The most expensive training I have ever attended

Previous articleHow can IT professionals avoid a mid-life crisis? "has received a lot of attention, and the comments and appreciation have also set a record for this public account (cloudman6).

This result was both expected and unexpected.

Unsurprisingly, because this is indeed a topic that resonates. Everyone's career has more than 40 years, there will always be lows, and there will always be ups and downs. Only by taking precautions and preparing in advance can we deal with it calmly.

Unexpectedly, because as an IT engineer, I have never studied professional investment theory, nor have I achieved impressive investment achievements. I just like to know more about the world, have a stronger thirst for knowledge, and be more curious.

Writing this article stems from a few unfortunate things that happened in the IT circle some time ago, and I also felt a sense of crisis, and I inevitably began to rethink and plan my life. In addition, I recently participated in a training (more on this later), and I felt inspired, which can be regarded as a summary of my thinking and actions during this time.

Investing is a very personal thing, but if I can give you a little inspiration, I think it also makes sense.

Let’s briefly summarize some of the conclusions we deduced from the previous article:

1. Investing is important to everyone.

2. Stocks are good value investing targets.

3. The Chinese stock market is suitable for value investing.

4. Value investing methodology:

Find a good company
Buy when it is fair or undervalued Be
patient and wait for it to appreciate

Today we will discuss in detail how to practice this methodology.

most expensive training

Last weekend, I attended a training, Super Digital Power , tuition fee 13998, the course content is to teach you:

Judging the operating status of the company through the financial statements of the listed company.
Calculate the reasonable range of the stock price of listed companies based on financial data.

Look, isn't this just the right way to practice value investing methodology?

Find good companies first, buy at a reasonable price, and sell at the right time.

But don't get excited, I actually learned about this course a year ago, and there is a reason why I waited until a year later to sign up.

The price of the course is not the point. Although 13998 is very expensive, if it is really dry and effective, the price is acceptable.

The key is how to judge the value of the course. The strategy I take is  to look at multiple dimensions .

First of all, this course was published in a knowledge-based community that I often follow. Most of the people in the community are of high quality and belong to lifelong learners. They often create some high-quality articles, and they are all  paid  users. I have purchased several paid courses from the community, and they are all good. From this point of view, the quality of the courses should be guaranteed. (If you want to know which community it is, you can reply to the  community on the official account  )

But after all 13998 is not a decimal, I still need to wait. What are you waiting for?

Waiting for feedback from people who have eaten crab.

The course starts in 2017 and is held once a month. After each time, someone will post an article to share, which is full of harvest, value for money, and highly recommended. Every time I see a sharing, it increases my confidence in this course. After all, I also hope that there is really a practical course on value investing. What finally made my mind up was that a person I trusted who attended the training on December 3 also recommended this course.

The next step is to register immediately, but the courses in December are already full, so I have to register for the end of January this year.

After waiting for nearly two months, I finally participated in this two-day special training last weekend.
There is only one word to feel: great value!

Next, I will introduce the specific content of the course to you.

How to find quality companies?

Financial statements are the transcripts of a listed company's operations, through which the fundamentals of the company can be judged.

Wait a minute, you might ask:

Are the financial statements credible?
Isn't that what an accountant does?
Can it reflect the real situation of the enterprise?
Isn't it okay to falsify financial reports?

Well, being able to ask these questions shows that you are an independent thinker.
The teacher gave the answer as soon as the class started.

The annual report must be audited by a formal accounting firm. Considering the high cost of violations by the accounting firm,  the reliability of the annual report is very high  . The monthly, quarterly and semi-annual reports do not require auditing, so they are for reference only.

There are three financial reports: the income statement, the balance sheet and the cash flow statement.
Among them, the income statement is the most likely to be falsified, and it is difficult to detect even if there is an audit.
But the cash flow statement is difficult to fake, and this is the most important statement, and Buffett also values ​​it the most.

Be sure to  look at the three tables together . Through cross-validation, the real situation of the enterprise can be analyzed.

