There is a saying to evaluate value investment like this: "go against human nature, go against the market, fight with the value trap, and find a life in nine deaths." "

Value investment is difficult, and it is even more difficult to make a good value investment. What is the core of it, and how can we find a way to make a steady profit?

Compound interest: repeat a simple and sustainable method countless times

Value investment has two cores, one is to find growing companies, and the other is compound interest.The former is the source of profit, the latter is the process of capital appreciation; the former is the idea of research, and the latter is the method of investment.

In the institution, these two cores belong to the research department and the investment department respectively, but individual investors can only merge into one, which often causes many value investors to focus only on corporate research and regard compound interest as a natural result of long-term investment.

Is that really the case? In the past, there were a lot of industry research and company analysis, but today's article will start with "compound interest."

There is a thinking question: there is a small piece of duckweed the size of a palm in a pond, which doubles every day. Experts expect the whole pond to grow in 10 days. How many days can it grow in half?

The answer is 9 days, the day before the 10th day. Because in the pond on the 10th day, all the duckweed that grew in the first 9 days were growing.

The magic of "compound interest" does not lie in "profit" but in "compound". The first is "re-investment", which is easier to understand, but there is an important premise that if you want to reinvest, there is an important premise. This is the second meaning of "compound": repetition-repeating a simple and sustainable method countless times.

The growth method of all duckweed is the same, and the raw materials needed are the same, so that they can be repeated at the fastest speed. The reason why it is difficult for individual investors to obtain compound interest is not that they will not repeat their investments, but that they do not have a "repeatable investment method". The repeatable investment method is actually the "profit model".

Profit model is the optimization of investment methods.

Yes, investment, like business operation, should also have a profit model.

People have their own personality, have their own methods, have their own preference for risk, but also have their own uncontrollable weaknesses, if you can not fix one or two methods that suit you, you will be at a loss as to what to do in the transformation of various modes.

Although the lion on the African prairie is powerful and has few natural enemies, it consumes a lot of energy because of its large size, and once it launches an attack, it is like a Boeing 747 that burns tons of oil. If there is no harvest, it will lead to a decline in physical stamina, which will further weaken its attack power, making it even more unable to catch its prey, forming a vicious circle.

So every time a lion attacks, it is extremely dangerous to himself, following the principle of "minimum physical exertion and maximum probability of success". In the long run, they form a "profit model" for hunting:

First, it looks around a group of prey for a long time, judging the most likely targets, usually the old and the weak.

Then, it will suddenly launch an impact, disperse the entire prey group, and then quickly select the easiest target from these targets.

Finally, go straight to the target and hit with one hit.

All the investment gurus are repeating a long-term and effective profit model, and they will wait for the right opportunity to emerge.

Many senior investors think they have a way, but the method is not equal to the profit model.The profit model is the result of the optimization of the method.The conditions required by many people's methods are too harsh, unrepeatable, or long-term losses, or hidden fatal risks, and the profit model must be a way to achieve a satisfactory rate of return in the long run, just as lions have 10,000 ways to catch their prey, but only a few are "all-weather, all-species-wide".

The specific methods of trend investment will change with the proportion of retail investors, regulatory policies, and the quality of listed companies, so it is difficult to form compound interest. Trend investment has at least three waves of mainstream hype:

At firstSitting modeIn the era of full circulation, the banker could not control the market, so he transferred toHot money short speculation mode, that is, when the Expendables are at their most glorious time; after the supervision becomes stricter, they enter again.The playing board mode of hot capital relay.

I never advise readers to participate in "boarding", not because the risk is high, but because it is not sustainable. Maybe there will be no soil for boarding in two or three years, and there will be no compound interest effect.

The reason why value investment occupies the mainstream is that the persistence is strong, the funds are universal, and there is a "compound interest" effect for a long time.

Many people just enter the stock market with the purpose of making a profit, but in fact, if there is no stable method, you will find that you can not take away the money you earn, and many short-term experts will not be able to do so once the scale of capital becomes larger.

Based on my personal experience, I have summed up four profit models that are very suitable for individual investors.

Let's start with a general introduction.

Four classic profit models

• The first profit model: dilemma reversal

Every investment master's case collection has such a counterattack story, coupled with the fact that success tends to increase dramatically, so every investor wants to seize such an opportunity.

But "predicament reversal" is not an opportunity, but a special profit model, which requires strict screening criteria. Only good companies in good industries encounter "bad luck" can they be "reversed". The other 90% of companies will only drift with the tide.

The profit model of "dilemma reversal" also requires considerable investment skills. to find companies with high margin of safety, to judge the timing of a company's performance reversal, and to be vigilant that good companies will eventually become "junk stocks" because of the lack of hearts and minds of the people.

