Global REITs Map: Best REITs Can Still Grow Despite Higher Interest Rates
With the 60 years of development of the global REITs market to date, more than 40 countries and regions around the world have adopted the US REITs approach to real estate investment, providing all investors with a global income-generating real estate portfolio.While the U.S. remains the largest listed real estate market, the listed real estate market is increasingly becoming global. The growth is being driven by the appeal of the U.S. REIT approach to real estate investment. Today more than forty countries and regions have REITs, including all G7 countries.Source: www.reit.comRecommend to Read:Quick Learning of REITs' Keypoints & 8 Benefits of Holding REITs?1. How Many REITs Are There in the World?A total of 865 listed REITs with a combined equity market capitalization of approximately $2.5 trillion (as of December 2021) are in operation around the world. As the following charts show, REITs have grown dramatically in both number and equity market capitalization over the past 30 years going from 120 listed REITs in two countries to 865 listed REITs in more than 40 countries and regions.Source: www.reit.comAmong them, Asia has a high absorption rate of REITs, growing from 31 REITs in 6 countries and regions in 2005 to 216 REITs in 11 countries and regions in 2021.Singapore established the operation system of REITs as early as 1999, which is one of the earliest and most mature markets in Asian countries. India and China will join the market in 2014 and 2021 respectively. Since 2015, the Middle East has also seen significant growth with the addition of REITs in Saudi Arabia and Oman. Note: Asia REITs with higher-interest rates, and Asian REITs payouts are more attractive.2. How about REITs‘ Return？Comparison of REITS and stock index and bond returns From the current issuance of REITs, companies and investors have achieved a win-win situation. The former has revitalized assets and the latter has obtained excess returns.According to Wanhe Securities’ statistics on U.S. infrastructure REITs in March 2021, the U.S. infrastructure REITs index has grown at a compound annual growth rate of 12.11% since 2010, slightly higher than the S&P 500’s 11.67% over the same period.According to research by investment consultancy Wilshire Associates, real estate allocation in listed markets around the world can help improve returns on a diversified portfolio. REITs play a key role in enhancing investment returns and reducing risk in target date funds (TDFs), popular investment products.Source: www.reit.comThe Best REITs Can Still Grow Despite Higher Interest RatesIt’s important to note that REIT share prices aren’t just affected by interest rates but can and do trade on other factors, including a REIT’s fundamentals, long-term growth prospects, and dividend growth history.The chart below, courtesy of REIT.com, plots the 12-month return of REITson the y-axis, and the change in the 10-year Treasury yield on the x-axis from 1992 through 2017. The blue dots represent periods when REITs earned a positive total return during each of those periods. The red dots signal that REITs lost money.While an investment in REITs made money in 87% of rising rate periods observed, it is clear that REITs have been positively and negatively correlated with interest rates during different periods of time, indicating that there are other factors influencing their returns.Have you ever invested in any REIT? Please share with tigers.
DAY2 Education : Lower Costs and Expenses Means Better?
Review: 【Investor Education】11 days of Financial Statements Column DAY1 Education : Sustainable Competitive Advantages Explained Hey, tigers： Today is the second day of "Learn US financial reports for beginners ". In this article, I mainly introduce: Is less cost and expense better for listed companies? three key metrics of ''Operating Expenses'' in the income statement ： SG&A expenses, R&D expenses, and depreciation expenses. By learning these three metrics, we can assess the cost management capability of a company. 1. Selling, general and administrative expenses(SG&A Expenses) Selling, general and administrative expenses, as its literal meaning, includes selling expenses and administrative expenses. Selling expenses are the costs of hiring people, advertising and marketing to sell its products; administrative expenses are the costs of corporate management, including travel, hospitality, and salaries, etc. This concept seems simple, right? But I would remind you here that the ratio of SG&A Expenses/Operating Expenses is very critical, which can have hidden information. Let me give you an example of Ford in the auto industry. During the past 5 years, the SG&A Expenses accounted for 54% of total operating expenses, which means that Ford was paying very high costs in this section. If its product sales are low, investors' money can hardly return. Once the company with high SG&A expenses is trapped in financial crisis, investors are likely to suffer great losses. So you need to be careful about companies that are stuck with high "SG&A Expenses". 2. Research and development expenses(R&D Expenses) We all know that technology drives productivity. But is it really better to spend more on research and development no matter what? Of course not. Technology is changing rapidly nowadays. Excessive R&D expenses not only consume a lot of human and financial resources, but also make a company's operation vulnerable once the company's research is disrupted by other disruptive technologies. Warren Buffett has a principle when reading financial reports: companies that must spend heavily on R & D are at competitive disadvantage. Once these technologies become obsolete, the company’s long-term prospects will be in jeopardy. Therefore, investors should be particularly cautious when investing in companies that consistently invest high amounts of investment in R&D. 3. Depreciation and amortization expenses Depreciation and amortization expenses are usually of great importance in the manufacturing industry. The property, plant, and equipment purchased by a company will eventually be scrapped due to wear and tear. They are called depreciation and amortization expenses in the income statements. Suppose your company purchased communication equipment worth USD 200,000 this year. The economic life of the equipment is 10 years. According to the regulations of the U.S. IRS, the $200,000 expenditure cannot be expensed at one time, but shall be included in the depreciation expenses of each year, i.e. the 10-year schedule. In other words, the annual depreciation expense is: USD 200,000 / 10 years = USD 20,000 per annum. Regarding this equipment, the annual depreciation expense is USD20,000, which is amortized year by year. After 10 years, the equipment will be scrapped. As you see, depreciation and amortization is applied to average out the expense of property, plant, equipment over its economic life. While there is nothing wrong with this calculation method, many companies are abusing this convention. For example, some companies will try to extend the depreciation time, in order to create more profit for the current period. 