[The two poles of investment] Netizen retail investor B said that there are only two extremes in the general direction of investment. One is to make money from the market A. One is to earn money from the company B.
Connect A and B with a straight line, assuming that the middle is used as the boundary, the closer to A, the higher the proportion of market factors considered in investment, and the less corporate factors are considered.
On the contrary, the closer to the B-end, the more factors are considered by the enterprise, and the less factors are considered by the market.
Then all our investors are in different positions on this line.
Those who fully consider the market without considering the enterprise and those who fully consider the enterprise without considering the market are a minority.
Most investors are actually in the middle of the two, but with different emphasis.
Illustrate with 4 cases:
AA Graham, mainly plays value return, margin of safety, human nature game, earns money in the market by diversifying investment, and may occasionally make money in enterprises.
AB Qiu Guolu mainly plays valuation arbitrage, earning both market money and corporate money. It is a mixture of speculation and investment. Most fund managers use this mainstream investment method. The long-term annualized rate of return can be done after deducting fees. to 10%.
BA Li Lu, limited by the management of funds, is also playing valuation arbitrage, mainly to earn corporate money, supplemented by market money, and the long-term annualized rate of return can reach 20% after deducting fees.
BB Duan Yongping means equity thinking, which is equivalent to buying a non-listed company and making money from the company through concentrated investment, and may occasionally make money from the market.
There is no distinction between high and low, up and down in the method itself, it is mainly determined by personal character and values.
This is the different understanding of the depth of value investing and the different coordinates of each person’s position.
At the beginning, the reason why I was interested in stocks was that I was attracted to it after seeing the big news that Duan Yongping made 100 million US dollars on NetEase. At that time, looking at the salary of more than 1,000 yuan per month in my hand, I thought that I could still make such money, can I still earn so much?
From the very beginning, I paid attention to Duan Yongping earning the company’s money B, but I couldn’t understand the company, and gradually slipped to earning the market’s money A. With the accumulation of business knowledge and the deepening of the company’s understanding, I gradually returned to the equity thinking and changed. In order to make money for the company B, there are a few who fully consider the enterprise and do not consider the market.
Three levels of thinking in practice value investing:
The first is the return of value, which is based on the margin of safety and the game of human nature. There are large unpredictable accidental factors. It is necessary for the market to understand the value of the enterprise and earn profits from underestimation to return to value.
The second is valuation arbitrage, that is, buying undervalued and selling overvalued. In fact, most value investors are tossing and turning at this level of thinking, and the external manifestations are various arbitrage transactions and band operations.
The third is equity thinking, which is the way of thinking of buying non-listed companies. There are many investors who understand this principle, but there are very few people who truly integrate knowledge and action, fully consider the company and not the market.
The common part of value investing is that buying stocks means buying a part of a business. But practice is an extremely personalized thing. In fact, there are not many intersections between each person. Maybe everyone understands value investment differently.
In the stock market, we can only make two kinds of money that are the most reliable: making money from the growth of enterprise value and making money from the return of market value. Although we do not rule out making money from the market, in the final analysis we still need to make money for business growth. Therefore, there are always elements of “zero-sum game” more or less in investment. You must find a way that suits your personality in the process, and gain an advantage through long-term efforts.
The only way to gain an edge in the competitive game of investing is to work relentlessly and hard on the right path. Investing is actually a process of discovering yourself: who am I, what are my interests, what am I good at, what do I like to do, and then continue to strengthen and magnify these advantages until I surpass others and gain considerable advantages.
——2023.1.26
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