Over the past decade, I have attended Berkshire Hathaway's annual shareholder meeting in person seven times, aiming to draw more investors' attention to and practice value investing through this global investment event. Warren Buffett has emphasized that value investing is the key to long-term success, applicable not only to the U.S. stock market but also to the A-share and Hong Kong markets. Over the past 60 years, Buffett's value investing approach has delivered a 55,000-fold return for Berkshire Hathaway, demonstrating the power of compounding.
The core of value investing lies in identifying "good industries, good companies, and good prices." However, good industries and companies often come with high valuations, and "good prices" typically emerge only during severe bear markets or extreme pessimism. Therefore, practicing value investing requires overcoming human tendencies of greed and fear: having the courage to reduce positions or even exit the market during euphoric bubbles, and the conviction to invest counter-cyclically when quality assets are deeply undervalued amid extreme pessimism.
Buffett's value investing philosophy originates from Benjamin Graham and has proven effective over the long term in the mature U.S. market. However, the A-share market, still in its developmental stage and dominated by retail investors, exhibits higher volatility. Thus, applying value investing in A-shares requires adapting to local conditions—exploring "value investing with Chinese characteristics." This approach involves selecting good industries and companies while flexibly managing positions based on market fluctuations.
Over the past decade, we successfully navigated market turning points by exiting at peaks twice and bottom-fishing four times, effectively practicing this localized strategy. In early 2014, we identified a "once-in-a-decade" bull market in A-shares. On May 21, 2015, amid severe market bubbles and excessive leverage, we significantly reduced exposure, avoiding the subsequent nine-month downturn. After the early 2016 circuit-breaker crash, when the market fell to 2,600 points, we shifted from defense to offense, aggressively increasing equity positions to capitalize on the blue-chip rally. On March 26, 2018, we reduced risk exposure ahead of Trump's trade war escalation, then fully repositioned post-National Day as conditions clarified. During recent market lows, we invested 580 million yuan in our own funds, demonstrating confidence and commitment to bottom-fishing.
To assess market phases, we analyze eight factors: policy direction, valuation levels, sentiment, liquidity, external risks, risk premiums, market themes, and fundamentals. Retail investors can also gauge market extremes through fund flows—failed fund launches and weak sales often signal bottoms, while blockbuster funds raising billions in a day typically precede market tops. Historical examples include the 2007 peak at 6,000 points, the 2015 high at 5,000 points, and January 2021, all followed by sharp corrections after such euphoric fund sales.
As Charlie Munger noted, "Investing is simple—buy stocks from the desperate and sell to the euphoric." This captures the essence of contrarian investing, a vital method for A-share value investors.
Additionally, value investing with Chinese characteristics must closely track policy direction. Prioritize sectors with strong policy support while avoiding those facing restrictions to align with market trends and mitigate risks.
In summary, value investing remains applicable in A-shares but must incorporate local realities. Currently, the A-share market presents a golden investment opportunity. Investors are advised to adhere to value investing principles, rationally allocate to quality stocks or funds, and seize this historic moment.
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