Breadth and depth of investment research

$Xiaokang (SH601127)$ $BYD (SZ002594)$ $Zhenhua New Materials (NQ870341)$ @Today’s topic

In the process of investing in stocks, we need to keep learning and researching. Learning the basics of investment, studying macroeconomics, GJ policies, different industries, and different companies, as well as the technical trends of different stocks, can be said to be a good investor, the requirements are not generally high. In particular, many investors are not professional investors, and basically invest in their spare time. Therefore, if they want to do investment research well, they are often unable to enter or have more than enough resources. So in the end how to do investment research, can achieve multiplier effect?

First of all, we must be clear that investment research has two different development directions: one is to pursue the breadth of research, and the other is to pursue the depth of research. Generally speaking, it is difficult for someone to take into account the breadth and depth of research, because in order to do both at the same time, the time spent on research and the requirements for knowledge reserve and learning ability are unimaginable.

Pursuing the breadth of research requires as much understanding as possible of the operating rules of the market, the rotation characteristics of different sectors, the internal relationship between sectors, the conceptual themes of different stocks, and the internal logic of hot stocks rising and falling… In short, it is necessary to Studying a lot of stocks every day, and building a set of stock databases that you can call at any time in your mind, over time, you will form a keen investment intuition and a sense of pan. It is easy to find fleeting investment opportunities based on a policy, an economic or social phenomenon, a sector or a stock movement, and to seize this opportunity to gain profits at the first time. There are two requirements for this research method: one is the breadth of the research, and the other is the speed of the research. Because this research method finds opportunities more frequently, there are more stocks, but the lack of research depth will lead to insufficient understanding and inability to hold stocks. Therefore, it is usually suitable to hold multiple stocks at the same time, and each stock should not be overweight, and the holding period should not be too long. It is suitable for medium-term, short-term and ultra-short-term investment. This can effectively reduce the risk caused by in-depth research on individual stocks. This research method is commonly used by many short-term or ultra-short-term experts. They always track the latest policy information, hot events and industry trends, map them to the corresponding stocks in the first time, and keenly grasp the fleeting Investment opportunities can be hit with a single blow, and once you get them, you will never fight again. Even if the judgment is wrong, the stock does not rise as scheduled, and it will never be nostalgic. It will immediately retreat and invest in the next opportunity. Therefore, the requirements for operation level and discipline are also very high.

The pursuit of research depth is completely different. This research method generally starts with the study of a certain stock or a certain company. First of all, we must study the fundamentals of the company, such as: the company’s development history since its establishment, the company’s founder and core team, the company’s main business and industry status, the company’s main competitors for products or services, and the competitive landscape, recent years The company’s financial status and operating data, the company’s core competitiveness and moat, the evaluation and prospect of the company’s future development direction, the company’s forecast of the company’s operating performance for a period of time in the future, the company’s valuation level and its historical position, etc. . The more in-depth research on these issues and the clearer the understanding, the more boldly you will be able to invest your capital and invest heavily in this stock. Therefore, relatively speaking, this research method is suitable for concentrated investment, medium-term or long-term holding. This method requires high research depth and relatively low research timeliness. There are two points to pay attention to: one is the depth of research, and the other is buying and selling at the right time. Don’t make a move easily when you don’t have enough research on individual stocks and you are not sure enough; once you research enough, you need to wait for the right hitting point, hit the ball with all your strength when the opportunity comes, and try to hit a home run. This research method is a commonly used research method by value investing experts such as Warren Buffett and Munger, the great gods in the hearts of investors all over the world. They insist on investing within their own circle of competence. The stocks they invest in are few and fine, but they are all researched and researched in depth. Sometimes a stock takes several years of research and waiting to be released. As the saying goes, slow is fast, and less is more. From the perspective of a long period of time, this research method has a high success rate, so the rate of return under the blessing of compound interest magic is very amazing.

Therefore, most of our investors must first figure out which research method they want to choose. Is the pursuit of research breadth, or the pursuit of research depth? At the same time, the method of operation should also match the method of research. The breadth research matches the operation methods of scattered positions and fast-forwarding and fast-out; the in-depth research matches the operation methods of concentrated positions, optimal timing and medium and long-term holding. Only in this way can achieve a multiplier effect. Of course, which research method and operation method to choose depends on your personality, knowledge system, time, etc.

For most retail investors, I recommend that you choose the in-depth research method for investment research. The main reasons are as follows:

1. More time-saving: For most non-professional investors, the most lack is the time for research;

2. Dare to take positions: Due to the short research time, there are few targets that can be tracked, but each target can be researched more thoroughly and in-depth, so it can also take heavy positions, and good research and timing can also achieve good benefits;

3. Do not operate frequently: This research and operation method does not require as high a timing as ultra-short-term and short-term. As long as the stock price enters a range, it can be operated for a long time. There is no need to watch the market every day, and the pursuit of every band is perfect, so it is very suitable for retail investors;

4. More able to withstand fluctuations: Due to the in-depth research, even if the heavy positions are subject to fluctuations, they can be relatively peaceful. Taking myself as an example, in the process of operating Weilai Automobile and Yaben Chemical, I have endured a drawdown of about 40% in the case of full warehouse receipts, but in the end, I also achieved very high investment returns .

To sum up, no matter which research method is adopted, it is necessary to persevere and keep an empty cup mentality to keep learning and progress, so that we can truly build our own circle of competence and form our own investment system. No one can sleep on top of past investment successes. Pride and laziness are the worst enemies of investors, and diligence and humility are the best qualities for us to continuously improve and achieve good returns. Let’s work together!

The above is only for investment system sharing or fundamental analysis of the industry and company. It is not recommended for stocks and should not be used as an investment basis, otherwise you are at your own risk!


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