Appropriate Diversification of Value Investing

Value investing is about buying great companies at the top of the industry at low price-to-earnings ratios. During the downturn of the entire industry, the leading companies are the baby market value buys.

To avoid misunderstandings, vote two to three. One look right can make a lot of money. It’s better if you look right.

About ten years ago, I worked with Wuliangye, Industrial Bank, and BYD for a third of each.

These three companies are the three leading companies in the liquor industry, banks, and automobile industries. And the stock price has not risen for a long time, and the price-earnings ratio is around seven times. Market value is not high. The market value of Wuliangye is around 60 billion, BYD’s market value is more than 20 billion, and the market value of Industrial Bank is around 100 billion. When I bought it, the three major industries of banking, liquor and automobile were in a downturn, and a lot of stocks were very cheap.

For example, China Merchants Bank, Bank of Ningbo, Bank of Nanjing, Great Wall Motors, Kweichow Moutai, and Luzhou Laojiao are not expensive, but very cheap.

Today, Chinese medicine and pork faucets are heavily held, and the price-earnings ratio is also around seven times. The current stock prices and valuations of these two industries are in the downturn, the stock prices have not risen for a long time, the market share of the industry leaders is still relatively low, and there are also a lot of cheap companies in the industry, such as China Resources Pharmaceutical, Ma Yinglong, Jiangzhong Pharmaceutical, Da Ren Tang, Chinese Traditional Medicine, Yunnan Baiyao, Baiyun Mountain, etc. Pork industry such as Muyuan Co., Ltd., New Hope, Wen’s Co., Ltd., COFCO Jiajiakang, etc.

In order to avoid misunderstanding and losing money, it is important to diversify into two or three industries, which is equivalent to insuring investments.

Once the whole warehouse is wrong, it is very dangerous. For example, if the whole warehouse LeTV, Bilibili, Ferrari Future, who to learn from, TAL, even WuXi PharmaTech, Hengrui Medicine, Tencent Holdings, Wuliangye and other track companies would suffer heavy losses or even lose money once they fell sharply .

Therefore, in order to increase the probability of investment success and keep the principal, proper dispersion is necessary.

Riskier than concentrating a full position in one stock is taking a full position in one stock and investing with leverage or borrowing money. Even ten percent leverage is dangerous. For example, in education and training, some real estate leaders have fallen by more than 90%. In 2002, even Amazon fell by more than 90%. No matter how good a company is, there is a chance that the decline will exceed your expectations. Once this unfortunate small probability event occurs, the principal will be wiped out, and there will be no chance of surviving in the stock market after that.

Carefully select a few good companies, properly disperse, never borrow money, never leverage, spare money to invest in stocks, work normally before financial freedom, pay dividends every year after financial freedom, enjoy life, and continue to work for interest and a sense of achievement , wouldn’t it be fun.

$ Industrial Bank(SH601166)$ $Kweichow Moutai(SH600519)$ $WuXi PharmaTech(SH603259)$

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