Discuss valuation with a friend. In his opinion, the valuation of a certain stock has reached a historically low level and can be bought with confidence. What I reminded him was that if the company was in danger of falling profits for the next two or three years, its valuation could fall even higher. Moreover, the bull market sees the top and the bear market sees the bottom. The calculation method used in the bull market to look forward to the future will become worthless in the bear market, and even have a counterproductive effect.
In my trading system, market segmentation is a very important issue of principle. Just like seeing a patient, you must first dialectical, and then you can prescribe the right medicine. Bringing the idea of a bull market to a bear market is the root cause of many people’s losses; and bringing the thinking of a bear market to a bull market is also the reason why many people take the plunge.
A lot of value investors like to say: I don’t look at the macro market, I just focus on enterprise value. But after the stock price fell to a certain point, we would hear him constantly complaining to the market. You look for food in the market, but you have to ignore its existence, then the market will tell you what you are ignoring!
Value investing was originally a good book, but there are too many people who misread it. When Kweichow Moutai was in more than 60 PEs, whenever someone said that they sold Moutai, they would always be ridiculed by many people, saying that this person betrayed value investment. There are still many people who keep telling their believers that good stocks do not need to be sold, but in the end they chose to sell their treasured Maotai when they were more than 20 PE.
We can cite many such examples. Without it, in the bull market, we think that we are making money by our own ability, but in fact we just catch up with the bull market. In a bear market, they start to look at themselves again, and in the end it is the stock price that changes their beliefs. The meat cuts of these people are often very representative. If they do not cut the meat, the market will not bottom out.
Going back to valuation, many people want to use valuation as an anchor to cross the bulls and bears. But first of all, everyone must figure out, will the stocks in their hands also make money from the bull market? The so-called enterprises are all living people. Like many big Vs, they do whatever they want in a bull market, but in a bear market, they can change at any time.
Market division, which is the basic skill of trading. For many people, the biggest problem is that they deny the existence of transactions, thinking that value investing does not need to consider transactions. The fundamental of value investing is value. When the fundamentals of the company have changed, when the company’s valuation has overdrawn its performance for four or five years or more, the investment attributes of the company have changed. If you don’t trade, you will be traded by the market.
If you want to cross the bull and bear, you must first find out what a bull and bear is. @Today’s topic
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