Buffett will look at  five consecutive years  of financial reports to find excellent companies that can make steady profits.

Therefore: high-quality companies can be selected through financial reports .

How to do it?

A company is comprehensively measured from five key dimensions of cash flow, operating capacity, profitability, financial structure, and solvency .

There is a set of specific operation methods for measuring cash flow. For example, cash flow depends on whether the cash flow ratio, cash flow allowable ratio, and cash reinvestment ratio satisfy >100/100/10. If it is not satisfied, it cannot immediately judge that the cash flow is not good. Whether the ratio of cash to total assets is >10%, and whether the company collects cash every day (receivables turnover days <15).

Because it involves specific accounting subjects, the details will not be expanded here. You only need to know that companies are scored from five dimensions according to the financial report data. Finally, the company with the highest comprehensive score is a good company.

Can you really find a good company this way?

There is a practical part in the course. The teacher sent more than 100 financial reports to each of our groups, and let us use the methods we learned to filter out the companies we think are the best. Since the name of the company is not marked on the financial report, the only thing we can do is to make judgments based on the financial report data. Each of us looked at 10 financial reports, and then picked the best one, and then PKed this one with the twos picked by others, and finally selected the best one in this group.

In the end, the teacher summarized the financial reports selected by each group and announced the answers. A total of six listed companies from different industries were shortlisted: Biotech, Chengde Lulu, Wuliangye, Hengrui Medicine, Robam Electric and Haitian Flavor.

The financial report issued by the teacher is the annual report as of 2016. If at the beginning of 2017 we picked out such a portfolio through these earnings reports and bought it, what would be the annual return by the end of 2017? Here is what I came up with:

It can be seen that, except for Chengde Lulu's poor performance, the rest of the stocks far outperformed the market, and Wuliangye's income even reached 137.8%

You know, these stocks are just blindly selected from more than 100 companies in half an hour by reading the financial reports   . Everyone had an idea at the time: how great it would have been to have attended this training in early 2017!

But more importantly:

We have mastered the method of picking quality businesses.

According to the value investing methodology, we can now enter the second step:

Buy when shares are fair or undervalued

How to determine the reasonable range of stock price?

The teacher showed everyone a financial report. The five dimensions are perfect. It can be said to be the best of the best. This company is  Kweichow Moutai .

As China's stock king, Kweichow Moutai's share price has exceeded 700. Can you buy it?
The company is undoubtedly excellent, but isn't it a good stock?
Remember the definition of a good stock:

Good stocks are stocks of good companies that are reasonably priced or undervalued.

Whether you can buy or not depends on calculating the reasonable range of the stock price.
The formula is as follows:

(If you want to check the valuation range of other A-share stocks, you can reply to the  valuation range on the official account  )

This formula is derived, and the specific process will not be expanded. It can be seen that the reasonable range of Maotai's share price is [179.89 - 539.66]. This price was calculated through the financial report in 2016. At the beginning of 2017, it was only 327 yuan. The price at that time was not expensive, but it is already very high now. Once again, if it is the training that I participated in in early 2017...

Of course, it does not mean that Maotai can no longer rise.

1. This is only a reference range, and the stock price will also be affected by the market heat.
2. After the 2017 annual report comes out, the figures in the formula will be adjusted.

However, as a qualified value investor, we pursue long-term and stable investment returns, and we must choose stocks with reasonable prices. This is what Buffett often said:

Have a sufficient margin of safety.

When will it be sold?

Now that we know what and when to buy, the next question is: when to sell?

Actually it's not difficult.

1. If the company's financial report shows that the company's operations are very stable, and the data has not deteriorated significantly, it can continue to be held.
2. Conversely, when the data goes bad, it's no longer a good company, and of course it's time to get off.

Two frequently asked questions are answered here.

Q: What should I do if the stock price falls during the holding process?
A: The short-term trend of stock prices is unpredictable.
Remember, we are investing in value, and the investment logic is that the value of a good company will eventually be reflected in the stock price. Our investment cycle is in years. Value investing strategies are not suitable for short-term speculation.