4. Is less cost and expense better for listed companies? With these three subjects in mind, let's go back to the original question:Is less cost and expense better for listed companies? Of course not! But why? Because a company reduces employee benefits and wages in order to cut costs, then the company's operation will have problems. If you were working for this company, you would surely leave. Therefore, excessive cost control might only reduce brand value or lead to high employee turnover. Increasing revenue and reducing costs are equally important. Both of them are designed to increase income, which determines whether the company is competitive or not. In other words, we need to be more concerned about how much money a company has left. we can understand that cost reduction and efficiency increase also need to pay attention to the basic welfare of employees and so on, which can maintain a stable and long-term development of a listed company. Okay, today's content is over. This is also the key content of our "US Stock Financial Statements for Beginners" lesson 5. Today's Interaction: Comments Win 20-50 Tiger Coins!
Short selling is a concept that many friends have heard of, but few people are able to make profits through short selling during bear markets. This article will discuss short-selling, including its risks and benefits. I hope you will have a better understanding of short-selling after reading this article.1. What is short selling？Short selling is a trading strategy that speculates on the decline in a stock or other security's price.According to the image from Motley Fool's website, short selling is to borrow shares of a stock or other asset that the investor believes will decrease in value. You borrow the stock from the brokers with a certain amount of funds as a guarantee to sell, and when the stock falls, you purchase the same number of stocks at a lower price and return them to the brokers.For exampleImagine a trader who believes that ABC stock—currently trading at $100—will go down in the next months. He can borrow 100 shares from the brokers and sell them to another investor.A week later, the stock falls to $50. The trader decides to close the short position and buys 100 shares at $50. The trader’s profit on the short selling, excluding commissions and interest on the margin account, is $5,000 ( ($100 - $50 ) x 100 shares = $5,000).2. Why short selling？There are two main motivations to short:1. To speculateThe most obvious reason to short is to profit from an overpriced stock or market. The most famous example of this is when George Soros broke the Bank of England in 1992. His profit from short selling eventually reached almost $2 billion.2. To hedgeMost investors use short positions as a hedge. This means they are protecting their long positions by shorting other similar stocks.3. How to short selling？In order to use a short-selling strategy, you have to go through a step-by-step process:Identify the stock that you want to short.Click the "Trade" button and then the "Sell" button. (Make sure you do not hold long positions in the same stock)Enter your short order to choose the appropriate number of shares.At some point, you'll need to close out your short position by buying back the stock that you initially sold.4. Pros and Cons of Short SellingPros1 Possibility of high profitsIt has been mentioned before that short selling can be beneficial in a bear market.Furthermore,when companies are involved in financial scandals or crises, their stock prices tend to fall rapidly.For example, Luckin's stock fell 75% in April 2020 after its Chief Operating Officer admitted to fabricating a significant portion of the company's sales. Short sellers can make a fortune from shorting.2 Hedge against other long positionsSome investors use short positions to protect (hedge) against the risk of a declining asset/stock price in the future.Cons1 Potentially unlimited lossesShort selling can be costly if the seller guesses wrong about the price movement. A trader who has bought stock can only lose 100% of their investment when the stock decline to zero.However, a trader who has shorted stock can lose much more than 100% of their original investment since the equity prices can continue to go up, and the risk of "short" is theoretically unlimited.2 Margin callShorting is known as margin trading. When short selling, you open a margin account, which allows you to borrow money from the brokers using your investment as collateral.If the value of the collateral in your margin account drops below the minimum requirement, the broker may require you to deposit more cash or be forced to close it by buying back the stock to cover the difference immediately.3 Margin fees incurredThere are a number of fees associated with short selling in addition to commissions, such as margin interest and dividend fees.Margin interest can be a significant expense when trading stocks on margin. Short positions can accrue interest over time if held for an extended period of time.In addition, short sellers need to pay dividends on shares that they have borrowed. The dividend will be deducted from the short seller's account on the payment date and delivered to the stock owner.4 Recall riskIn certain situations, a short position may be covered without being directed by the position holder.When a stock has a high percentage of short positions, there are no more securities available in the short pool, and the lenders who originally held these stocks are seeking to close out their positions. The brokers may recall the shorted stocks from the holders and return them to the lenders.The Tiger Trade app provides key information about shorting pools, short interest, and other metrics which are key to short selling.