"Dilemma reversal" is a probability game. Of the five companies that meet the criteria of "dilemma reversal", there may be only two real "reversals", and only one can be seized by you, so this profit model must control the position. as a result, the increase is huge, but the profit is average.

Due to the volatility of A-shares, most of the best funds are good at "dilemma reversal", so strictly speaking, "dilemma reversal" is more suitable for institutional investors to make portfolio investments. However, retail investors should still pay attention to the study of this model, because once reversed, the stock becomes the second profit model.

• The second profit model: growth and increase of positions

Growth plus position is the best way to invest growth stocks in the performance improvement period.

Many people regard value investment as a study of one or two companies, and then hold heavy positions all the way from the bottom, hoping to catch a "ten-year tenfold" stock. In fact, this method is tantamount to gambling.

The operating condition of a company is constantly changing, and the stock price of the company usually matches its operating condition, and there is little long-term undervaluation. So, behind buying a company is that you have a different view from the market-that is, "poor expectations", and the key to profitability is that your views are accepted by the market, which is finally reflected in the rise in the stock price.

The growth and increase of positions is based on"certainty determines the position"The idea is that when we find that a company has an "expectation gap", we first buy a part of the position and keep increasing the position to the maximum position as the business situation improves in the direction we expect; but if the "expectation gap" cannot be confirmed for a long time, then I will maintain the current position or reduce the position; if this "expectation gap" is negated by the market, then we should clear the position realistically.

Growing positions is also a "profit-driven" mechanism. When you have a position in a company and make a small profit, you will have the motivation to study it more intensively; leaving room for future positions can also avoid the situation of "butt directing your head".

• The third profit model: value center

This is an investment method for stable growth companies, especially some big white horses.

These companies are characterized by sufficient market research, and their stock prices almost reflect the fundamentals, and their valuations are more affected by market preferences, and it is often difficult to predict their ups and downs. If the interference of valuations up and down is excluded, the rise and fall of stock prices depends only on the growth of performance.

So the income of white horse stock is divided into two parts, one is the profit of rising performance, the other is the profit caused by the change from undervaluation to overvaluation caused by market style preference, or the loss caused by the opposite movement.

Then our investment position in the company is also divided into two parts.One part earns money for performance growth, and the other part earns valuation, fluctuating money.The first part of the position is stable for a long time, and the second part of the position is overallocated when the stock price is lower than the value center and low when it is higher than the value center according to the value center of the company.

There are two problems to pay attention to in this method:

First, the value center of the growing white horse stock is constantly moving up, and the first part of the position should not be easily lost.
Second, white horse stocks also have performance fluctuations, the stock price falls below the value center, it must be clear whether to kill valuation (can increase holdings), or kill performance (down value center), or kill logic (should be cleared).

• The fourth profit model: industrial trend

The differences in development trends between consumer companies and technology companies are as follows:

Brand consumer goods have consumer stickiness, and it is easy to have the "Matthew effect" of the strong, while technology stocks are easily affected by technological changes, making the original head enterprises lose their original advantages overnight.

This leads to a major difference in investment methods between consumer stocks and technology stocks: consumer goods companies focus on companies, while most technology stocks focus on industry trends. Except for a few excellent companies, most TMT companies use "industry trend" investment methods.

The profit model of "industrial trend" is to first judge the main industrial trends in the next few years, then to find the companies that can produce the best performance in accordance with this trend, and finally to buy before the trend is formed. cash in profits before performance is cashed in.

The "industrial trend" is different from the "topic stocks" in the trend investment, which does not need performance, but the more rubbish it is, the easier it is to speculate; the "industrial trend" is a value investment, which must produce performance, and the increase is proportional to the explosive performance in the future.

Just different from the general value investment, the "industrial trend" is to stir up all the relevant concept stocks at first, and finally to stay in the high position with performance, which can not return to the starting point of performance.

Therefore, the profit model of "industrial trend"The core competence is to predict the future performance of the company..

Turn the profit model into instinct

The efficient hunting mode of lions is developed step by step from imitation to practice, following the herd of lions from an early age.

Profit model, all the stocks in the optional stock are like a group of prey, and those in line with the "dilemma reversal" model must not be suitable for the "value center" model. You should know from the very beginning which mode you will use to "hunt". Never use the meaningless judgment of "this company is valuable, that company is too overvalued."

Value investment spends most of its time doing boring research and waiting, and the real opportunity is fleeting, breaking down every process of a profit model into the simplest actions, repeating it over and over again, until it becomes an instinctive reaction. in order to make this profit model work efficiently.
Having at least one profit model is a sign that an investor is moving towards maturity, and it can even be said to be the only way to become a professional investor.

With a stable profit model, it's like finding a job after graduation. although there are unlimited possibilities in the future when you go to college, they all fly in the sky. Only a formal job and a stable cash flow income is the real starting point of life, and the ROE of life can continue to improve.