For investors, short selling is half seawater and half flame, because the professional judgment, risk control and the threshold of securities lending of up to 500 thousand have mixed feelings between institutions and retail investors. This issue of Red Weekly interviewed Huang Sheng and told his short-selling experience from the perspective of a professional investor. Huang Sheng has 6 years working experience in the investment department of commercial banks and 7 years working experience in PE equity M&A. He is currently the investment director of Shenzhen Guangfu Investment Company. Focus on the short-selling object "Red Weekly": You said that "Minsheng Bank has contributed a lot to the loans of small and medium-sized enterprises in China and should not be short-selling". Is there a moral judgment standard when shorting, rather than financial fundamentals? Huang Sheng: Hehe, my Weibo has been questioned by many people. They all think that shorting has nothing to do with Minsheng Bank's contribution to SMEs. But I don't think so. Minsheng Bank's own valuation level is so low (4. 16 times PE-editor's note), which has contributed so much to the development of small and micro enterprises in China. Why short such a good company? In fact, we short sellers also have faith. We don't short positive enterprises. In addition, the risk management level of Minsheng Bank is very good, and its default loans are under control. From a financial point of view, there is no need to short such a company. Red Weekly: So how do you choose short targets? Huang Sheng: The choice of short-selling targets varies according to investors' personal risk preferences and values, but the basic methods are the same. I generally look for short targets from the following points: First, the valuation is seriously overestimated; Secondly, there are stocks that turn from positive to negative in the industry, and there are companies that look for financial fraud from a financial perspective. Red Weekly: Tell me specifically how to operate it. Huang Sheng: For companies whose valuations are seriously overvalued, this is the way I choose to observe whether the stock price is much higher than its intrinsic value. Through the discounted free cash flow (DCF) model, the present value of AAA long-term bonds is calculated at a discount rate of 6%, and then compared with the company's share price and that of companies in the same industry. If the stock price is much higher than the present value or the value of the company in the same industry, the stock may be a better short target. Of course, there is no uniform standard for valuation, and the value of a company depends on its own judgment. Short the stocks with fundamental inflection points in the industry, such as photovoltaic industry and steel industry. These industries are obviously overcapacity, and the possibility of problems in many companies in the industry will increase. Commission income continues to be sluggish, as well as ocean shipping, shipping and brokerage industries. These industries all have a fundamental turning point. Event-driven is another short-selling opportunity, such as the purchase of waste oil pharmaceuticals by Health Yuan. Many listed companies cheat investors through financial fraud, and the main method is to inflate profits, such as fabricating operating income through related party transactions. To identify the transfer of benefits in related party transactions, we can observe the related enterprises of the actual controller to see whether the price of the purchase target and the price of the sale target are fair or whether the gross profit margin of their products is normal; We can also check its bad debt reserve, inventory depreciation reserve and so on. Analysis and judgment are above everything else. Red Weekly: After the investment target is selected, when should we choose to go short and how to close the position? Huang Sheng: The specific methods of pending orders, closing positions and closing positions depend on personal choice. If you find that the shares of listed companies are seriously overvalued through research, you can stop placing orders at any time and act immediately, believing in your choice. If you still have a lot of uncertainty in this process, you will hesitate. At this time, you can choose to make some asset hedging portfolios, mainly to buy some cross-market varieties that are expected to rise, which may be seriously undervalued bonds, currencies or stocks. Moreover, this variety is not necessarily directly related to the short target, but the operation direction is opposite. The operation of liquidation, the specific skills of pending orders are the same as those of multi-mode, and vice versa, and ultimately depends on the investor's risk tolerance. In fact, if you want to make a profit in the whole process, you must rely on your own judgment. Why short? You must have enough reasons. The most important thing that determines success or failure is to choose the right investment target accurately. Red Weekly: Foreign short-selling institutions, such as Muddy Water, should investigate the customers, suppliers and competitors of listed companies during the short-selling process. What do you do in this process? Huang Sheng: Take out all the public information disclosed by the company, such as announcements and statements, do a detailed reading and analysis, make a comparative analysis with companies in the same industry, and then make an evaluation of the company to see if it is fraudulent, overvalued or has some major mistakes. We will also do some field research, such as shorting liquor stocks, and we will ask the distributors of liquor companies about their market supply. We have many means, and sometimes we listen to the opinions of their competitors and investigate the real service providers of the company. Even if we don't have time to go abroad, we will invite our friends to go abroad. This is an important method besides analyzing their public information. International mode is the direction of Red Weekly: What is the difference between foreign short-selling mode and domestic short-selling mode? Huang Sheng: In fact, short selling is almost the same. Foreign countries provide stock index futures, securities lending and various financial derivatives to short sellers, which is more than ours, and there is no restriction. There are also naked short selling, which means that you can short stocks that you don't have at all. At present, there are too few targets for shorting A shares, which also determines that the threshold for shorting is very high, and many retail investors cannot participate. Red Weekly: In which direction will the domestic mainstream short-selling model develop in the future? Huang Sheng: At present, it is developing into stock index futures, but the varieties of stock index futures are still too single. Only the Shanghai and Shenzhen 300 stock index futures will become the new trend in the future. The naked short selling mode in foreign countries is very powerful. When a company has fundamental problems, it will encounter a fatal blow. With the development of China stock market, naked short selling will appear in China one day, which is a matter of time. If after the development of securities lending, the stock prices of fake companies are still high, far higher than their inherent fair value, then these companies will be targeted by short-selling institutions, and the blow to stock prices will be fatal. If retail investors do not adapt, they may be marginalized. Red Weekly: Your short-selling remarks about CITIC Securities and Suning Appliance hit the nail on the head. Can you tell me about the company you are going to short next? Huang Sheng: It is not convenient to talk about this now, but companies with high valuation and cyclical industries, industries that need a lot of money, and companies with particularly high debt ratio and deteriorating industry cycles are potential short sellers. In addition, in the actual operation process, it depends on whether the company has the conditions to short, because some coupons cannot be melted, and you can also borrow them in Hong Kong to see if you can melt the coupons of this company. If not, there is no way out. Red Weekly: Does shorting mean keeping retail investors away from the stock market? Huang Sheng: I advise retail investors not to short easily, because the risk of shorting is great. He needs very professional knowledge, not only to know how to value individual stocks-how much the company should be worth, but also to have a very professional judgment on the company's finances, a certain judgment on the possible problems of the company, a long-term tracking of the industry and the company, and a certain means of hedging risks against shorting, so that even if it is wrong, it will not lose a lot. Okay, Yan Hui.