Fortunately, value investment is not an investment behavior based on accurate prediction of enterprise value. Investors only need to predict the approximate range of enterprise value. This is because value investment does not need to hit a specific number as accurately as buying lottery tickets. Value investment is to buy stocks at a price below value. Suppose an investor predicts that the value of an enterprise is between 500 billion and 1000 billion. When he buys at a price of 300 billion yuan, he has a high probability of making money.
How to invest in value? Methods: Use the deviation between price and value to make money. This is what people often say about making money in the market. Buy when the bear market is undervalued and sell when the bull market is overvalued. In my opinion, this is an easy way to make money, both in terms of technical difficulty and cognitive difficulty. After all, it is relatively easy for ordinary people to judge whether a market is a bear market or a bull market. But from the perspective of human nature, this method is not easy to adhere to. The long holding period is a great test of human nature.
Method 2: Use value release to make money. How to understand this sentence? We say that the value of an enterprise this year is 500 billion, which is based on the discount of future cash flow, which involves a discount rate problem. Assuming that the future annual cash flow of the enterprise remains unchanged, the discount rate is 8%. Then this year's 500 billion will become 540 billion next year. This extra 40 billion is the money released by value. This method is much more difficult, because many enterprises may continue to create value in the next 10 year, but the value destruction will begin after 10 year, so it is difficult for value investors to have the ability and consciousness to judge that the enterprise has moved towards value destruction. When investors discount the future cash flow of enterprises, they habitually define a time after N years as the sustainable growth period of enterprises. But we know that enterprises with sustainable growth do not exist, and the behavior of value destruction after N years is eternal.
Method 3: Combine earning market money with earning value and releasing money. Graham and Buffett's safety marginal utility theory is the application of combining earning market money with earning value to release money. On the one hand, you can make money in the market. On the other hand, even if the fundamentals are wrong, there are safety mats in the market to make money, and investors will eventually lose money under control.
The theory of safety marginal utility refers to the use of the market by value investors when buying. For selling, Graham emphasized overestimation of selling, and formulated a stock-debt balance strategy. In other words, Graham attaches great importance to making money from the market. Buffett didn't say much about whether to use the market in selling, but more emphasized the extreme overestimation of selling.
Most domestic value investors are brainwashed by well-known fund managers. I believe that value investors are holding shares and making money from the release of enterprise value. This view of fund managers satisfies the lazy thinking of many value investors, does not study the fundamentals of enterprises in depth, and advocates that fuzzy correctness is better than precise error. I don't know that the correctness of vagueness comes from profound cognition.
The fund manager wants the basic people to hold shares, which we can understand. Which fund manager doesn't want the basic people to hold the fund for a long time and earn management fees. For fund managers themselves, dynamic balance is a kind of enjoyment. For the basic people, it is acceptable to hold funds for a long time. Because the fund manager himself is doing high selling and low sucking, and the position is balanced, the basic people can enjoy the results. But it is even worse for investors brainwashed by fund managers, and the result of long-term holding is mostly a loss. And often the long-term income shrinks after short-term and medium-term profits. The reason is that we don't understand the enterprise value and the law of enterprise development and value change.
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