Quick Learning of REITs' Keypoints & 8 Benefits of Holding REITs?
What are REITs? Why Configure REITs?Recommend to Read:Weekly Focus on Logistics/Industrial S-Reits: M44U.SI & BUOU.SI5 SG Reits With The Lowest Gear Ratio To Watch: DCRU, CRPU, BUOU, SK6U & UD1USource: https://passiveinvestingaustralia.com/6 Keypoints of REITs:1. Definition: REITs is Real Estate Investment Trusts Funds. It is an investment vehicle similar to a closed-end mutual fund, but the investment object is real estate.2. Origin: The investment trust was created by the U.S. Congress in 1960, mainly through the securitization of real estate and the fundraising of many investors. Investors without huge capital can participate in the real estate market with a lower threshold and obtain real estate market transaction rents and profit from value added. Investors do not need to substantially hold real estate targets, and can trade in the securities market, and the market liquidity is better than real estate.3. Source of income: The characteristic of real estate investment trusts is that the main income of the trust comes from rent, so the income is relatively stable, and the trust must also use most of the future surplus as dividends. Because of this, REITs pay much higher dividends than average stocks in the market. 1) Dividend 90% of rental income distributed to investors 2) Management and maintenance costs of the property 3) Capital gains. Shares rose. The price of real estate itself can be anti-inflation, and the acquisition and acquisition make it more valuable, and the real estate leverage ratio is high4. Types of Reits: Includes industry, data center, commercial real estate, logistics, infrastructure, highway, sewage treatment, etc. You can do only one section at a time, or you can do all of them. Logistics sector: high barriers: because the government grants land.5. REITs Funds:Refers to mutual funds that use real estate securitization commodities as investment targets, including REITs, commercial real estate mortgage-backed securities, and commercial real estate secured debt certificates.6. Net Worth Performance: Can direclty check on Tiger App or Yahoo Finance.8 Benefits of Configuring REITs?1. Comparison between Reits, Stocks and Bonds: REITs have stable quarterly/half-yearly dividends, the rental income is mainly used as dividends or coupons. Some stocks have dividends, but the long cycle or unstable dividends are related to other factors such as profitability. Bonds’ dividends come from the coupon rate, and the average payout ratio lower than REITs.2. Steady total returns: According to general observation, the risks and rewards of REITs are about between stocks and public bonds. One reason is because that REITs have the value-added income of the underlying assets (stock attribute); the other is that REITs have mandatory dividend income (bond attribute),3. Low volatility 4. High dividend payout：As Rent-to-sales ratio is associated with first-tier cities.5. Risk diversification: REITs invest in multiple real estate targets at the same time, which can diversify risks.6. Anti-inflation: Due to the characteristics of its real estate, real estate investment trusts are particularly advantageous in fighting inflation.7. Small proportion of capital: Invest smaller compare to invest a house in first-tier cities directly.8. Professional property management: Compared with buying a house by yourself, it saves time and worry with concentrates professional management.
Hi, tigers~Today is the first day of column "Learn US financial reports for beginners".In this article, I will introduce 2 practical methods of how to judge whether a company has competitive advantage.Total revenueGross profit1. Total revenueYou might think, company A with tens of billions of dollars in annual total revenue is much better than Company B with billions of dollars in annual revenue, but is that true? Let me give you an example:Jack and Rose run separate companies. Jack's company generates $9,000 in revenue per month, while Rose's company generates only $6,000.From a revenue point of view, you would definitely think that Jack's company is better developed and more competitive.But if we do a careful analysis and take into account the cost of sales each month, the results may change.As can be seen from the picture, although Jack company has a high revenue, its monthly cost of revenue is also high, and its final gross profit is only $2,850.However, although the revenue of Rose company is behind that of Jack, the cost of revenue is well managed and the monthly gross profit can be $3,810 dollars.It can be seen that Rose has more profit funds than Jack in the company every month.At this point, we get to the first conclusion: you can't judge a company by its revenue alone. You may ask, So what should we pay attention to?This brings us to the second point: gross profit.2.Gross profitWarren Buffett, the investment guru, is very good at picking companies.He once said that gross profit is the key metric of long-term profitability. Only companies with sustainable competitive advantages can maintain profitability over the long term.What is this gross profit that Buffett takes so seriously? Why does Buffett focus on this number?Gross profit = revenue-cost of revenue. Cost of revenue is the total cost of manufacturing and delivering a product or service to consumers.However, high gross profit doesn't mean everything.Buffett said:" Firms with excellent long-term economics tend to have consistently higher margins." In short, there are two key words: "high gross margin" and "consistency".Let's look at the first key word: -- "higher gross margin".How to calculate gross margin? The basic equation is: Gross margin = gross profit/revenue.As we have learned that: gross profit = revenue-cost of revenue. Therefore, gross margin = (revenue-cost of revenue)/revenue.Then it becomes a simple math problem.We just need to find companies in an industry, count their gross profits, then we can find the top companies.I would like to remind you that gross margin varies greatly in different industries.For example, the software industry has a median gross margin of 59% by the end of 2021. The top 10 companies in this table all have a gross margin over 91%.The industry leader Microsoft only has a gross margin of 65%.While in the traditional manufacturing industries like auto and auto components industries, the median gross margin is only 16%.You can tell from this table that the average of gross margin is only 35%, even for the top 10 companies.So different industries have different gross margins, and we must treat them separately.Let's look at the second key word: "consistency."If the company can't sustain its high gross margin, its competitive advantage is not consistent. When many companies are facing a crisis, they may also break out a high gross margin for a period of time through some means of financial fraud.Therefore, it's necessary to identify the feature of "growth" in the income statements. If the growth is not sustainable, the company doesn't have long-term competitive advantage. We need to look at gross margins for the past 5 years or more.So, Let's summarize what we've learned today :First, we have learned that we can't simply look at "revenue" to judge whether one company has good profitability or not.Secondly, we need to focus on the gross profit and gross margin of the company.Thirdly, gross margin is a key indicator to assess companies' sustainable competitive advantage. Within an industry, companies who have higher gross margin means these companies have higher competitive advantage.Fourthly, we have learned how to calculate gross profit = revenue-cost of revenue, and gross margin = (revenue-cost of revenue)/revenue.Okay, have you learned the content of today? I hope it can help you to understand the US financial reports quickly.Share your thoughts with me and other Tigers, You can get cions~😎
【Investor Education】11 days of Financial Statements Column
Hi tigers~I believe that in recent days, you must have seen a free course of "US Stock Financial Statements for Beginners" recommended by me ! [Applaud] [Applaud] [Applaud] This earnings season is coming to an end, Various star companies have different ups and downs.I guess someone must have made a good profit! But I also got some questions from tiger friends:How can we use the data of each financial report to game the ups and downs?How can we easily understand the "fat" behind the three major financial statements？How can you judge financial fraud and avoid being deceived early?How can we see the essence through the phenomenon and select the leading stocks in the industry?I think the answers to these questions, you must be wondering too![Miser] Someone will say that the financial report has too many obscure terms and it is too difficult.But i want to tell you that reading financial reports is actually very simple.If you want to go further and further on the road of investment, you must learn to read financial reports.Next @Tiger_Academy will spend 11 days, using the most simple and effective content to take you to a quick start.Quickly @ your friends, follow me, and make progress with thousands of Tigers.During the next 11 days, you can get 20-50 coins when you make comments.The picture below a preview of the content for the next 11 days.I will begin our formal study next Mon .see you next time[Tongue]
Prepare to Hedge The Market Crash? Check These 4 Strategies
Stocks declined on Wednesday following yet another hawkish Federal Reserve statement. The Dow slumped 522 points to its lowest level since June 17. The S&P 500 and Nasdaq Composite shed more than 1.7% each, putting both averages at their lowest levels since June 30 and July 1, respectively. In this article, we want to discuss how to profit from a market crash.How to profit during a market crash?1. Inverse ETFThe easiest way to hedge risk is to buy an inverse ETF that goes up when the underlying index it tracks goes down.Investing in inverse ETFs is similar to holding various short positions, which involve borrowing securities and selling them with the hope of repurchasing them at a lower price.ETFs to short $DJIA(.DJI)$: $ProShares Short Dow30(DOG)$, $ProShares UltraShort Dow30(DXD)$, $Dow30 Bear 3X ETF(SDOW)$ETFs to short $NASDAQ 100(NDX)$: $ProShares Short QQQ(PSQ)$, Bear 2X-$ProShares UltraShort QQQ(QID)$, $Nasdaq100 Bear 3X ETF(SQQQ)$ETFs to short $S&P 500(.SPX)$: $ProShares Short S&P500(SH)$ , $S&P 500 Bear 2X ETF(SDS)$ , $Direxion Daily S&P 500 Bear 3X Shares(SPXS)$ETFs to short $iShares Russell 2000 ETF(IWM)$ ：Bear 2X-$ProShares Short Russell2000(RWM)$, $Direxion Daily Small Cap Bear 3X Shares(TZA)$Click here for more details: SPX Outlook & All Tickers/ETFs to Hedge the Down Market 2. ETFs related to safe-haven assetsTo hedge against a decline in the market, it is also a good idea to purchase safe-haven assets in addition to inverse ETFs.A variety of safe-haven ETFs are available, including VIX(Volatility) ETFs, Gold ETFs, and Bond ETFs etc.However, it should be noted that such assets may be subject to other risks. As an example, the supply of silver will impact the asset price, and the gold mining company ETF will be affected by market fluctuations due to its tracking of gold mining companies.Tracking short-term futures of S&P 500 VIX volatility indexYou can also go long volatility by buying a volatility ETF such as VXX. During early 2018, 10% sell-off in the S&P 500, the VXX doubled from $25.68 to $50.