This article comes from the official account "thought Steel Seal" (ID:sxgy9999) of Wechat.

Author: people and gods work together

Original title-5000 words depth: how to quickly judge the investment value of a company in 30 minutes?

Niuniu knocks on the blackboard:

The long-term value of a company depends on only three aspects: industry space, competitive pattern and business model. You only have 30 minutes. The easiest information to get is one or two in-depth research reports (you can see the prospectus for new shares). Ten minutes to look at the industry space, ten minutes to look at the competitive landscape, ten minutes to look at the business model.

Judge the industry space from the "stage, periodicity and sustainability"; judge the competition grid from the competition stage of the industry and the competitive position of the enterprise; find the core business model of the enterprise to see whether it matches the competitive advantage or not? whether it can form a "positive feedback magnification" stage.

First, find a company worthy of long-term research.

For individual investors, the best company is not a company with a strong explosion within a year, but a long-distance running champion with a long logic that can last for several years and more than a decade.

This view is not only based on the concept of long-term investment, but also because individual investors have limited research resources to maximize the effect of the learning curve.

The so-called "learning curve" means that when learning a new thing, the energy invested at the beginning is very large, but the output is very small, but with the passage of time, the effort is less and less, and the harvest is higher and higher. Just like the new products made in the workshop, workers need a lot of training at the beginning, but the production capacity and qualified rate are very low. After proficiency, they do not need training, but the production capacity and qualified rate are very high.

The same is true of studying a new company. at the beginning, you have a very large amount of learning, and you have to study all aspects of industries, competitors, products, business models, and so on, especially in industries with high technical barriers, but the return on investment is small. because the understanding of the value of the company is limited, only a small number of tentatively build positions, up do not know whether to chase, fell do not know whether to fill positions.

But as long as after the initial learning stage, the enterprise has established a comprehensive value framework, the follow-up only need to update some business developments, understand the latest financial statements, learning investment is greatly reduced; and the income? As you deepen your understanding of the company, you will dare to put down heavy positions when you have high odds or high demeanor, and the profit will naturally be greater.

So, to get the most out of the learning curve, you need to find a company that you can follow for a long time.

So the first thing to look at in studying a new company is not whether the product is good, whether the technology is strong, whether the ROE is high, whether the profit is growing fast, but whether the company is worth your time to study-- that is, whether it has the value of long-term investment?

After all, there are only a small number of companies with long-term value, and it is possible to study 10 to find one, so you need to use as soon as possible to judge whether the company has the value of long-term research, whether the company directly gives up, or whether it can do further research.

The long-term value of a company depends on only three aspects: industry space, competitive pattern and business model. You only have 30 minutes. The easiest information to get is one or two in-depth research reports (you can see the prospectus for new shares). Ten minutes to look at the industry space, ten minutes to look at the competitive landscape, ten minutes to look at the business model.

Look at the industry space in two or ten minutes.

Industry space refers to the future growth space of the industry, the growth model, and the current stage.

Industry space is the first thing to consider. Good enterprises have to pay twice as much effort as others in industries that are not growing in order to achieve the same performance; in industries that are doomed to decline, if they do not find a way to jump out, no matter how hard they try, they are tragic heroes.

There are some industries that are growing very fast at present, but it is not clear in the future, such as many science and technology industries; some industries are growing at a moderate rate, but the future is quite clear, such as many consumer goods industries; and some fast-growing industries are running out of steam, and there are some seemingly prosperous industries that lurk the factors of technological change.

Industry space can be analyzed from three dimensions: stage, sustainability and periodicity.

1. Stage:Determine which stage of development the industry is in, including:

The early days of seemingly large but very uncertain space, such as hydrogen cars, third-generation semiconductors, OLED, quantum computers

A period of rapid development after the outbreak of industrial consumption, the formation of business models or technological breakthroughs, such as lithium electricity, photovoltaic, artificial intelligence applications, some pharmaceutical industries, and some new consumer industries.

Stable growth period: most industries are at this stage

Stagnant period of development: most of the so-called sunset industries are at this stage

Uncertain period: industries that may be replaced or become niche in the future, such as traditional new housing development, traditional supermarket department stores, print media

2. Periodicity:From the perspective of macroeconomic cycle, industry inventory cycle and Jugla cycle, this paper judges whether the industry has obvious periodicity, and which of the four stages of the cycle "upward period, downward period, trough period and peak period".

3. Sustainability:What is the probability that the industry will continue to grow in the conceivable future (which can be interpreted as 15 or 20 years from now).

For example, the sustainability of consumer electronics is worse than that of home appliances, the sustainability of optional consumption is worse than that of compulsory consumption, and the sustainability of fossil energy is worse than that of new energy. Spirits and condiments are highly valued precisely because of their sustainability.

However, "sustainability" is a very subjective indicator. People always overestimate the changes of one or two years and underestimate the changes of more than a decade.

There are two ways to judge based on "industry space":

The first is grading:File An is an industry in a period of rapid or stable development, with weak periodicity and a certain degree of sustainability; C refers to an industry in an uncertain early stage, a stagnant period of development and an uncertain future, or a strong cyclical industry, or a downward period in a weak cycle; file B is an industry other than An and C.

