To The Moon

Article Supported from Delong Yang, chief economist of Qianhai Kaiyuan Fund,

Delong Yang: 8 Value Investing Essences of Buffett's Annual Letter

The chatGPT and other AI sectors that have been hyped in the early stage have accumulated a large number of profit orders due to the excessive short-term increase, and the possibility of rushing up and falling back is relatively high, and the market style has gradually completed the switch.

In April, I suggested that investors should pay attention to the switch of market style, mainly because April may be an important time window for the switch of market style: with the disclosure of annual report and quarterly report, the emperor of many theme stocks and concept stocks New clothes are revealed. Many companies are not only unprofitable, but also loss-making, but their stock prices have risen sharply, with a market value of tens of billions or hundreds of billions, which undoubtedly reflects the style of speculation.

Some investors even translated AI into "All in", reflecting the excitement of this kind of hype.

Charlie Munger once humorously said that investing is actually very simple, that is, buying stocks from those who are desperate and then selling them to those who are excited. This is a good revelation for us.

Last weekend, the 2023 Buffett shareholder meeting held in Omaha, USA, became an important window for investors to pay attention to high-quality stocks.

During his 60-year investment career, Buffett has always adhered to the concept of value investing, seizing opportunities by allocating high-quality companies, rather than focusing on short-term market hotspots. In fact, he doesn't have a computer in his office, nor does he have market software in his mobile phone, because he doesn't know how to keep an eye on the market. He believes that it is a very stupid behavior to buy a stock today and see if it will make a profit the next day. The essence of investment should be to be a good shareholder of the company and grow with a good company, rather than paying too much attention to the fluctuation of stock prices. Because the company is well configured, the profit of the company increases, and the stock price will naturally increase. It is only a matter of time. The short-term stock price fluctuations are determined by the game between long and short sides, not by the fundamentals of the company.

Value investing has been proven to be a magic weapon for long-term investment success. The most important thing is to be able to stick to a good company and keep your original intention. Buffett's long-term investment success is related to his almost paranoid sticking to good companies.

Any short-term market fluctuations, even if there were four circuit breakers in a month in March 2020, Buffett did not sell the stock, but responded calmly. The reason why Buffett dares to hold good companies when the market is falling is because he has confidence in the companies he invests in. Buffett once said humorously, I try to buy stocks of companies that are so good that a fool can run them, because sooner or later there will be a fool to run them, which reflects his philosophy. Therefore, short-term stock price fluctuations will not have an impact on the company's operations, and as long as you hold and do not sell, the shares you hold will not actually decrease.

Fluctuations in stock prices should not affect your confidence in holding stocks, but once he finds that the fundamentals of the stocks he bought have deteriorated, Buffett will not hesitate to sell them.

For example, when the pandemic broke out in 2020, the fundamentals of aviation stocks deteriorated sharply at that time, and Buffett decisively cut meat and sold aviation stocks. He once said that the most important thing to do when you find yourself in a pit is to stop digging. However, after the company’s fundamentals deteriorated, many investors’ stock prices plummeted. They did not clear their stocks decisively. Words are also worthy of our reflection. And Buffett has never questioned the prospects of the economy and the value of good companies, so he can withstand the long-term fluctuations in the market and earn profits by holding good companies for a long time.

He said that I always knew that I would become rich, and I never doubted it for a minute. This kind of firm confidence allowed him to be a good shareholder of the company in the long run and seize the benefits brought by the growth of a good company.

In terms of risk control, Buffett also does a good job. Buffett uses a large amount of insurance float to invest, but he always has more than 100 billion US dollars in cash assets in his account to deal with possible crises. For example, a hurricane in Florida may cause his insurance company to face huge losses, so it is wise to keep sufficient cash in the account, just like Buffett once said that predicting rain is nothing, but building an ark , This kind of risk awareness is very necessary, because when investing, the leftover is often the king, and this leftover is the leftover.

In numerous market fluctuations, many investors have disappeared, but Buffett has always stood tall, which is related to his relatively large cash position. According to a quarterly report, it is now about 130 billion US dollars. In addition to preventing large insurance claims, another purpose of keeping cash is to wait for good opportunities to buy good companies. The stock market crash is a gift from God to value investors. And there is a lot of cash in the account, once there is a stock market crash, he can have funds to deploy, which in itself is also a better strategy. There are also many investors who adopt the strategy of always covering their positions, which is undoubtedly unwise, and they may be locked up in market fluctuations, and there is no way to adjust their positions. Buffett modestly said that he is not a genius, but he is very smart in some things, and he only pays attention to these things.

He also praised Musk as a genius at the shareholder meeting, his IQ may exceed 170, and he always does some very complicated things, such as exploring Mars. Buffett said, we just do some simple things, we create value for shareholders. And as long as you don't do too many wrong things, you only need to do a few things right in your life. This actually reveals the secret of Buffett's investment success, that is, he invests within his own circle of competence and only invests in companies with simple business models. Take $Coca-Cola(KO)$ , for example, you can calculate how many cents you earn for selling a can of Coke. Including his investment in Apple, he is also fancy that Apple has a lot of cash in its account, and Apple's core competitiveness is unrivaled, and it has a relatively wide moat, so Buffett's investment in Apple is very heavy, with a position close to 40%. And Buffett's success is due to his adherence to the concept of value investing. He once vividly said that someone sitting in the shade of a tree today is because he planted a tree a long time ago. This is very wise.

It is very important for us to lay out a good company when the market is in a downturn and make money when the market comes. We must stick to the concept of value investment so as to obtain a good return on investment. Stay rational and patient, stick to a good company or a good fund, and welcome the next round of the market.