A Good Stock Needs To Meet Four Criteria.

A good job

According to the author's research on investment theory and the summary of years of actual combat experience, we should do a good job of value.

Then, what is the four good stock? That is, a stock needs to meet the following four criteria: good industry, good management, good products and good mechanism. If an enterprise can meet the above four points, I will call it a good vote, and believe that in the long run, there will be good returns.

First of all, a good industry is very important. The so-called "men are afraid of going wrong", it is easier to create and realize value in a good industry.

The growth rate of the industry is fast, and the growth of enterprise value often needs to be built on the basis of high growth in the industry. Historically, there are few companies like Marlboro cigarettes that achieve long-term growth in low growth industries.

Industry at the same time

Good management and good mechanism are equally important.

Even good industry, but no good management is still difficult to create value, such as attractions companies, have comparable natural resources monopoly and the rapid growth of tourists, but the management performance and mechanisms are scarce, few companies with good returns.

In addition, the mechanism is equally important. We will have a good idea of the comparison between the operating results of most state-owned enterprises and their restructuring.

From this point of view, the capital market should treat the management incentives with a tolerant attitude. Incentives are much stronger than those without incentives for the long-term development of enterprises.

The reason for having good products is very simple. The competition between Microsoft and ordinary textile products is obviously different.

Products with barriers can isolate enterprises from fierce competition such as price wars, service wars, advertising campaigns, etc. it is easier for companies to create profits and return shareholders.

In recent years, the dynamic portfolio fund has carried out value investment on the basis of the above four reasons, avoiding the theme stocks and the "bad" companies.

Apart from the choice of stocks, the larger assets of the management of friends may need to consider the allocation of industries and sectors at the meso level.

Here I would like to talk about how we feel about the industry configuration.

In fact, it is not difficult to do industry allocation, the main basis is "underestimation", which industry is obviously undervalued in the whole market, and increasing industry configuration can generally get better returns in the medium term.

There are two kinds of underestimation. One is the analysis of the current operation of the industry and the profitability of the enterprises, and the overall valuation of the industry is low.

As early as 2007, the coal industry was widely recognized as a valuation depressions, but many people refused to buy stocks of rigid coal stocks because they were not hot spots or the future price trend was not clear.

But in the two quarter, coal stocks rose all the way, and the industry boom became more and more optimistic in the future.

At present, the steel industry seems to have something in common with the coal industry at that time.

The second underestimate needs stronger research support, because this underestimation is not simply based on the valuation but on the future development.

For example, the food and beverage industry in 2004 and 2005, the valuation of major companies in the year was relatively high in the market, but the subsequent corporate earnings continued to exceed expectations in successive quarters.

For example, in the securities industry in 2005, the valuation of the year was almost the most expensive in the whole market, but if we take into account the alarming growth in 2006, the securities industry in 2005 will be an excellent allocation industry.

It should be said that Peter Lynch is in the grasp of the industry's rotation of superhuman cognitive ability, in order to lift the weight of the huge Magellan Fund Management, and achieved amazing results.

Value investment has a variety of subdivision operation logic, whether it is completely bottom-up or from the middle industry rotation configuration, each has its own inferiority, but it can be said that eventually all roads lead to Rome.

However, for those who are not familiar with the strategy, the best value investment strategy is to hold mutual funds for a long time or to reach Rome.