Today is February 15, 2024, the sixth day of the first lunar month, and I will continue the 11th lecture of my A-share lecture column "Stock Selection", with the theme: Cash is the king of stock selection.
As the saying goes: If you have food in your hands, you don't panic in your heart. In this highly developed world with an economy and **, cash can be equivalent to food, to be exact, equivalent to everything we need. Whether it is us as an individual or as a listed company, as long as it exists in modern society, we cannot do without cash in our hands; So, whoever has enough cash will be king.
This stock selection strategy is to screen the listed companies with the most abundant and stable cash flow in A-shares, and the screening indicators used include earnings per share, operating cash flow, net profit, return on net assets and other indicators. Some indicators of the screening strategy in this issue:
1. The most abundant cash flow: the total operating cash flow must be greater than the total net profit, and the positive value must not be negative.
2. The most stable cash flow: the above conditions must be met for more than 5 consecutive years1.
3. Good asset liquidity: the current assets of listed companies account for a high proportion of total capital, more than 50%.
There are more than 5,300 A-share stocks in Shanghai and Shenzhen, and only 15 listed companies are in line with the stock selection strategy in this period, of which there are 8 listed companies on the main board of the Shanghai Stock Exchange starting with ***6; There are 6 listed companies on the small and medium-sized board starting with 0; **3 The GEM listed companies are only the leading new energy battery stocks - CATL are shortlisted.
The full list is listed in the chart below in order of ROE in the most recent year** ROE from high to low.
Reviews & Summary:
Most of the above list are high-quality blue chip stocks, in addition to the above-mentioned CATL, there is also a leading white goods stock from Shunde, Guangdong Province - Midea Group; In the field of food and beverage, Tsingtao Beer, a leading beer stock from Qingdao, Shandong Province, and Haier Smart Home, a home appliance giant; Lingrui Pharmaceutical, a leading stock of traditional Chinese medicine plasters from the Dabie Mountains of Henan Province; Yixintang, a leading chain pharmacy in the southwest pharmaceutical retail field from Yunnan; Baoxin Software, a leading software and data storage concept stock in the steel field from Shanghai.
Most of the above-mentioned ** are in the list of self-selected pools, and in general, the asset quality of listed companies on the main board of the Shanghai Stock Exchange is better than that of the small and medium-sized board and the gem. Among them, Lingrui Pharmaceutical and Baoxin Software B shares are my real position stocks, and my holding cost is low, so it is not recommended as **.
After reading the stock selection strategy in this issue, some people may wonder what is the difference between the stock selection strategy in this issue and the "money printing machine" stock selection strategy mentioned in the previous period? Because, both of them are based on cash flow stock selection.
The difference is that the current stock selection strategy does not include the "moat" stock selection index, although the above 15 listed companies make very stable money every year, not bad money, but their moat depth and competitiveness, can not compare with those listed companies with the characteristics of "money printing machine".
Finally, it should be noted that the stock selection strategy in this issue only proves that the asset quality and earning ability of the above 15 listed companies are relatively outstanding, and does not mean that it is suitable for opening positions at the moment**; If you open a position, you should also consider the valuation level, and the identification method of the valuation will be introduced in the last few articles of my A-share lecture column.
Previous Review
A-share Lecture 1: **The essential "toolbox" for investment
A share lecture 2: a book to take you to understand Buffett.
A Shares Part 3: Billionaire Warren Buffett's Secret to Making Money by Investing.
A-share Lecture 4: 11 Listed Companies That Make Money Like "Money Printing Machines".
Lecture 5 of A shares: Lin Yuan's "mouth business" stock selection method.
Lecture 6 of A shares: "Davis double-click" stock selection method.
Lecture 7 of A shares: Duan Yongping's way of investment.
Lecture 8 of A shares: two high and one low stock selection method.
Lecture 9 on A-shares: Foreign capital heavy position stock selection method.
Lecture 10 of A-shares: Executive shareholding selection method.
Boutique long essay creation season investment and financial management **Finance