The next round of layout of real estate stocks

Since November 1, this round of rising market has gone on for nearly 28 trading days, and the Shanghai Composite Index has risen by 10%. More importantly, market confidence is constantly being restored. There are two main driving forces for the rise of the market, one is the continuous optimization of prevention and control, and the other is the continuous benefit of the real estate supply side.

As an industry affected by both prevention and control and the supply side, the overall rise of real estate stocks is naturally logical. The current real estate stocks have also formed two camps. One is the mainland real estate stocks represented by private real estate stocks in Hong Kong. Due to all-round concentrated outbreaks of debt, sales, exchange rate, and Hong Kong stock market environment, these stocks have experienced a serious plunge in the second half of this year. Ushered in a recovery rise.

But even within a month, ushered in a surge of tens of percent or even doubled, most of the stock prices of these stocks are still lower than the closing price of the first half of the year. This is because at that time, the market had not yet experienced emotional killing, and the pricing was based on the intrinsic value of the company. It is naturally difficult to cross this threshold when the sentiment rises later.

For private real estate enterprises, except for a very small number of enterprises, the next three years will be a process of continuous decline in profits, and losses are also a high probability. Some stocks seem to have only 3 or 4 PE on the surface, but the annual report may reach 6 or 7 PE. After two or three years, if the stock price can maintain the current price, its PE may exceed 20, or even a negative number.

No matter how many current supporting factors there are, for real estate companies, the most important thing is the recovery of sales. From the perspective of support, after the supply-side measures should be exhausted, the follow-up will be a boost to the demand side, but this has nothing to do with some real estate companies, and their properties have already been sold out.

Even for companies that have benefited from the November policy, their sales performance in 2023 is still difficult to stop the continued decline in the context of not acquiring land normally for more than a year.

The foundation of value investing is value. Calculate those real estate companies whose sales fell last year year-on-year, this year’s sales fell by more than 40% or even higher, and next year’s sales will be worse than this year’s. How much profit will they have in two or three years, or will they profit?

The current supply-side policies all have a premise, that is, “marketization and legalization”. Just because some enterprises cannot die, it does not mean that they can pay back the money immediately. If the debt problem can be solved within three years, it is considered a good enterprise. The recent good news is just to keep the accident companies from expanding their harm. It is already very rare for them to recover the decline that was killed by emotions in the second half of this year, so don’t think too much.

For these individual stocks, the final pressure on them must be additional issuance. In a sense, the rise in the stock price for more than a month is to ensure the smooth realization of the additional issuance. Interestingly, some companies have just received tens of billions of credits, and then began to issue additional shares at a low level when the market was broken. Is it because the credit line is not enough, or can’t get the money at all?

It is a good thing that additional issuance can make some companies survive, but what about their future? In the context of loose capital, they still have to issue large amounts of additional issuance when it is less than 0.5PB. How hungry is this company? company? Its future is to survive!

Many things in November are intriguing, so I can’t say more, let’s unfold it by ourselves. It is often said that investors do not create value, but if there are no shareholders, who will solve so many difficulties? Paying the bill is really some people’s strong point.

This game has come to an end. Of course, for some stocks that have been intensively speculated, there may be room for short-term stock price rises, but this has nothing to do with value. Those who invest should stay away from these allotment companies, and those who come to speculate will be lucky.

The real estate market will continue, and this is no longer a matter of real estate itself. But the story of Baojiaolou has been told, and the protagonists behind will be those companies that rely on endogenous growth to increase sales.

The market is lingering here, just waiting to see if there is a measure for further liberalization on the demand side, and there should be a clear statement next week. The focus of real estate stocks will also shift accordingly. Whether or not land has been acquired in the past year will be the main watershed for the next wave of real estate stocks. For the specific situation, we will discuss it in detail after the meeting notice comes out.

Regarding how far this round of real estate stock market can go, many people are now pessimistic. It is true that in the past year or so, various unfavorable factors have come together, and there are very few bright spots in the overall environment. But after all, in November, we have seen the double inflection point of prevention and control and real estate, and we can still be more active.

It is often said that “the stock market is a barometer of the economy.” I do not agree with this view. The stock market is more like a weather forecast for the economy. What it reflects is not reality, but expectations. Although this forecast is sometimes not so accurate, it is still reliable in the general direction.

The current real estate stocks reflect expectations. It is better to look at the future than to look at the present. The year-on-year decline in sales of commercial housing this year is a foregone conclusion. The last time this happened was in 2014. However, representative real estate stocks such as Vanke, Poly, and Gemdale all rose sharply in 2014, and their rising time was even ahead of the market.

History will not simply repeat itself, but in terms of cycle cycle, now is indeed very similar to 2014.

After waiting for so long, wait another week and see. @Today’s topic

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