2022 Summary
(one)
In the history of mankind, there are always some years that are still fresh in people’s memory because of their astonishing decline. Obviously 2022 is that kind of year. Of course, there are always people who make money and others who lose money. I don’t want to say that suffering is the best mentor in life. However, adversity does temper a person more than prosperity. Prosperity delights the body, and adversity delights the soul. The perception in adversity is often more and more down-to-earth. In the past year when I lost a lot of money, I did have a lot of insights. Among them, there are 3 points that directly changed my current investment framework: first) the question of whether to choose the turnover rate or the rate of return. The second) is the issue of timing regardless of the current rate of return. The third) is to re-examine the value of financing positions.
Let me talk about the first one first. In the past, I have been pursuing an absolute high rate of return. For example, after Zijin hit a new high of 15 yuan, I still believe that it will continue to hit new highs in the next few years, so I have been holding large positions , while pursuing a high rate of return of 3 times and 4 times. A more typical example is East China. After hitting 53 yuan, they still believe that the valuation is reasonable and can continue to hit new highs, so they have continued to hold large positions. And the biggest insight for me this time is that an absolute high rate of return is not as good as a high turnover rate. 100% in exchange for a year is really not as good as 10% in a month.
It seems that Munger has mentioned this issue. What he probably means is that the higher the price of a stock rises, the higher its rate of return, but at the same time, its uncertainty is stronger. Taking East China as an example, when it was 18 yuan, I was losing money, but the certainty of East China at that time was extremely strong. When I reached 50 yuan, my position was profitable, and the later the stock price rose, the higher my rate of return was. However, at this time, its upward momentum, or uncertainty, was much higher than when it was 18 yuan. Too much. At this time, if you compare it, the value of the position in Huadong with 18 yuan is obviously much higher than that in Huadong with 50 yuan.
I have been pursuing a high position operation, because only a higher position can obtain a higher rate of return. This strategy itself is correct, but when you hold a position with a high level of uncertainty or a position with a low position value, your entire rate of return will become uncertain and low value. . This is also the most fundamental reason why I have withdrawn the rate of return so many times in the past-heavy positions held low-value positions.
Therefore, I formulated a new strategy this year, which is to use the turnover rate instead of the absolute rate of return, and keep cutting off high-priced positions and transferring them to low-priced positions, without deliberately pursuing the rate of return.
The advantage of this is that the retracement can be effectively controlled, and at the same time, the utilization rate of funds can be improved, thereby reducing the leverage habit that has always been full of positions. In this way, I can even make the financing position a margin of safety without using leverage. Obviously, this strategy is safer for large funds. Of course, the disadvantage is that as the risk decreases, the explosiveness of the market value also disappears. But I believe that in the long run, the rate of return of this approach is better than my one-sided pursuit of rate of return. Because it is more fault-tolerant. I believe that in the early days, Buffett’s rate of return rarely exceeded 100% annually, but he maintained it at 40+% for many years. This strategy should be used to smooth the return curve and reduce the risk of retracement.
The second is the issue of timing regardless of the rate of return.
Regarding timing, I mentioned it in last year’s summary, but my thinking is definitely not as mature as it is today. After a year of thinking and practice, I personally deeply believe that the performance of stock trading is not in choosing stocks, but in timing. Because timing requires not only an understanding of the fundamentals and a test of the circle of competence, but also a comprehensive grasp of the current environment of the stock market, the future trend of the world economy, and so on. It also has quite high requirements for an investor’s psychological quality and perseverance and self-confidence. Of course, it may be true that you say you can’t grasp it, but if you think that only gods can grasp it by analogy, then you are too arrogant and ignorant. Stock selection is basically an introduction; and timing is an advanced level, a high level, and a sense of luxury.
Many people like to ask a question, should they speculate in stocks full-time? I personally think that timing is a threshold. When you can choose timing with a relatively high degree of confidence, you can basically be a professional stock speculator. Stock trading is like fighting a war. The qualities needed by a famous general are basically the qualities needed by an excellent trader.
