandon it.
A-shares most often appear in some TMT or manufacturing companies, the product competitiveness is average, the financial data is mediocre, and it belongs to the target that will not have a chance no matter how you look at it, however, a technological breakthrough in the industry, suddenly the product becomes the core link, large orders are flying like snowflakes, and the stock price is also soaring - 99% of the annual increase in A-shares is this type of company.
The criterion for judging the business model is not whether it is good or not, but what are the characteristics of the business:Is it as urgent as a tuyere or as steady as an old dog?Is it a long cycle or a wave?Is the cycle "slowly rising and falling" or "rising and falling slowly"?Is it pro-macro cycle or anti-macro cycle?
The second is what kind of management model the company adopts to match the above business characteristics:Is strategy or efficiency first?Is it organized or flat?Is it fully empowered or highly centralized?Do these management models exacerbate or smooth out the business cycle?Is it a continuation or an obstacle to the release of performance?
The characteristic of A-share value investing is that it is "fundamental timing".That is, to judge when there will be accelerated growth in performance, how long the growth can be maintained, how far the valuation can rise, and how long the stock price will peak in advance of the performance inflection point.
It can be seen from thisThe judgment of business requires rich experience in the real economy, so the first alpha has extremely high requirements for the ability of investors, and there are mainly two kinds of people:
One is that you have your own experience in business, or have rich experience as a company executive, which is most suitable for doing itBusiness, management at the same time, do the best investmentAs Munger said, there are no real value investors until the age of 40.
The other is an investor with research experience, most commonly a researcher-turned-investor, but they often have congenital defects and are only familiar with one or two industries, which is neededVery good at fundamental timing。A better way is to putThe research methods of a certain industry are "generalized" to multiple industries, but it is also necessary to solve the ability shift from research (theoretical proposal ability) to investment (practical decision-making ability).
Alpha** 2: Analysis of data
Business analytics is very experience-dependent, and most young people don't have it;Business judgment is very dependent on intuition, and at least half of people will never do well. What to do, Warren Buffett's growth stock investment is not the only way,If you like data analysis, are good at financial mining, or are sensitive to the rules of stock price movements, and are good at summarizing certain experiences into investment strategies, this is also an alpha.
It can bePurely fundamental data:
Changes in the fundamentals behind the financial data.
There are certain patterns between changes in financial data and stock price movements.
It can bePure market-level data:
The law of stock price movement triggered by the herd effect of funds.
The law of stock price movement triggered by investment psychology and emotional fluctuations.
The regular movement triggered by the special trading rules of some investment products (such as convertible bonds, options, structured products).
It can also beData between fundamentals and markets:
The law of stock price movement triggered by the evolution of the fundamentals of hot topics.
Certain patterns of rotation between major themes.
Most of the market data is meaningless noise, but there are also data fluctuations that contain value, and there are two main types:
1. Fluctuations related to changes in fundamentals
2. Fluctuations caused by the general behavioral deviations of investors
The reason why there is value in excavation, the first type of volatility caused by fundamental changes, due to the difference in investors' information understanding, sometimes cannot fully reflect the changes in fundamentals, and sometimes over-reflect;The fluctuations caused by the second type of behavioral bias have a strong trend, and after the disappearance of the relevant factors, there is the possibility of mean reversion.
The law of these fluctuations,It can be used to continue the fluctuating trend operation, but also to do the contrarian operation of mean reversion.
Although the emergence of quantitative trading has greatly compressed the profit space of this type of alpha, quantification has scale constraints, some strategies can not be seen to do, and some strategies need the assistance of subjective judgment, so,The investment method based on data mining and analysis is still the most important alpha.
Alpha No. 3: Excavation of people
The first alpha earns money from listed companies, and the second alpha earns money from other investors, both of which are not easy to earn, a person's advantage determines his profit ceiling, and ability defects determine his loss limitA person's alpha is always constrained by one's own abilities and resources.
So the third type of alpha is to avoid one's own ability constraintsTap into the circle of competence of other investors, more precisely – look for people who "have alpha".
The most basic method is "wiring", which is what we often call "mixed xx core circle".
The more important the news, the more it will only flow in a small circle, and the more forward-looking the opinion, its influence only needs to affect the top part of the investment circle.
The purpose of most people mixing circles is to grasp more information, so in a circle, the real value is only one or two people, and the "wiring" is to find people with alpha in as many small circles as possible.
The only question is, what do you exchange for these people who have mastered the alpha?The most exchangeable information is the alpha of the other inner circle, because everyone has a deficiency in ability, and other alphas are needed to fill the gap.