$VIX Short-Term Futures 1.5X ETF(UVXY)$Track short-term futures of S&P 500 VIX volatility index$ProShares VIX Short-Term Futures ETF(VIXY)$Track the short-term futures of the S&P 500 VIX volatility index$ProShares Short VIX Short Term Futures ETF(SVXY)$Track short-term futures of S&P 500 VIXGold ETFsGold tends to do well during a downturn. Even though gold generates no earnings and provides no dividends, it’s a commodity that can be traded. Gold ETF is an ETF linked to tracking the fluctuation of gold spot and futures. Buying such ETF is equivalent to buying gold spot itself. In general, the ETF price move along with gold in the spot market.$SPDR Gold Shares(GLD)$Gold ETF-SPDR tracks the spot price of gold (Loco-London gold), which is more than one time. It has the best liquidity, and the daily turnover is extremely large, which is suitable for trading on the right side. Once the trading direction changes, it can be taken out immediately.$iShares Gold Trust(IAU)$Gold ETF-iShares tracks the spot price of gold (refer to the global gold reserves), which is long. The trading volume is moderate, and the price difference range of buying and selling orders is reasonable.$ProShares Ultra Gold(UGL)$Gold ETF-ProShares tracks the spot price of gold (London gold), which is more than twice. It is more suitable for intraday trading, and futures such as gold are paid 24 hours a dayEasy, so the risk of staying overnight is not small.$ProShares UltraShort Gold(GLL)$Gold ETF-ProShares tracks the spot price of gold (Loco-London gold) and shorts it twice. Like UGL, it is not suitable to hold positions overnight.Click here for more details:Click here for more details: How to use VIX & SQQQ to Profit From a Down Market Click here for more details: How a Russia-Ukraine conflict might hit global markets？3. Short stocks or ETFsYou can also short individual stocks or ETFs as well if you feel you have an edge and want more direct exposure. The stocks that usually get hammered the most during a downturn are high beta stocks with weak balance sheets and no earnings.Short selling is a trading strategy that speculates on the decline in a stock or other security's price. In short selling, a position is opened by borrowing shares of a stock or other asset that the investor believes will decrease in value. You borrow the stock from the brokers with a certain amount of funds as a guarantee to sell, and when the stock falls, you purchase the same number of stocks at a lower price and return them to the brokers.E.g.Imagine a trader who believes that XYZ stock—currently trading at $50—will decline in price in the next three months. They borrow 100 shares from the brokers and sell them to another investor.A week later, the stock falls to $40. The trader decides to close the short position and buys 100 shares for $40. The trader’s profit on the short sale, excluding commissions and interest on the margin account, is $1,000: ($50 - $40 = $10 x 100 shares = $1,000).While short selling can be beneficial in a bear market, it is also very risky since the equity prices can continue to go up, and the risk of "short" is theoretically unlimited.Click here for more details: [Short selling] Ways to Survive a Market Crash4. Options In addition to short selling, you can also hedge risks through options and achieve extar returns. Buy put can reduce the risk of a sharp decline in the stock market, while Covered Calls are intended to protect the portfolio against time fading.How to trade options in Tiger?Trading options in Tiger are simple, taking NIO options as an example:Step1: Search for [TSLA]& Enter the TSLA stock details pageStep2: Click "Options" & select any option contract (Call or Put) to tradeStep3: Click Buy or Sell buttonBuy PutA put gives the buyer the right to sell a stock at a predetermined price (known as the option strike price).Buyers of put options are making bearish bets against the underlying stock.Buy put can reduce the risk of a sharp decline in the stock market. In this strategy, the biggest loss is the premium of options, which are less risky and more flexible than futures.Sell PutA seller of put is taking on the obligation to buy the underlying stock at the strike price.Notice the difference in buying and selling puts: when you buy a put, you have the right but not the obligation to sell the option. The sell put option strategy is preferred by some investors, especially long-term investors, to purchase a stock when its price falls below a certain level.When you sell put, you can get the premium.If the buyer does not exercise the option, your profit is equal to the entire premium.If the buyer exercises the option, your profit or loss will be equal to((market price – strike price) * 100) + premium received = profit or loss.One major risk of sell put is the risk of a margin call. If you sell put options but don't have the funds in your account to cover the cost if the option buyer were to exercise them, the broker may force you to sell other investments, even for a loss, to cover the liability. When selling puts, make sure you have sufficient margin in your account.Covered CallA Covered Call hedges against a long stock position by selling a call on a stock that you already own. You can