Revisiting Getdwell: Exploring the Source of Value Investment

Revisiting Getdwell: Exploring the Source of Value Investment

Head Figure from: Oriental IC; article from the micro-channel public number: pick up points Investment (ID: deepinsightapp); Author: Chanda

Buffett once said that the super investors are from Graham-and-Doddsville, but he seems to be drifting away from the "old" hometown of the price investors. --Inscription

What is not a price vote?

The price of a deposit is as deep as the sea, and it is often accompanied by fine points.

When I was an MBA student, in order to understand what value investment was, I reported the business class's course of the same name, "Value Investment."

The professor was a Hale and hearty white old man with a childlike face and a WikiLeaks Uncle Sang.

That year, I was young and youthful, and I was infinitely optimistic about the price. The lectures were also taken seriously. However, one semester, three credits, two projects, eight case studies, and repeated classroom discussions, I was confused.

The children in kindergarten got on the wrong bus to the red light area.

I asked the teacher: what is value investment? The professor threw a book of Buffett in front of me. I asked the professor: is this value investment? The professor said, "this is not."

Stupid. Warren Buffett is not a price investment? The world outlook collapsed.

The professor said that many people understand that "value investment" is actually a "valuable investment" - buy blue chips, buy white horses, buy cash cows, colorful, and feast.

This is the Buffett-style price that everyone is yearning for – you buy not a stock, a business; you are not a stockholder, but a capitalist. These are the investment ideas advocated by Buffett.

But Ben Graham's price vote is not the case.

When the value investment came to the world, every pore from head to toe was filled with humbleness. There was no such thing as a white horse blue code. The price cast was a surplus of Ashima - Graham placed special emphasis on investing in cigarette butts.

Cigarette buttocks, why is it called cigarette buttocks? Because although the cigarette butts are moldy, yellow, curled up, disgusting, but as long as you can smoke a free bite, for itching dogs, this is supreme value.

What does Graham's method pay attention to? the target of investing in net-net. What do you mean, net-net?? The current assets on your company's balance sheet minus current liabilities, called working capital (working capital, also known as net working capital, can be understood as highly realizable net current assets.

To write off all long-term debt with workingcapital is net-net workingcapital, 's net current assets.

And when you buy stocks at a price lower than net current assets, you complete net-net 's full score, net-net is an extreme cigarette picking behavior.

This method of breaking Ferrari into parts to weigh two pounds contains all the pessimism in the world.

Of course, Graham's pessimism has its own origins. In 1929, the US stock market collapsed. Graham's investment was almost completely destroyed. He was shackled for five years. In 1934, he published the epochal book "Securities Analysis". The core idea is actually two words:


Carry forward the spirit of "satisfaction". Because he doesn't want to lose money anymore.

So the price is the direct product of the stock market crash and the Great Depression. Graham's first thought in investing was not to lose money, but to protect downward risk, so his offer was stingy.

When Graham saw a scarlet Ferrari Enzo, what he saw was a pile of broken parts, and he only believed in the price of scrap iron-and in his time everyone had the courage, so the market was full of net-net opportunities.

Buffett has a saying to the effect that in every stock market crash, you should dance with joy, because the market is back on sale for a good company. But the problem is that if you hadn't been empty, you wouldn't have laughed, let alone danced.

Recently, heavy positions bear a certain storm of A-share investors must be quite experienced.

The professor said: I know that you are coming for Buffett, but we want to focus on Graham and the more sturdy, and now I have time to get out. So in the second class, there were fewer than half of the students coming.

Especially from the students in Greater China, I am left alone.

Why am I leaving? In addition to the desire for three credits, there are still some unwillingness, this is not the ending I want.

Curiosity led me in, unwilling to stop me from rolling out. Later, I found that the course was really valuable, at least let me comb the core idea of the source of the bid to the system.

Of course, if the above story happens in a Chinese class, it will definitely be the following version:

I asked the teacher: What is value investment? The teacher put a bottle of Maotai in front of me. I asked the teacher: Is this a value investment? The teacher said: This is not.

(The price of the ancestors, Graham, recent photos)

2. Razor Schroth

The same-named course "Value Investment" also talked about Walter Schloss, as Buffett mentioned Schloss in his buzzing "Super Investors in Getdwell".

Schloss may be perhaps the closest clone to Graham in history.

In 1955, Hummer’s life-time godfather Graham spread his hands and prepared to retire. And Schloss, who hadn’t been to the university for a day, smashed his hands and prepared to take over.

This refers to spiritual inheritance.

Buffett rebelled against the revolution and went to the price of Fisher's characteristic investment; the hard-core vote that really put BUY CHEAP on his epitaph was not Schloss.

