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The Safe Margin Strategy Of Entering, Attacking, Returning And Guarding

2010/12/21 16:56:00 51

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Find a good company that you think is just a good company.

Investment

Half of success is not about buying a good company.

Price

As long as the company is still growing and the valuation is reasonable or even undervalued, it is worth buying, but how to determine the value?

Guess with certainty

Investment is not a precise science. No matter how hard you work hard to study the profit pattern of enterprises, divide the stock into types, study the numbers carefully, take pains to investigate, and no matter how much you know about the past of the company, you can not be sure what the future will be like, you can only guess.

As a stock selection investor, the most sure guess is not speculation.

Your task is to pick up stocks and buy, hold, wait, and pay attention to the family at a low price.

enterprise

Information.

Buying opportunities should be at a time when prices are below value or close, but emotions always affect your rationality, because fear is when you are in a bear market or down, you dare not buy, because greed, you dare to buy when stocks go up sharply.

In order to avoid this emotional tendency, we only buy when the stock price is lower than the value, and the difference between the stock market price and the valuation is the margin of safety.

When you analyze an enterprise and decide to buy it, especially when you have no experience in judging the value, you should pay attention to giving a margin of safety.

For a company with uncertain prospects, the margin of safety should be greater than that of a company that can be expected to make profits.

As an investor, what we can do is to persevere in the analysis work and find a growing company, buying at the margin of safety. The valuation level varies with the investor's mood. Although it is consistent with the basic valuation in the long run, we have tried to analyze this sentiment, but we still can not predict how the other investors in the market will give a stock valuation.

You can buy at the margin of safety, expect the valuation to return to normal level, but you can not expect other investors to buy at a higher valuation when they are overestimated.

As a definite rule, the stock price should not be higher than its annual average net profit growth rate, that is, the PEG ratio is less than 1, and for fast growing enterprises, the net profit of more than 30% in the next few years will not exceed 1.5 times that of PEG.

Suppose that a stock's growth rate of 20% is now 16 times that of the valuation. We have certain valuation discounts (margin of safety). If our judgment deviates, our growth will be slightly worse than our expectations, but there will be a certain discount for buying, and the risk is not great. If growth meets our expectations or even exceeds, the valuation of the future stock can be increased to more than 20 times. Plus the growth gains, your investment profit will be very considerable. From this point, the margin strategy is to enter the strategy of attack and retreat.