I feel more and more that the timing of stock trading is very important, and it can also help you avoid low price traps. If there is no timing, the low can be even lower, and there are eighteen levels of hell below hell! For example: After the third quarterly report at the end of October, the winter of semiconductors has become obvious. On the other hand, the domestic recovery has begun to sprout, and it will be even more obvious when the wind is released in November and it is ready to open. I am already very confident that Sanan will definitely not do well, and the bank will reverse. But it is a pity that there is still no courage to replace Sanan’s full warehouse with Pingyin. I think San’an in his early 20s is too cheap. Later, I also saw that Sanan fell to 16 at the lowest and has not bottomed out at all, while Pingyin rushed from 10 yuan to 13 at the highest, and it is still rushing. It can be seen that it is easy to talk about stocks, but it is actually difficult to really increase the rate of return.
In the future, I will continue to strengthen my choice of timing, and will deliberately downplay the rate of return to see timing. In fact, the opening and holding of the Beijing-Shanghai high-speed railway has actually been done according to the timing.
The third is about the management of positions.
This is actually a game between capability and margin of safety. I used to be full of money. Of course, it definitely doesn’t matter if it is full of money to do things like the Agricultural Bank of China. Because it doesn’t require much of your abilities. But later on, we continued to challenge higher and higher levels of difficulty, first strengthening the cycle, then medicine, and finally manufacturing and chips. It can be said that these requirements for professional knowledge and market grasp are very high. And at this time, the warehouse is still full, and it is obvious that my ability is somewhat out of control. At this time, a margin of safety must be introduced. The so-called margin of safety is actually fault tolerance, which is equal to braking. Any extreme sport without a way to slow down is clearly courting death. The explanation about the margin of safety will be clearer later.
(two)
Lost 1.5 million last year. How did you lose? 1) Oufeiguang lost 165,000 yuan; Yifan Medicine lost 165,000 yuan; these two transactions are actual losses. Sanan lost 500,000 yuan, Xinwei lost 400,000 yuan, Guangguang lost 100,000 yuan, and Leon lost 100,000 yuan. To sum up, there are actually only three points: 1) Failure to know yourself and the enemy, 2) Rush forward and greedy for merit, 3) Margin of safety. In fact, these three items are interrelated. Because we don’t know enough about the enemy, we are greedy for merit, and because we are greedy for merit, we ignore the margin of safety.
At the beginning, when Jiancang Xinwei focused on the company’s revenue, it ignored the overall downward valuation of the consumer electronics industry, and also ignored the initial capital investment and consumption of the company’s transformation. The result was deep-rooted. The good thing is that the company’s fundamentals are relatively solid, and I believe that it will be resolved and profitable in time. But what this transaction reflects is that I did not have an in-depth understanding of the opponent, including the industry, cycle, and the difficulty of the company’s own transformation. The same mistake also occurred in O-Film. One-sidedly saw the sharp drop in the stock price and the resources accumulated by the company over the years, while ignoring the risk of development after losing a major customer, and also ignoring the overall downward impact of the consumer electronics industry.
The losses on Yifan are mainly due to greed for merit and margin of safety. At that time, there was a big rebound in the market, and I unilaterally bet on the reversal of the calcium pantothenate reported by Yifan, and entered at a high position. At the same time, in the next decline, follow-up capital planning was not done well. Of course, there are also accidents between Guangguang and Sanan. Although it is a very small probability, my financing position was forced to the psychological tolerance line of 200% by accident, and I was finally forced to cut my flesh at the bottom to level up financing. It wasn’t until that moment that I deeply understood the margin of safety that Seth Klarman said.
Many financial bloggers like to use a tone, saying that Karaman has achieved the miracle of a compound annual growth rate of 20% when he only uses 50% of the positions on average. The implication is that if he uses 100% of the position, it may be a 40% annualized return. However, at the moment when Yifan cut the meat, I suddenly realized that if Karaman used 100% of the position, I am afraid that there would be no 20% annualized return, because this is the margin of safety. I’m afraid this is why Buffett always likes to keep a lot of cash.