How do I take over? Schloth took out Occam's razor, which greatly simplified the whole decision-making process-to find a door, a tiny place for the office, and to hire only a free employee, himself, who did not analyze lions, did not raise apes, and hired only one free employee, himself, who did not analyze lions, did not raise apes, and hired only one free employee, who did not analyze lions and raise apes. No discussion with management, no investigation, no research, no disk, no rental of Bloomberg terminals, or even a look at the computer.

The source of information for its decision-making is either a first-hand company report or a research report from an organization called Value Line.

You will think that as a fund manager, he has done the above-mentioned acts. It is anti-intellectual to say that it is light, and that it is fundamentally reactionary. How can a price vote not care about the company's business?

Because the maverick Shroth doesn't care about the company's profits.

For Schloss, the intrinsic value of a stock is the value of the asset and has nothing to do with future earnings.

His logic is also simple. He doesn't think he can guess, he doesn't think the company's management is right, let alone the group of analysts on Flower Street. And even if you guess the profit, you can't guess the multiple the market will give him at that time. Guess? Tired.

Schloss has never been a man of hard work. He has lived 945 days in a few decades. His working hours are as long as trading hours, and he never works overtime. You let him predict the future, he is too tired.

So at first Shroth relied on net-net, to find that it was not a bad strategy, but that the market entered a new era of optimistic valuation, and net-net was wiped out. Later, he changed to the price-to-book ratio P / B, taking book value as the starting point of intrinsic value to choose stocks.

As a Occam razor-style minimalist bid, his strategy is roughly this: 1. Don't lose money, and don't lose money when you lose your heart. 2. Don't borrow money, mainly for fear of losing money. Excavate stocks at the lowest price in recent years; 4. Diversification of investment; 5. Using book value as the starting point of valuation, the most important thing is to look at P / B; 6. Buy at a discount on the net book value, the more severe the discount, the better.

This strategy, in 1973, "Forbes" made a very incisive summary of a writing by Schloss, the name of the article is "waste garbage."

You would think that value investment is looking for great companies and growing up with great companies, definitely thinking too much. Shroth doesn't have the nature of care's business at all. He's taking the idea of picking up garbage.

Buffett also said that Shroth owns a lot of shares, and he is not interested in the business of the shareholding company.

Schloth invests on whether the stock price is cheaper than its intrinsic value.

The so-called bid is the extraction of value-and the manifestation of the so-called value-is the difference between the price and "what we think is its intrinsic value." In his own words:

Basically, we try to buy value expressed in the differential between its price and what wethink its worth.

So buying prices is very important. If you don't agree with the importance of buying a price in an investment, you can hardly say that you are in the same position as the price.

Howard Max said that deciding whether you as an investor is a calf is not about what you bought, but how much you paid.

Of course, Schlose strategy seems simple, but the performance is not vulgar.

For nearly 50 years, Schloss's annualized income was 15.3%, and the S&P was 10% annualized.

What concept? If the $10,000 principal, the tender is finally to get 1.17 million, and Schloss is finally getting 12.34 million. This is the fruitful result of the accumulation of 5% of the "small wins" every year for 50 years. The rest is compounding in the cast.

(summary of Schross's return on Investment in Buffett's shareholder letter as of 1995)

The idea of ​​picking up trash made Schloss's mentality particularly good. When someone asks Mr. Schloss, what is the reason for your success? His son thought about it and replied:

"I slept very well."

But there is a problem, where come so many net-net and broken companies. Nowadays, the national market of Big Bull is not more than 30 in line with net-net, and the family is rubbish. It is really embarrassing.

You follow the example of Schloss, and you will finally find that the water in the portfolio is all bad. So although Schloss's method is not difficult to learn, the average investor can use this price method to succeed, and I report a skeptical face.

So use with caution.

(Schloss is wiping the glasses)

3. < margin of safety

These troublesome media are always looking for a second Buffett, targeted by them and likely to make a watershed in your career. Forbes also called Bill Ackerman (Bill Ackman) "Little Buffett," and Ackerman has never been able to recover.

Clarman's long-term performance was good. Baupost, his hedge fund, has $30 billion in assets and has earned more than 20 per cent for more than 30 years.

But in the past two years, Claman has been a bit weak. The US stock market is awkward. Like many other Graham-style bids, he is really not going to win the S&P and has been humiliating in the bull market.

In a way, you only have to lose the market in the bull market, in order to shoot your chest and say that you are a real price vote. Claman believes that the method of value investment is not designed for the bull market at all.

In the bull market, the chickens and dogs rise to the sky, and both the price and the closed eye can make money. The former is often not as good as the latter.

It makes sense only in a bear market, when value is the only reason why share prices have risen for a long time.