File A, B, C, and then combine the latter two factors to determine whether it is worth continuing the study.

The second way of thinking is to start from your own investment style:

• Growth investors choose industries that are in a period of rapid development

• Sound investors, choose industries that are in a period of steady growth and have no periodicity.

• Investors in cyclical stocks, choosing industries with strong cycles and in upward or trough periods

• Ultra-long-term investors choose industries with strong certainty of sustainable growth.

Look at the competition pattern in three or ten minutes.

The competition pattern mainly depends on the share characteristics of the industry in which the enterprise is located, the changing trend of the enterprise share, and the reasons behind it. Even in high-growth industries, if the competition pattern is not good, enterprises will have weak growth or a decline in ROE, and long-term income will not increase profits.

The competition pattern can be divided into five categories from the point of view of the competition stage of the industry:

1. The stage of "high growth rate and scattered share"

Usually in the early and explosive period of the development of the industry, the industry has a lot of space, a large number of participants, and players continue to enter, such as 19 years of e-cigarette industry, 20 years of medical beauty, pet medical care.

At this stage, usually all players are in the state of horse racing enclosure, the competition seems fierce is actually incremental competition, together to expand the market, we can not consider the competition pattern.

2. Industry reshuffle period

The industry share is also very scattered, but the growth rate is declining and becomes a buyer's market, and companies have to devote a lot of resources to "competitive strategies", such as advertising, price reduction and promotion, poaching, over-expansion, and so on, so as to reduce profitability.

Since 2008, most industries have entered the reshuffle period, but the industry reshuffle period can be long or short. on the whole, the lower the entry barriers, the higher the exit barriers, the lower the degree of product differentiation of the leading enterprises, and the stronger the downstream customers. the longer the industry shuffle.

3. Industry clearance period

At the end of the reshuffle period, if a company can take the lead to establish a competitive advantage and enter the state of "positive feedback magnification", the industry is likely to enter the clearing period of "leftovers are king". For example, 18 years of waterproofing industry, 19 years of construction machinery, last year's electric two-wheeler.

The sign that the industry has entered the clearance period is that some companies take the lead in entering the "positive feedback amplification", that is, a positive factor triggers a series of positive factors that make enterprises stand out in the competition.

The common "positive feedback magnification" in the development of enterprises are:

• Scale advantage: scale expansion-cost decline-profitability increase-scale expansion (the leader of most asset-heavy, steep cost curve industries)

• R & D-driven: strong R & D-technological breakthroughs-increased profitability-R & D plus investment (the dominant track leader in the semiconductor design industry)

• Brand scale model: scale expansion-brand launch scale increase-consumer base expansion-scale expansion (most mass consumer goods leaders)

In addition to "positive feedback magnification", the common industry clearing logic in listed companies is as follows:

• First, domestic replacement

• Second, the consumption is upgraded and the market share is concentrated to the head brand.

• Third, horizontal mergers and acquisitions in the industry

4. the leader in the stable period of share.

At this stage, the leading enterprises found that the market share has been basically stable, from the pursuit of share to the pursuit of profits, choose to eliminate low gross margin products, upgrade new products, control marketing expenses, raise prices with costs, and so on.

At this time, the industry leader is reflected in the leading share but slow growth, the revenue growth rate of the main products is higher than the industry growth rate, and the profit growth rate exceeds the revenue growth rate, including a super "super" and the "oligarch" in the duopoly competition pattern.

5. Dragon two and Dragon three in the stable period of share.

That is, the "strong" in a super and multi-strong pattern, this kind of enterprises can keep their share under the leading competitive advantage, often rely on differential competition strategy, and their growth certainty is poor, because "differentiation" also limits the path of enterprise development.

But there is one category of enterprises that need special attention, that is, subdividing the hidden champions of the track, whose "differentiation" is characteristic of sub-industries, often with better gross profit levels and steeper cost curves than big industry leaders. It is entirely possible to rely on this easy-to-defend and difficult-to-attack niche market to surpass the leading share. A more typical case is the transcendence of the Muyuan shares of the self-breeding mode to the Wen shares of the peasant household co-cultivation model, and the wet diaphragm bibcock.Enjie Co., Ltd. (002812.SZ) $Yes$Star Source material (300568.SZ) $Beyond.

The change in the industry pattern is not one-way. An industry that has entered a stable period of share may be reshuffled because of a subversive innovation, and most technology industries may experience such moments of "destructive innovation". There are also some highly cyclical tracks, where there are one or two companies that counter the trend and want to reshuffle at the trough of each cycle.

How to treat the "competition pattern"?

Similarly, one way of thinking is to choose only the industries where the competition pattern is stable, that is, the leader of the industry in the clearing period and the share stable period.

Another way of thinking is to choose according to your investment preferences:

• Stable investors only need to pay attention to the "leader in the stable period of share", especially those who have the advantage of moat.

• Investors in growth stocks pay attention to "industry clearance period" and "subdivision track invisible champion"

• Top-down investors can also pay attention to the enterprises in the explosive period of the industry with "high growth rate and scattered share".