collect a premium if the stock price doesn't rise.If you want to hold a stock for the long term, but are afraid of a bearish trend, you can trade the Covered Call to hedge our position.Selling an Call option collects a premium. If the stock price does not increase past the strike price before expiration, you can keep all the premium.A covered call has three risks.1) requires too much capital and receives very low returns.2) may miss sudden bullish moves in growth stocks.3) may suffer a substantial loss if stock prices suddenly decline. So you should make sure you select lower IV stocks when using covered call.StraddleA straddle is a neutral options strategy that involves simultaneously buying both a put and a call for the underlying security with the same strike price and the same expiration date. Usually these options are ATM.The biggest advantage of straddle is that it doesn't judge the stock will go up or down. It just trade the volatility and bet the volaitility is large enough to cover the cost of both sides.The risk is the volatility is small and cannot offset the cost of purchasing two-side options.Click here for more details:Watch OUT! Get Straddle and Strangle for earnings season.What is an Option?——learn about Call and put Video: Tiger Options Tour For Beginners to learn Options Trading and Settlement—what should we know before trading options？As a final note, neither bear markets nor bull markets are frightening, as long as you determine the direction in which they are going, you can make money from them. $Tiger Brokers(TIGR)$
Hey Tigers,Today, let's take a look at the story of one of the new energy vehicle giants: $BYD Co., Ltd.(BYDDF)$ , $BYD COMPANY(01211)$ BYD. Recently, Buffett reduced his holdings of BYD twice, directly cashing out nearly HK $820 million. BYD's market value was evaporated by about 120.8 billionRMB!In the face of Buffett's reduction, there is a lot of discussion in the market, BYD said: Shareholders' reduction of holdings is a decision made by shareholders.The company's sales volume has repeatedly hit new highs, its operations are healthy, and everything is normal.And domestic macro analyst Zeping Ren thinks "Warren Buffett era is over".In his opinion, new energy is the most promising and explosive industry in the future, short-term adjustment is normal, and long-term potential is huge.On the one hand, Buffett is reducing his holdings, on the other hand, economists are optimistic about it.As investors, they fall into the classic triple question:Reduce share position or not? Buy it or not?How often? How long does it sell?Is this stock still good or not?The old friends who are familiar with me know that I never gives trading tips, but really teaches everyone to make investment decisions through the analysis of fundamentals and underlying data.For the current "precarious" BYD, this time i uses the following four simple steps to analyze BYD, so that you can truly understand it and be aware of it:01 The development of BYDThe development of BYD can be divided into five stages:1995~2003: Started with consumer batteries, entered the supply chain of international giants MOTOROLA and Nokia, and successfully listed in Hong Kong;2003~2010: Entered the automobile industry by acquiring Xi 'an Qinchuan, acquired Ningbo Zhongwei to develop electric drive motor research, development and production, and laid out the whole industrial chain of new energy. The sales volume of the first car F3 increased rapidly with the advantage of cost performance after its launch;2010~2019: The product price of joint venture car companies in the car market dropped and poured in, missing the dividend of the domestic SUV industry, the independent brand entered the platform period, and determined the new energy development route;2019 ~ 2021: Tesla was introduced into the Chinese market. BYD grasped the market change and launched the third-generation battery system blade battery, helping the brand to break the cocoon and regenerate with the first-ride model "Han";From 2021 to now: fully switch to new energy, launch the fourth generation hybrid system DM-I/DM-P, and new pure level platform E platform 3.0, hybrid/pure power.02 The main business of BYDAt present, BYD has four main businesses:They are automobile businesses, handset components and assembly business, rechargeable batteries, cloud rail and other businesses.1. As is known to all, the automobile business is the core business of BYD: in 2021, the automobile business revenue accounted for 52.03 %, and the gross profit accounted for more than 69 %. It is BYD's most important source of revenue and profit.BYD has become the largest new energy vehicle company in China. The sales volume of new energy vehicles has occupied the first place in China for many consecutive years, and commercial vehicles such as pure electric buses and special purpose vehicles have also achieved good results overseas.2. Handset components and assembly business mainly includes metal, glass, ceramic, composite plate and other structural parts of electronic products, charger, secondary charging battery and other parts manufacturing, whole machine design and assembly;Product coverage is also very wide, including consumer electronics, automotive electronics and other fields. According to the company's 2021 semi-annual report, the mobile phone parts and assembly business achieved revenue of 86.5 billion RMB in the first half of 2021, accounting for 40.01 percent of the company's revenue.3. Secondary rechargeable batteries mainly include lithium ion batteries and iron batteries, which