Although you haven't heard of Claman, you may hear a book that you have heard, called Margin of Safety. The first edition of this book has only printed 5,000 copies and sold so badly that the first edition is out of print.

Later, when a bunch of fun players found that the book was instructive, it began to stir up like bitcoin, selling the price of the original book to $3, 000. the price of the original book was as high as it was in Bitcoin, and the price of the original book was as high as $3, 000. This book has become an intangible cultural heritage in the world.

(margin of Safety)

This book, as its name suggests, sets out the core concept of value investing – the margin of safety.

Investment is generally an art, not a science, so there is no formula for accurate truth in the world of investment, and no one can calculate the exact value of a stock.

Many times the reference ruler you can use around you is the price given by the market.

And the price given by the market is often ridiculous, just like the original book that was fired to 3,000 dollars.

Who is the price? The stock price is determined by the most eager buyer and the most pessimistic sellers when the daily trading is nearing the end.

These two people passed the SB, so there is no consensus on the market price. The non-consensus prices of these two goods are always catching the wind and are always crumbling.

The core meaning of the margin of safety is risk aversion, because the risk of price investment understanding is not the fluctuation of the securities price, but the permanent loss of the principal.

The margin of safety is that your decision can guarantee a safe pad without losing money even in the case of miscalculation, misfortune, and madness.

The way to realize the margin of safety is to rely on the buying price, the lower the buying price, the greater the margin of safety. Giving your assets in vain is the safest margin, so your chances of losing money are zero.

The concept is slightly abstract, to give an example.

In the 1980s, there was a company called Erie Lackawanna, which had an interesting mission to liquidate the Erie Lackawanna Railway, which had ceased operation since 1976.

In 1987, Erie Lackawanna's share price was at $110, but the company's book had $140 in cash per share and almost no debt. There was also a claim for tax refunds to the IRS.

Even if it is not a tax refund, the net cash of $140 has greatly exceeded the stock price, so the risk of permanent loss of the investment principal is almost zero.

By mid-1991, the company had distributed $179 in cash to shareholders' liquidation, while the remaining assets were still trading at $8 a share.

Then why does the market give this opportunity? This is where bidding needs to be done, because you are likely to face a value trap.

I still remember the company before the divestiture, the security margin is very good, but considering the bad corporate governance and the credit record of the major shareholders, the market seems to be a gift.

Howard Max believes that buying a good asset is not a price investment, and buying a good asset at a good price is a price investment. In contrast, Buffett believes that buying a good company at a price is better than buying a company at a good price.

Although I also agree with Buffett. But this obviously violates Graham's idea of ​​price investment, because this sentence does not consider the margin of safety.

It is often difficult to wait until or find a market price rich in safety margins, especially in a bull market. In the absence of a margin of safety, Crawman often holds large amounts of cash.

So when he was bullish, he took a heavy, half-storage cash, how to run out of the big-eyed market. But the unclear people who eat melons don’t buy it, laugh and roar, send their law numbers, and step on the master.

There is no margin of safety rather than carrying cash, which is weird.

Therefore, Claman believes that price investment is a kind of gene, you will either bring it to life, you will never be, you will not learn the day after tomorrow, and learning is also effective, don't think about it. It is really difficult to retire with human nature, with the market, and with the value trap.

If there is an afterlife, I wish I had never heard of value investment.

4. Graham's Market metapho

How to understand the market.

In the face of unpredictable monster phenomena, one of the skills of human beings is to describe all undescribable with metaphors. For example, there are bull bears, bubbles, casinos, gravity, games, dark clouds, three crows and so on.

It is very effective for humans to use metaphor to understand figuration. For example, the girl's face is like a red apple; but to understand the complex and abstract system, the metaphor often ignores this and fails.

For example, the metaphor that the frenzied market is full of bubbles is not good, and when the bubble explodes, it ends, but the "economic bubble" tends to make a comeback, and you see Bitcoin is about to come back to life now. (see, hey, hey.

The pendulum, a metaphor about the economic cycle mentioned by Howard Max in his cycle, is not a good metaphor, and its symmetry makes people mistakenly assume that cycles are very predictable.

Therefore, strict people generally speak without analogy, but they can't tell stories, and the audience can't understand them without analogy. As a result, some rigorous people will devote themselves to making an impeccable analogy once in a while.

A good example is Graham's analogy of the market to a patient with a two-way disorder.

Bipolar, also known as bipolar disorder, is a pathological phenomenon that is sometimes mad and sometimes stagnation, similar to the alternating episodes of mania and depression.

Graham said that the market is a depressed patient. He only does one thing every day, and he keeps asking you - brother, do you want tickets? The decision is entirely up to you, and he never forces you to trade.