In fact, this issue has already been summarized in the 20-year summary. At that time, Tsingtao Brewery was the one that cut the meat. When I first entered Tsingtao Brewery, I knew nothing about the FMCG industry, but this time I was relatively confident in entering the pharmaceutical industry, but in the end I still capsized in the same pit. This is essentially a question of margin of safety, not a circle of competence.
Experience cannot be taught. What others tell you is just a story. Only the thunder you have personally experienced can be your experience. Other people’s stories are like vaccines, which will make it easier for you to heal your scars and prevent severe illness, but in the end, you have to be injured yourself, experience it, and feel it before it may be your experience.
(three)
It has been said that stock trading is a game with a very low threshold, but it is difficult to master it. I have done my own calculations. To be proficient in stock trading, you probably need the following abilities, (1) high IQ (including learning ability and understanding), (2) rich knowledge (including insight into human relationships and all kinds of things in the world), ( 3) Perseverance and self-confidence (including emotional control), (4) good luck.
Putting luck last is not to say that it is not important, on the contrary, it is the most important. It’s just that it can’t be grasped, it can only depend on the sky. Really can only rely on the sky? What is the essence of luck or luck? I certainly wouldn’t be so arrogant as to think I could see clearly. But probably it should be attributed to a kind of its own law of the operation of everything, which was called “Tao” in ancient times. Those who have achieved the Tao will be helped more, those who have lost the Tao will be given little help, and if you walk the way for the sky, you will have great luck. For example, in the past year, those who speculate in real estate and Internet platforms have been flooded with all kinds of bad news. As an ordinary person, you might say that this year is really bad luck. On top of this luck, could it not be a more essential manifestation of the laws of economic development.
Therefore, there will be some wise and close characters in the past dynasties. They just want to see through the secrets and plan strategies. What he did was actually a “conspiracy”. The so-called “conspiracy” is actually “calculation” in essence, and the temple counts the rivers and lakes. “Solution” is to use the world as a chessboard, the right time, the right place, the harmony of people, people’s hearts and human nature, and everything in the world as chess pieces to melt into one furnace, and finally calculate an answer, and then hand it over to the king for execution. Secrets are like water, and the current situation is changing. In history, they were called advisers, Zhuge Liang, Liu Bowen, Fang Xuanling, Du Ruhui and so on. The so-called “putting an end to the affairs of the king and winning the fame of life and death” is exactly that. In modern times, there is also a corresponding word called chaos algorithm.
The essence of stock trading is actually the same, it is just a word of “calculation”. It’s just that the content contained in this word is no less variable than the ancient counselors. So looking back at the 4 points I mentioned at the beginning, the essence of IQ and knowledge is to serve the last luck. IQ is an algorithm, and knowledge is data. Character is the expression of executive power.
In Xueqiu, I read a lot of golfers’ understanding of Buffett, and I also watched a lot of debates about value investing and various speculations. And what Buffett did was actually a “calculation”. The difference may be that he can count, but you can’t. However, if you can’t count, you help Buffett’s “calculation” to quantify it self-righteously, thinking that what he plans and calculates is nothing more than equity thinking, margin of safety, market inefficiency and a few circles of competence. If it’s really that simple, why are there as many people speculating in stocks at all times and in all over the world, but there is only one stock god? It is also said that in the 50 years given to the Chinese stock market, there will be countless Buffetts. It’s about time roses but sir? Or is it Mr. Duan who left enough margin of safety to buy Tencent more and more? Tencent has bought the bottom dozens of times. But Buffett sold Apple and TSMC, and once he made a move, he was one of the top ten heavyweights. I don’t see Buffett buying TSMC more than 50 times. As long as you have a well-thought-out plan, one shot is enough. Only those who are in a hurry to fetch water with a bucket in their hearts will leave hundreds of opportunities for themselves to make calls. Is this a margin of safety or a circle of competence? I have never seen a first-class swordsman who stabbed dozens of people with swords. It’s all a sword to seal the throat!
