First of all, I wish you all a happy Chinese New Year, good health and good luck in everything!
There is nothing better than having a good body and a healthy and happy mood. Of course, a healthy and happy mood and body also require certain material guarantees.
At this moment, as a fund manager, I have to admit and consciously realize whether I am optimistic about whether the company I hold is rising and the net worth is rising, and because this optimism affects my objective and rational judgment and affects my own decision-making and trading behavior.
In contrast, when Tencent was at 200, I also had to be aware of whether I had pessimistic emotions, which would affect my decision-making and buying transactions after objective and rational judgment. Although I didn’t buy all of them at 200 when Tencent’s 300 fell to 200, I still kept buying during this process, and I recorded my thinking process by writing articles.
This article wants to talk about two things. The first thing is why Tencent’s current price has risen to this price. From an objective and rational point of view, how appropriate is Tencent’s valuation?
The second thing is to talk about what enlightenment the recent hit “Three-Body Problem” has on our investment.
Regarding the valuation of Tencent, I wrote in “Writing on Tencent 210” that Tencent, with a market value of 2 trillion, is basically worthless according to 500 billion investment assets. At the same time, the net profit may drop to 100-80 billion, or even possible The market value given by the judgment of continuous decline. Therefore, Tencent’s objective and rational judgment of 2 trillion yuan is likely to be cheap. Based on my knowledge and understanding, it is possible to “distinguish fat and thin at a glance”.
From Tencent to 300, and yesterday to 400, I tried to find out where the reasonable valuation is. Based on the public information that can be researched at present, as well as the follow-up to Tencent in the past and the understanding of the Internet industry, I do not have a lot of information and cognitive updates at present.
Probably the main update is a few points like this. The first is that the game version number is issued normally, and Tencent’s “Fearless Contract” has obtained a version number. The second is that the pace of monetization of video accounts has accelerated. At the performance meeting, executives gave higher monetization expectations relative to market understanding. The third is that after Yangkang, the pace of economic recovery may be accelerated. The fourth is to improve the quality and efficiency of Tencent’s internal management and anti-corruption efforts.
In my opinion, the economic recovery is actually the external environment. From the perspective of Tencent’s operators, this is not something we can control. Regarding the version number, although operators can work hard to communicate, in fact, this area is also biased towards external changes.
It really belongs to Tencent’s internal changes, and the business level that has a more obvious impact on profitability is that the realization of video accounts may be an increase. The launch of games such as “Fearless Contract” may become a phenomenal game, but it still needs to be tested by the market. The internal improvement of quality and efficiency has cut off many unprofitable businesses, and at the same time strengthened the anti-corruption efforts. In fact, they are all increasing revenue and reducing expenditure to make the interior healthier.
What is Tencent’s reasonable valuation? This should not be based on the models and imaginations we build, but on objective facts.
Here, let’s talk about the recently hit “Three-Body Problem”. I watched “The Three-Body Problem” through Tencent Video.
The reason why the TV series “Three-Body Problem” is currently highly rated is that it follows the original work as objectively as possible. And it pays great attention to explaining the background of the story to those who have not read the original work.
Although people who have read the original work may feel that the plot is procrastinated, for people like me who do not have a deep understanding of the details of the original work, these details have given me a lot of new inspiration.
Recently updated to the “Mozi” section, Mozi established a very complex three-body world model, and used his model to interpret the law of the sun’s rotation in this world. Although it seems that there are some small problems with the model, generally speaking, the explanation of the law has been reasonable for a long time, otherwise the world would not have invested so many resources to build this model.
But it is a pity that although this model can be justified, in the end the three-body world was destroyed again to prove that his model is not true, it is just a self-justified statement.
Isn’t this similar to investing in the stock market? In the process of Tencent’s 300 to 200, how many claims are just self-explanatory? Aren’t the articles I wrote a kind of self-justification? Even if I bought Tencent for 200 yuan and made some money now, can it prove that what I said at that time must not be justified?
The story of “Mozi” in “The Three-Body Problem” gave me the biggest inspiration that no matter how well the model can justify itself, and no matter how famous the model builder is, in our investment research, what we really need to do is to restore the truth. What we need is not a seemingly complicated and huge model, nor the golden rules given by past investment celebrities. What we need to really confirm is, what is the truth?
Then we go back to Tencent. What is the truth about Tencent’s current valuation?
Based on my level of cognition, or the circle of competence, Tencent is more likely to be cheap when it costs 200 yuan. But this probability is not 100%.
In the process of 300-350, I repeatedly calculated Tencent’s valuation and updated my understanding. However, in fact, how much Tencent is worth depends on the subsequent development of Tencent’s core business monetization capabilities, such as changes in games and advertising. In fact, the market is now giving a higher valuation based on the optimism that Tencent’s games and advertising may be more profitable in the future.
From my point of view, with Tencent’s scale, external economic factors must have an impact on its advertising business, and even the payment rate and level of game users. However, external factors cannot be influenced and determined by Tencent itself after all.
While paying attention to changes in external factors, I pay more attention to what the operators have done, or what is the core of thinking of the current decision-making of Tencent’s operators. From an internal point of view, Tencent is currently optimizing the team and version number allocation under the limited version number, and the research and development strategy is also more focused and concentrated resources.
From the perspective of advertising, Tencent is also looking for new ways to monetize such as video accounts. Even if the external environment has not improved, Tencent’s internal changes have found new increments.
Applications including Tencent Conference are also seeking to realize cash, although it may not necessarily bring huge benefits in the short term. But there may be an application similar to Tencent Conference, which will become a source of new profits in the future.
There are some open source actions internally, and there are also some throttling actions. In the throttling operation, the most important change is to stop the continuous development and upgrading of some products. For example, I have been using QQ Video and Video, but after I checked it, QQ Video and Video should still be able to continue downloading, maybe it just won’t continue to develop and upgrade.
At the same time, throttling also includes anti-corruption. Judging from the announcement materials, in the second half of the year, Tencent began to propose increasing revenue and reducing expenditure. At the beginning, business adjustment was mentioned first, and then repetition was mentioned during the Chinese New Year. I speculate that the internal cost-benefit analysis of each project must have been carried out during the throttling process, and some projects may be found to be unreasonable and healthy. Projects that are judged to be difficult to break even and have no strategic value may be stopped, and some may be found to be corrupt due to the discovery of abnormal losses during the analysis process.
Generally speaking, from an internal perspective, Tencent’s decision-makers realized an internal business review and inventory during the difficult process of last year, at least in the process of market value and stock price. In my opinion, the core values have not changed. In such a somewhat adversarial environment, a new upgrade of internal business has just been completed.
The above content is the objective fact of Boshi’s review during the investment process. The facts and opinions in it are only for academic exchanges and do not constitute a recommendation for specific investment targets. Investment is risky, and you need to be cautious when entering the market.
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