When you are mad, the price he gives you is as expensive as a chicken tank. When you stagnate, give you a quote for the grass.

Therefore, investors are as smart as you are, and what they should do is to use the market's bipolar disorder, when they are dry, and when they are depressed.

The following is intercepted from Chapter VIII, investors and Market volatility (translated by the people's University of posts and Telecommunications):

"But, please pay attention to the important fact that very few people have seen that a real investor will be forced to sell his shares; and for the most part, he can ignore the current stock price.

He focused on his stocks and took some action just to make them suitable for his books, and there was no other purpose. Therefore, if an investor himself follows blindly or overworries about the unreasonable fall in the price of his securities market, then he can't believe that he has turned his basic advantages into a basic disadvantage.

For such a person, it may be better for his stock to have no market offer, because in that case, he will not suffer from mental torture because of other people's misjudgment. ``.

The reason for the big excerpt is that some big people think this passage is the gentle eye of "smart investor".

The main idea is that the price bid does not need to pay attention to the market all the time, only in the interests of him, he needs to pay attention to the operation of the market.

If you hold a straight flush every day, you will be scared by the rapid changes in the market, unless you are a masochistic madman - then your source of pain is entirely a decision-making mistake of others, and your judgment advantage becomes a psychological disadvantage, so you are very passive.

There is also a virtue in the market is particularly generous, like a licking dog. Even if you refuse him coldly today, he will come back tomorrow and ask you, brother, do you want a ticket?

Because the decision to vote is completely up to you, so the more he is in the spirit, the better he is. Of course, if you have to follow him with him, then the dog will become a wolf dog.

Therefore, the price of the market to understand the market, is not to be too entertained, just look at it - as Paul Samuelson said - such as the growth of the leeks, such as watching the pen and ink.

Many people say that the market is my teacher. I am not convinced and teach me to be a man. You use the market as a teacher - there is a big brother who once said that the existence of the market can reveal human weaknesses, and where there is no real understanding, the psychological and even physical weaknesses in your body will definitely be exposed in a certain market state - From this perspective, it's true, but if you always ask for investment advice from the market, you should consider whether his mental state is stable.

What is a value investment? It is to take advantage of the market (otherwise there is no opportunity to obtain a margin of safety), but never to worship the market.

5 Conclusion

The intrinsic value of Schroth, the margin of safety of Kraman, and Graham's market explanation, I think are the core triangles of understanding the theory of value investment.

Buffett doesn't really emphasize this, or talk about crosstalk, but it's clear from the evolution of his investment style that he's not playing like this for a long time.

Therefore, Buffett’s Fisher-style price vote is his unique martial arts, and Bar’s father should be extremely proud.

Good business, moat, holding period is a lifetime, this is Buffett's ideas; look at ROE, look at management, and emphasize concentrated investment, which is the view of Fisher.

I think bid is a strong thinking, you must believe that you have the ability to value, believe that you can see the blind spot of the market.

Most of the price investors are reverse investors, who can rebel themselves, and are generally a stubborn and confident man.

But in case the judgment is miscalculated. The price vote also knows this logic, so it is necessary to secure the margin to protect the bottom.

If you want to emphasize the margin of safety, then your pool will become small. Not to mention the margin of safety, even the "good company" standard, the pool of investment is getting smaller and smaller. Previously, Buffett said that Berkshire, who was lying on the account with $100 billion in "free money," planned to spend the money to buy back his company's stock.

The stock god bought all the good companies in the world and finally had to start buying his own company.

By contrast, index investment is the thinking of the weak, drifting with the flow, as one says-making money in a cycle rather than earning money in a position to do so. This is the difference between taking an elevator and climbing a staircase.

Of course, the thinking of the weak does not mean that you are weak, and now the price investment does not pay attention to absolute gains. The whole day of thinking is how to beat the index. So if you are the opponent that Buffett wants to defeat every day, it is not so weak.

Of course, whether it is Graham, Barfield, or choose high-growth stocks, or index investment, or even focus on the trend of speculation, from the point of view of whether or not to make money, there is no fundamental difference between right and wrong.

In any case, as long as you know how to be one, you can be awe-inspiring.

The most fearful mouth shouted value investing to conceal speculation without systematic recklessness.

Buying Maotai is not a value investment. It is a price margin when it comes to the margin of safety, buys Maotai at a low price and holds it for a long time. Value investing is not just about investment value, but how does she differ from general investment, and how Graham's coffin board can hold it.

It is difficult to invest in value. Or that sentence-contrary to human nature, contrary to the market, and value trap, in the nine death to find a lifetime, the price is TM is really difficult. If there is an afterlife, I wish I had never heard of value investment.

This article from the micro-channel public number: pick up points Investment (ID: deepinsightapp); Author: Chanda

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