Original title: Deep reading of Buffett’s shareholders’ letters on Heifeng Island: Respect and fear the market, and practice value investing
On the evening of February 27, Buffett in Berkshire HathawayThe companyThe official website announces the annualShareholderOpen letter. The letter mentioned that the company’s revenues in 2020 amounted to $ 245.510 billion, a decrease of 3.6% compared to $ 254.616 billion in the corresponding period last year.profit$ 5.02 billion,US(Compared to the same period last year) An increase of 14%.
Influenced by the epidemic, the company in the first quarter of 2020investmentloss$ 54.517 billion, and the fourth quarterNet investment income$ 30.45 billion, a 24% increase over last year. From the data to verification again, according to Buffett’s long-term value philosophy, the losses and losses of each quarter have no meaning. The real meaning is to discover the value of the investment in the long run.
1. RespectStreet marketKnowing your “limitations” is just as important as knowing your “circle of qualifications”.
“Limits” is one’s own risk factor, which needs to be self-disciplined and strictly controlled, while a “competency circle” is one’s own return factor, which requires a lot of self-confidence and effort. Because the market has different methods of interpretation at different stages, when encountering a market that does not suit your style, you must first understand what to do and how to respect the market.exposure。
Like a year agoGeneral Meeting of Shareholders, Buffett admitted his “limitations,” and was unable to make an accurate judgment in the face of the epidemic’s impact beyond his “capacity circle.” Buffett’s “circle of qualifications” is to perform industrial analysis through financial knowledge, such as discovering the intrinsic value of the aviation stocks themselves, but when the impact of the epidemic exceeds their “qualification cycle”, Buffett emphatically eliminates aviation stocks. Whether it is from a risk point of view or from an investment point of view, we can see that its action is very crucial, and it also informs us that it is very important to recognize our “limitations”.
For the proponents of “long-term investment, value-based investment and responsible investment”, the most stable income stems from a proper judgment of continued profit expansion.
Usually when people study a company, valuation is the main factor, but I personally agree with Buffett’s value investment philosophy, because valuation is just a ruler that will help us make judgment and spend too much.Learning TimeThe ruler is very limited. Value investing should measure stock selection from the three dimensions of quality, valuation and timing. Popularly, this is what we often say “good company, good business, goodprice“I personally think that quality is the main consideration. It represents the sustainability of the company’s profit model and is used to judge whether the company has a ‘moat.’
Just as Buffett continued to hold a new energy car company, in September 2008, Berkshire subscribed for 225 million H shares in the company at a price of Hong Kong $ 8 per share and held it. But the companyMarket valueAlways getting up steadily. When the company’s profits are at a stage of continuous expansion, high valuations can be digested, which well illustrates the importance of the company’s quality analysis.industryThe grid is in the process of switching from fuel to new energy. This company enjoys dividends in the industry and its revenues are in a continuous cycle of expansion. If you ignore quality because of valuation, it will lose the increase of 423.6% in the company in 2020. On the contrary, the valuation of the coal and steel industry was at a low level after 2017. If the sector is judged only by valuation, it will last three years.Sector IndexA decrease of 22% because the entire sector is in a period of continuous profit contraction. Therefore, the most stable income should come from the right judgment regarding the continued expansion of profits.
3. “Balanced allocation” is a sincere expression of respect for the market. On this basis, the desire for the right “quality” is more important than the desire for the right “quantity”.
The term “balanced allocation” can be derived from BuffettpositionThe stocks have been verified, and there are technology-related positions, such asApple、Amazon, There are also consumers and traditionalBankStatus.When we are respectful of the market, we will not focus on certain industries in our holdings, but will well define the assets by way of a “balanced allocation” in the industry.Sustainable competitive advantage, A company with good growth potential. Under the influence of rotation in the industry, it is difficult to obtain long-term benefits from joining certain industries.
Based on “balanced allocation” in the industry, individual stocks should be moderately concentrated, and focus on discovering “quality” companies, and even more daring to make “heavy bets”. If only a balanced allocation is applied in terms of quantity, then the investment portfolio has a high probability of converging to the index trend. In Munger’s view, people who worry too much about quantityInvestment hueThis is a failure strategy. As an investor, if you really want to get excess returns from the market, you need to achieve concentration in high quality investment goals.
Finally, from Buffett’s shareholders’ letter revolving around the main investment line, it can be seen that the year is a value year driven by profit expansion.RepurchaseStocks are also an expression of security. Profit-often-invested years contribute to a “fundamentalist” value investment, meaning to focus on the value and cash flow of the asset itself.Pricing, Not based onMarket behaviorAnd trading behavior.
(Source: The newspaper)
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