• Investors who like predicament reversals and odds need to start tracking from the "industry reshuffle period", or study the upward counterattack of invisible champions on more subdivided tracks.

Four or ten minutes to look at the business model

The business model is the way in which the company makes money. It usually represents the unique cooperative and competitive relationship between the company and customers, suppliers and other enterprises in the production chain.

The business model of an enterprise can usually be summed up in one or two simple descriptions, such as:

$Guizhou Moutai (600519.SH) $The core of the business model is the product, that is, the long-term accumulated value of luxury brands.

$sea and sky flavor industry (603288.SH) $The core of the business model is the channel, that is, the huge and efficient marketing network established by the catering industry for more than ten years.

$BOE A (000725.SZ) $The core of the business model is resources, that is, the establishment of barriers to entry through high-intensity investment and technological upgrading.

The information of the enterprise is very trivial, and if there is no goal, it will fall into the ocean of business data. In the first step of your research, you need to find a grasp-if you don't understand the business model, just give up; if you think there's something wrong with the business model, rule it out directly; if appropriate, then take the "business model" as the outline.

Looking at the "business model" has the following three functions:

First, directly use the "business model" to exclude some companies that do not conform to the concept of value investment.

Value investment buys free cash flow created by enterprises in the future, while there are some business models in which the cash flow created during the product life cycle is less than the investment needed during the period (non-leaders of industries with heavy assets and rapid technological change) Or the investment of the enterprise can easily turn into a pile of inventory or accounts receivable (PPP model), these enterprises need investors to invest constantly, once stop financing, the enterprise cash flow will be exhausted.

There are also some business models that can easily lead to vicious competition and are unable to establish competition barriers before the industry is cleared (clothing and some FMCG industries); there are also some business models with a high degree of uncertainty in the product life cycle (some content industries). Specifically see the article "bad business model, is the investment" accident-prone areas "…...

Second, directly use the "business model" to judge the targets that can be tracked for a long time.

Some business models are unique and directly represent the competitive advantage of enterprises, which can directly enter the optional stock.

For example, focus's business model, covered by the largest elevator media outlets, has become the most extensive and fastest way for brands to contact first-and second-line white-collar groups. In addition, the ladder media resources are limited, there are negotiation costs, focus business model is competitive advantage.

There are also some new economy enterprises whose business model is very uncommon. Once understood, it is tantamount to understanding the core of enterprise value.

such as$Pop Mart International (09992.HK) $If you think of the business model as a "blind box", it certainly doesn't have much value, but if you see "IP whole industry chain operation", its value is very different, even if you are not sure whether the business model will work, your understanding of the enterprise itself is on the right path.

And for example,$Meituan-W (03690.HK) $If you see its business model as "a platform for diversified local life services such as takeout, arrival, wine and travel", the valuation is obviously too high; but if you see an "organizational structure that supports borderless expansion", it's clear that you've found a source of long-term high growth.

Of course, there is no difference between good and bad business models of most enterprises. at this point, the third function of business model judgment is--

Third, establish the goal of further research and tracking.

The business model of most enterprises is not good or bad, but it is appropriate or not. If a company is OK in both "industry space" and "competitive pattern", the next step is to judge whether its business and business advantages match, and whether it has the opportunity to enter "positive feedback magnification".

For example, A shares are mostly manufacturing enterprises, and the most common business model of manufacturing industry is "cost leadership", in which it can be cost reduction (Longji shares), upstream and downstream integration (Hengli Petrochemical), process cost reduction (Muyuan shares), and management cost reduction (Haitianwei industry).

If you like and invest in cost-dominant companies for a long time, the first step is to figure out which business model it is, so that it can correspond to the relevant financial indicators and operating data, determine the stage and follow it over a long period of time.

Fifth, we should talk about the methods when looking at the materials.

The article is relatively long, so let's sum up these three 10 minutes:

• First, judge the industry space from "stage, periodicity and sustainability".

• Second, judge the competitive pattern from the competitive stage of the industry and the competitive position of the enterprise.

• Third, find the core business model of the enterprise to see whether it matches the competitive advantage and whether it can form a "positive feedback amplification" stage.

Of course, 30 minutes is just a goal, you need to see enough enterprises, accumulated enough judgment experience.

If you want to find a good company, you can only use the word "look more"-- if you look at the data of 100 companies, you will find that the probability of a good company is definitely higher than that of only 10 companies. As a professional investor, you have to look at a large number of companies in order to "feel" about the enterprise.

There must be a way to look at the data. many investors remember every financial detail, but they are at a loss about the basic business model; they have a lot of knowledge about the competitors and shares of the industry, but they have not thought about why such a competitive pattern and future trend can be formed.

To make matters worse, there is a disconnection between research and investment. After studying all aspects, it can only form a vague impression of a "good company". In the end, it is bought because of an unimportant financial data and hastily sold because of an unimportant business development.

We are investors, not enterprise sales managers and business executives. We must stand on the position of the chairman, judge the general direction and pattern, have qualitative research results, and prepare for long-term research and follow-up.

Edit / IrisW