are widely used in mobile phones, power tools and other portable electronic devices;Its main customers include leading consumer electronics manufacturers such as Samsung and Dell, as well as leading global robot manufacturing brands such as Ecovacs and iRobot. This accounted for 7.63% of BYD's total revenue in 2021.4. In addition, BYD is also actively expanding rail transportation, but the income share is still very low (less than 1%).Generally speaking, BYD takes the automobile business as the core.From the perspective of the structure of the company's main business, it is not excluded that they will focus their strategic focus on the new energy field, which is consistent with the national policy and the general direction of the automobile market, and has a great development prospect.03 BYD’s operating performanceThe company recorded a CAGR of 15.87% in operating revenue from 2016 to 2021, and achieved a revenue of 216.14 billion RMB in 2021, up 38.02% yoy.From 2016 to 2019, the net profit attributable to the parent of the company showed a downward trend, and in 2020, the net profit recovered to 4.234 billion RMB, with a yoy growth of 162.27%.In 2021, the company has a total of assets impairment and credit impairment of nearly 1.25 billion RMB, superimposing the impact of the epidemic and raw material price rise, the annual net profit of 3.045 billion RMB, a yoy decrease of 28.09 %.Automobile and mobile phone parts assembly business, which together accounted for nearly 90% of revenue in 2021, accounted for a slight decrease in the proportion of automobile business in 2021, while the proportion of mobile phone parts and assembly business increased to 40.00%. The revenue of the secondary rechargeable battery business was stable at 7%-9%.The gross profit margin of the company fluctuates around 15%, and the gross profit margin of the automobile business is the highest.From 2018 to 2020, the gross profit margin of the company's automotive business improved steadily. In 2021, due to the price increase of raw materials, the gross profit margin of the company's automotive business decreased to 17.4%.Secondary rechargeable battery business: affected by the price increase of lithium carbonate, the company's gross margin of secondary rechargeable batteries in 2021 decreased;Handset components and assembly business: due to factors such as BYD Electronics downstream boom and customer structure adjustment, gross margin decreased to 7.8% in 2021.In terms of research and development investment, the company's long-term research and development investment, the three expense rate has steadily decreased.The company attaches importance to the research and development of products and technologies, and the research and development continues to advance, with a CAGR of 19.36 percent in R&D investment from 2015 to 2021. The company's expense ratio level has steadily decreased, with the three-expense rate decreasing from 9.0 % in 2018 to 6.3 % in 2021.After reading so much data, I would like to summarize to you in one sentence: BYD's operating revenue has grown steadily, and the effect of reducing cost and increasing efficiency has gradually been obvious; Performance continues to improve, with a good development trend.04 How to view Buffet's reduction of BYD's holdingsAfter understanding the main business and performance of BYD, we return to the most important question: how will BYD change after being reduced by Buffett? Can we still buy it?In fact, judging from historical factors, Buffett's decision to reduce his stock holdings may be more due to his own investment framework and individual stock aesthetics, and "not fit" is not the same as "not good."Let's look at two cases:$Wal-Mart(WMT)$ (ROE dropped) and $Procter & Gamble(PG)$ (PB rose), which Buffett cut in 2016, have seen their stock prices rise sharply.1. In 2016, when Walmart competed with $Amazon.com(AMZN)$ in the online market, ROE dropped from 21.0% in March 2015 to 18.6% in September 2016, and Buffett's position decreased from 68 million shares in 2014 to only 10 million shares in the third quarter of 2016. $Wal-Mart(WMT)$ 's ROE and stock price rebounded.2. The price-to-book ratio of$Procter & Gamble(PG)$ increased from 2.5X in 2012 to about 3.5X, while the ROE declined. Buffett sold down his holdings until 2016. After Buffett sold, P&G began a series of capital operations, PB and ROE rose across the board, driving the stock price to double.From the above data, it can be seen that Buffett's reduced holdings of stocks, not necessarily into the abyss, but may rise; BYD owners should not be overly pessimistic about Buffett's reduction.After all, in the 14 years he owned BYD, he has made a return of more than 3,000 per cent. The seeds are already ripe, and when it is time to harvest, it is routine to reduce the warehouse and collect cash.Finally, let's wrap up today's highlights:Before making investment decisions, we must first understandthe company's development, main business, performance and other key data. Stocks that have been reduced by the gods do not mean that they are not good, and "not fit" is not the same as "not good."Have you learned? Today, I will continue to recommend our free course to you.I believe this course can systematically help you to improve investment ability. hope you like it～[Shy] US Stock Financial Statements for Beginners（Click the link to start learning）If you have more ideas, let me know in the comment section below.(Disclaimer: This article is for learning and communication purposes only and does not represent any investment advice.)