Stock trading is like fighting a war. All the qualities that a famous general needs are basically the qualities that an excellent trader needs to possess. The so-called knowing the sky from above, knowing the location from below, and understanding the harmony of people, you must also know the personalities, hobbies, and behaviors of your subordinates and generals, and know yourself and the enemy. You know your enemies better than you know yourself. You must not only be courageous, resolute, optimistic, etc. Finally, you must be full of aura when marching and fighting, and you must be in harmony with each other. There have been few famous generals since ancient times, and there is no one who can be called a famous general in ancient and modern China and abroad. Therefore, people who can make a name for themselves in stocks are actually very rare, very few. Most people seem to be called “Bone Qingqi” on the street, and then pick up a few “cheat books” that they think are martial arts cheats. After reading them for a few days, they feel that they can punch Buffett and kick Soros. Old guys The ones in the past are just a few hands. My generation can replace it! Have you ever seen Buffett who bought a stock dozens of times?
So this part is actually written “The temple counts the rivers and lakes, make a plan and then move!”
(Four)
There is a sentence in Xiuxian novels that says: “The avenue of heaven and earth has changed, and the cultivation system of monks cannot stick to the rules. Only by creating a cultivation system that conforms to the current avenue of heaven and earth can we truly break through the shackles of heaven and earth.” I think the same is true of the current stock market system: The stock market today is not what it used to be. There are mainly 3 different places. First) After joining the WTO, our economic GDP has maintained a high-speed development for almost 20 years. But after entering a well-off society, it is obvious that it is impossible to continue to maintain this growth rate. So at this time, the long-term value of blindly holding traditional enterprises is not as good as before.
Second) After the Internet, the current innovation economy is developing rapidly, and its efficiency has been greatly improved compared to before. In the past, cars and horses were slow, and it took a long time to read a love letter. Now it is definitely not enough. In the market, with the rise of new energy vehicles last year, a large number of stocks have sprung up like mushrooms, with a 5-10 times increase in a very short period of time. And this kind of increase is not a speculation concept, not an increase in valuation, but a real increase in value. The valuation of some companies even rises and falls, such as many lithium mining companies and new energy vehicle companies. Because their performance growth rate is faster than their stock valuation inflation. This is the efficiency of the development of modern society. Therefore, it is difficult to adapt to this fast pace when building observation warehouses, observing enterprises, observing industries, etc. in the past. Many of them may wait for you to understand, and the industry has already entered its twilight years, such as the previous Internet platform. The operating efficiency of the entire society is improving rapidly, which determines the improvement of the metabolism speed of enterprises, and it is also doomed to increase the turnover rate. You see, Buffett is selling BYD.
Third) Since the Sino-US trade friction in 2018, the default rules for economic development have changed. You can no longer simply look at the macro, the industry, and the company from the perspective of the economy and the cycle.
The avenue of heaven and earth has changed, and our method of stock trading should also change. We can’t continue to stick to the rules, but we must follow the trend, quickly fill our own knowledge base, and adapt quickly to adapt to changes. It is a pity to miss the new energy layout in 21 years.
Summarize
There are a lot of summaries this year, but these are the experiences I got in exchange for real money. Finally, keep a running account: Last year, I lost 1.5 million, which is a loss of 41% in percentage terms. At the same time, 100,000 was withdrawn to live. If calculated on a three-year basis, a total of 800,000 yuan has been withdrawn in three years, and there are still 2 million yuan left. Yield 280%.
Of course, it cannot be said to be a complete loss. Using my own summary above, it is to replace low-value positions with high-value positions. If the stock prices of Xinwei, Sanan, and Guangguang can return to the beginning of 2022, converted into a market value, I will have more than 4 million. I believe that it is very possible for Xinwei to return to 25 yuan this year, and Guangguang should be able to touch 12 yuan throughout the year, but it is almost impossible for Sanan to return to 37 yuan…
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