SoThe way to level up is to "save the game".。If you have strong social skills, when there are enough "lines", you can gather these lines into a round.
Many people have alpha and don't like "output", but everyone needs "input", which is the value of your "saving game".By connecting the "output" with the "input", you can find people with alpha and get the value of the information.
The most important thing in the bureau is the circulation of two types of resources:
The first category is important informationAny important information needs to be cross-validated, one line is not enough, multiple lines are too slow;
The second category is forward-lookingThe views that affect the market will not appear in the public statements of brokerage research reports or bigwigs, and are often one or two sentences of private exchanges, and more importantly, the views are not correct, but in the influence, and any forward-looking views need the recognition of multiple inner circles to be enough to affect the market.
If the first alpha is to make a business an investment, a businessman who appears as an investor, then,The third type of alpha is to make investing a business, although this business does not come in the form of a company, butThe core is "the power of gathering people".
This alpha doesn't necessarily require you to be able to discern the quality of informationBut you are required to be able to "know people", especially young people with potential who are just starting out, the so-called "Maxima often has, Bole does not often have", this is also a relatively rare ability.
The above three are just common and legitimate alphas, in fact, there are many distinctive alphas in A-shares, but there is no universality, such as alpha based on "special information**".
Compared with U.S. stocks, A-share listed companies are more casual in their information exchange, and their demands for stock prices are more unscrupulous, and there are always people who have the ability to obtain internal information in advanceChina is also a country where political resources are above all else, and there are always people who can know in advance about high-level movements, but because they are illegal, they are not suitable for public discussion.
Requirements for character
Investment from a resource perspective,It's the allocation of one's own time
The first type of alpha is spent most of the time researching and communicating with people in the real economy;
The second type of alpha, which spends most of its time researching the market and data;
The third type of alpha is spent most of the time on communication with other investors.
The direction that anyone spends the most time in is the direction that they like, or that is in line with their personality, otherwise they will not be able to stick to it for a long time, so these three alphas must not only be capable,It also matches your character and values.
The first type of alpha, if you spend most of your time researching and communicating with real economic people, you have to be very "down-to-earth", and you are not the kind of typical financial person.
Character-wise,You have to be relatively outgoing, in order to be willing to communicate with enterprises, businessmen, channel providers, customers and other people, from politicians and businessmen, down to peddlers and pawns.
Also, from fundamentals to stock prices, sometimes there is a considerable amount of timeYou have to be patient, you don't have to worry about gains and losses, and you can hold on to an opportunity for a long timeSo in terms of investment values, you need to have enough faith in the real economy, which many financial people actually lack.
The second type of alpha, which spends most of its time researching the market and data;You must first be able to calm down, be introverted, and have a rational analytical approach and patience, preferably with strong mathematical skillsin order to truly enter the ocean of data.
Character-speaking, this alphaIt requires both a feeling and an intuitive personalityThis is the biggest challenge, investors need to care about the details of the market, get used to collecting data to verify the rules, summarize experience, and be keen to find the underlying laws of things, and have some sudden whims;He is not only good at starting from the details, has a good memory, his brain moves very fast, he feels particularly sensitive, but he can also grasp it from the whole, has strong judgment, and has the ability to construct models.
Therefore, the second type of alpha requires the least external resources, a computer is sufficient, and the requirements for internal abilities are extremely high, usually requiring the cooperation of several people, and only those who are gifted can achieve it alone.
The third type of alpha is spent most of the time on communication with other investors, but this kind of communication is different from the first type of communication, and the core purpose is to judge the value of people.
So you have to be an extrovert firstWilling to share and good at listening；At the same time, there is no standard for the value of peopleYou have to rely heavily on intuitive judgments, while also being able to evaluate each person's flaws rationally and objectively.
You also have to have circles, which requires the ability to organize high-end resources, the background aura that you preferably have, and you don't have a good show, or you have a leadership style and personality appeal.
Embrace Alpha
I once wrote an article with the title: Only Beta is good in the world, and alpha without Beta is like a root?
But even if the beta of A-shares is still there in the future, because the growth rate has declined, it is still a very weak beta.
Munger said that the macro is what we need to bear, and the micro is what we can do to make a difference. In other words, beta is what we need to bear, and alpha is what we can make a difference in.
This is especially true of A-shares, if we are destined to live up to a new era without beta.
Many people say that if Warren Buffett comes to A-shares, he will become a "Leek", but according to my research on Warren Buffett, before the 90s, in the investment stage with a relatively limited amount of funds, he was also good at digging up unpopular tickets, and he could "not be afraid of fire" when he went to A-shares.
People who embrace alpha can find opportunities in any market.