Earnings season | Read and analyze AMD's financial report in three steps
Hi, tigers~Today, I will focus on using the "three-step method" to teach you to understand $AMD 's Q2 financial report，and I also bring a free course for you. US Stock Financial Statements for Beginners At 10 p.m. on August 9, U.S. President Biden signed the "CHIPS and Science Act 2022" in Washington, marking a rare high-subsidy bill for a single industry finally taking effect.Unexpectedly, chip stocks fell collectively that day, with Applied Materials down more than 7%, ASML, STMicroelectronics down more than 5%.In recent days, memory-chip maker Micron Technology and chip giant Nvidia both cut their revenue forecasts for the current quarter, putting the industry, already battered this year, on shaky terms. You may ask, can we still invest in the semiconductor industry? My answer is yes!Instead of answering this question directly, you need to focus on finding great companies. In the range of cheap valuations, if you can ambush the fundamentals of good, excellent financial reports of a company, to the rebound cycle, there is a great chance to gain profits.So, how can we tell if a company's financial statements are good? This time, I will use AMD as an example to teach you how to quickly identify good companies in three steps!Here's a three-step tutorial for beginners in investing:Step1: Find out AMD's main business and quickly focus on core dataWhen we look at a company's financial results, the main business is the most important thing to pay attention to. Through a company's main business and revenue, we can quickly judge the company's industry, business proportion, competitive advantage and other core information.AMD's main business is as follows:1.Data CenterIt mainly includes server microprocessor, GPU, data processing unit (DPU), field programmable gate array (FPGA) and adaptive SoC products for data center.2. ClientThese are microprocessors, accelerated processing units (APUs) that integrate microprocessors and graphics, and chipsets for desktop and notebook personal computers.3. GamingIt includes independent graphics processing unit (GPU), semi-deterministic system-on-camera (SoC) products and development services.4. EmbeddedThey are mainly embedded microprocessors, GPU, FPGA, adaptive SoC products and Adaptive Computing Acceleration Platform (ACAP) products.(The Company may also sell or license portions of its intellectual property portfolio from time to time.)5. All OtherIncludes primarily certain expenses and credits not allocated to any operating segment. This category also includes acquisition-related intangible asset amortization expense, stock-based compensation expense, acquisition-related costs, and licensing benefits.Proportion of Main Business (2022 Q2) :Conclusion:1. AMD has five main businesses: Data Center, Client, Gaming, Embedded, and All Other.2. Two departments account for the largest proportion of services: Individual users (clients) account for 32.85%; Gaming accounted for 25.27 percent.All right! After finding out the main business of the company, we can make simple statistics on the revenue data of each business and the business proportion. In this way, we can not only have a certain understanding of a company's main business, but also know which is the largest income, which is convenient for follow-up analysis.Step2: Analyze the growth of AMD's main business1. Data center growthData center revenue was $1.5 billion, up 83% from a year ago.Mainly because of strong sales of EPYC server processors. Operating income was $472 million, or 32% of revenue, compared with $204 million, 25% of revenue a year ago. The improvement in operating income was primarily due to higher revenue, partially offset by higher operating expenses.2. Growth of clientAffected by the epidemic, the sales performance of PC terminal is not good. The so-called good results are all set off by peers, Intel's performance this quarter was down, AMD's performance appeared more resilient.Revenue from the personal user business was $2.2 billion, up 25% year over year, driven by sales of Ryzen's mobile processors.3. Game growthGaming revenue was $1.7 billion, up 32% from a year earlier.4. Growth of embedded departmentEmbedded revenue was $1.3 billion, up 2,228% yoy, driven by embedded revenue driven by Xilinx's business.Operating profit was $641 million, or 51% of revenue, compared with just $6 million, 11% a year ago. The improvement in operating income and margins was primarily driven by Xilinx revenue.Growth of other key earnings indicators:1. Operating revenue growth:Operating revenue in Q2 2022 increased from $3.9 billion to $6.6 billion compared to Q2 2021, representing a 70% yoy increase.Note that there is a gap in gross margin here mainly because GAAP counts the amortization expense of intangibles related to acquisitions, resulting in a decrease in gross profit growth. Excluding factors such as acquisitions, gross profit rose 6% year on year.2. Operating profit, net profit, EPS and other indicatorsSimilarly, operating profit fell $300 million when it included amortization of acquisition-related expenses; If not, it's up $1.1 billion.EPS would have been up 0.42 if the company's acquisition related expenses were excluded, and down 0.31 if not.GAAP net income was $447 million and non-GAAP net income was $1.7 billion.Step3: Understand the future deployment of AMD and find the performance driving pointsKey points driving AMD's performance:1. Performance growth point from the mobile internet Era to the Data Center Era (Industrial trend)Revenue growth in the enterprise, embedded, and semi-custom segments has exploded over the past two years, mainly due to AMD's assault on Intel in the data center market, and rapid volume expansion as the industry accelerates.In addition to developing high-performance products, AMD is also making acquisitions to strengthen its presence in the data center market.So, one of the most important factors that will determine the trend of AMD's stock price in the future will be how much space it gets in the data center.2. The Nvidia/Intel battle (Corporate rivalry)The current data center chip market by Intel, Nvidia, AMD three world pattern has been emerging.AMD may not be able to compete with Intel and Nvidia in the short term, but it's nimble enough to keep gaining market share, and with its recent acquisitions to fill in the gaps in its technology, it can significantly strengthen its competitiveness in the data center chip market.For Intel, the strategy of increasing the number of high-performance GPU close to the "enemy hinterland" and integrating multiple computing platforms deeply plows into the data center market.Nvidia, in addition to its GPU, has been focusing on the CPU line and is pushing ahead with it.Who has more camps, who has more market share, who can get more attention from investors.3. Technical progress of own products (Product advantages)On the product side, AMD recently detailed its leadership roadmap and expanded product portfolio to achieve the next phase of growth in the estimated $300 billion market for high performance and adaptive computing solutions, including:For semiconductor companies, technology means a lifeline. In the same race track, whoever has a stronger technological advantage has a higher bargaining power.That's how the Cheese Tiger interprets AMD's earnings in three steps. Did you get it?Let me summarize it with a mind mapping:Is it easy to learn in three steps? If you're new to stocks and have no idea what financial metrics are, I recommend one of our official financial reporting courses: U.S Stock Financial Statements For Beginners Lesson 4 is what we learned today 👇Just take three hours , you can easily grasp various financial indicators, easily read the financial statements of listed companies! 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