Q: What if there is a stock market crash? Do you die?
A: Before the stock market crash, there is a high probability that the profit has been huge. When the stock appreciates sharply, we will reduce the cost of holding positions and lock in the profit (the specific method will be broken down next time). And when the general trend stabilizes, the first to return value are high-quality companies.

What's next?

Well, at this point, I think the specific practical methods of value investing have been discussed clearly.

Find a good company
Buy when it is fair or undervalued Be
patient and wait for it to appreciate

For me, the next thing to do is the following:

1. At present, the 2017 financial report of listed companies has not yet come out (it will not be until April). You can first screen out high-quality companies through the 2016 financial report and calculate a reasonable stock price range.

2. After the 2017 financial report comes out, conduct secondary screening to select good stocks (please review the definition of good stocks above).

3. Buy in batches.

4. Focus on your own business and personal growth, and be a friend of time.

If you also want to practice value investing, you can do the following:

1. Sign up for  the Super Digital Force  training. However, I heard from the teacher that due to my age, I may not be able to hold one or two classes in the mainland (the teacher is from Baodao).

2. Buy this teacher's "Five Key Digital Powers", which is the same as the training content, but unfortunately, it is currently out of stock on Amazon. Hope you have a way to get it yourself.

3. If the above two methods do not work, then you can only see what I have learned and sold now.
   After the 2017 financial report comes out, I will announce the good companies and stocks I have picked out in the public account one after another, and give reasons. At the same time, I will also disclose my investment process.
   The purpose of this is not to ask you to invest with me, because this is the first time I use this method. This is done just to practice the following philosophy:

Once you know a truth, understand it, and approve it, you must put it into practice with action.

summary

This training taught me how to read financial statements.
Armed with this financial knowledge, you can judge a company's fundamentals and pick blue-chip stocks.

Even if you don't buy stocks, there are many benefits to reading financial reports.

For example, if you have a company, there is a company A that buys your products upstream, and a company B that supplies you downstream. During the business process, you will definitely worry about whether company A can pay for the goods in time; you will also pay attention to whether company B's operational capability can supply you in time. And these can be seen in the financial report.

Understanding financial reports can help you choose business partners.

Take another example, LeEco, which is now on the cusp.
On April 20, 2017, the CEO of LeEco said in his letter to shareholders:

Six years ago, LeTV was listed on the Growth Enterprise Market for the first time. Relying on the innovative model of copyrighted content and membership payment, its annual operating income reached 230 million yuan. Today, the company has built three sub-ecologies of Internet and cloud, content, and big screen, with an annual revenue of over 20 billion yuan and a market value of over 60 billion.

Annual revenue  corresponds to   the accounting subject of operating income in the income statement. The following is the comparative data of LeTV's income statement over the years:

There are indeed 22 billion, and it has increased by 69% compared to the previous year!
According to normal logic, most people should think that LeTV made a lot of money in 2016. It is a good company!

But, remember? We said earlier: the income statement is the easiest to cost!

Whether or not you make money depends on the cash flow statement .

Cash flow from operating activities is  -1.068 billion!
What's the meaning? When the turnover increased by 9 billion compared with the previous year, the cash flow was negative! And it was 1.9 billion less than the previous year (10.68+8.76). To describe it in one word is to  make ends meet . Without access to continuous financing, it could run out of cash at any time and go bankrupt.

Although we can’t be sure whether LeEco has tampered with the report, at least it can be judged that LeEco’s business situation is not optimistic, and it is not as good as its CEO said.
If you can understand the financial report, you will not be surprised by the current situation of LeEco.

Understanding financial reporting can improve the insight to see things.
As mentioned in the previous article, there are two types of investments:

1. Invest in common investment varieties such as stocks, futures, spot, and gold.

2. Invest in yourself .

This training perfectly balances both of these investments, so it feels like a  great value!

In the next article, I want to talk to you about another very important question: how to do asset allocation?