A common mistake many friends make when valuing stocks is "valuing only from financial data". For example, the valuation of stocks is based on the pure P/E ratio, ROE and free discounted cash flow method model. There are also people who are a little "professional", who will comprehensively score according to the company's financial indicators, such as gross profit margin, debt-to-income ratio, year-on-year performance growth rate and other N factors to make a valuation.

actually, these are all theoretical valuations.

how can you value an enterprise without looking at its products? How can you not look at the company's profit model?

For example, the data in the financial statements of the two companies are basically the same, one is manufacturing arms and the other is manufacturing liquor. Can their stock valuations be the same? Different products, different ways of making money, and different valuations.

Most first-line liquor products have the right to raise prices, and most downstream customers are scattered and have little say. Therefore, liquor has more potential profit growth space. The arms product has no right to raise prices, and the downstream customers are very concentrated and are powerful customers with the right to speak. It is difficult for companies that produce arms to have a large net profit margin. Because your life is in the hands of downstream customers.

speculating in stocks means speculating in expectations. Obviously, the products of liquor industry have made its future profit expectation better and should have a higher valuation.

when I was young, I set up a stall in the night market. at that time, I found that the goods sold by vendors and the mode of making money determined how much money they could earn.

Some vendors sell umbrellas, which are commodities that depend on the weather for food. He must look forward to rain every day. There are also commodity vendors who sell pesticides and toilet water. Of course, they hope that there will be more mosquitoes and flies every day. Obviously, the sales of such products are difficult to be stable and it is difficult to make big money. Because it depends on god to enjoy the meal.

The gross profit of vendors selling daily necessities such as toothpaste, soap and washing powder is the lowest and the hardest. They sell hundreds of kinds of goods, which need to be sorted and transported every day. But selling a bag of washing powder and a bar of soap will earn 23 cents.

on the contrary, selling cosmetics is much easier to make money. A bottle of cream may earn consumers 1 yuan or even tens of yuan.

People who sell clothes in the night market and pork in the morning market make more money. Because these goods are necessities of life.

I'm not saying here that all clothes sellers, pork sellers and cosmetics sellers make money. I mean, the market space of different products is very different. The products you sell determine your ceiling of making money, that is, the limit of making money, and at the same time determine the degree of hard work you make money and so on.

For example, Pathfinder and Mugaodi, both listed companies that produce outdoor products, have different product emphases. In addition to producing outdoor clothes, the tent of Mugaodi has more technical and brand advantages, so it is easier for Mugaodi to make money than Pathfinder.

Why are the valuations of banking and real estate industries not high at present, and the P/E ratio is only single digits? In the final analysis, the money-making model is not good, especially in the current environment. Both of them use leverage to make money. That is what we usually call borrowing money to do business. Banks borrow money from depositors, while real estate borrows money from banks. Therefore, in a bad economic environment, people will suspect that they have a lot of bad debts. People will question their ability to make money, so the valuation of banks and real estate is low.

Why is the liquor industry highly valued, with a P/E ratio as high as 5 to 6 times? This is because people's money-making model is very good. The operation of liquor industry does not need financial leverage or borrowing money. My family is not short of money, and there are billions of dollars to manage money every year. Of course, such companies have little financial risk, and people are more willing to buy their shares, so of course, the share price is pushed up very high.

I can learn value investing quickly after middle age because I can quickly understand the key of a business. When I was young, I worked as a hawker in the night market, then as a small boss in the wholesale market, and finally worked in a central enterprise. These experiences left me with valuable business experience.

To learn value investment, you must know how to do business. To understand how these companies make money. We must think about the company from the perspective of the boss, not from the perspective of accountants or auditors.

it is actually very difficult to value listed companies. Enterprises that are mainly characterized by easy valuation actually have little need for valuation. Enterprises with poor valuation are difficult to estimate accurately, and most of them are useless.

For example, companies such as Industrial and Commercial Bank of China, Yangtze Power Company and Kweichow Moutai, which have stable performance and mostly cash income, are very easy to estimate their cash flow in decades. However, do such enterprises need valuation? Theoretically, such enterprises will not lose money at any price. It's only a matter of time before making money. This is because such enterprises survive for a very long time, can continuously generate profits, and can continuously pay dividends for decades or even hundreds of years. The certainty of making money by long-term investment is close to 1%. Unless the banks fail, the Yangtze River runs out of water and people stop drinking, we will lose money by investing in them.

in other words, investing in companies with high profitability and abundant cash flow is guaranteed, just earning more and earning less.

and those companies with complex profit models, such as high-tech enterprises, are hard to value. We can't predict how much money it will make in the next ten or twenty years. Maybe they can make a lot of money, and maybe they will go bankrupt after 1 years. Therefore, it is difficult to make a valuation. So Buffett generally doesn't buy high-tech stocks, because he can't value them and can't understand their profit model.

if time went back to 1 years ago, who would have known that Tencent's share price would rise so much today? For stocks in high-tech industries, the essence of our buying is to make venture capital. Be sure to control positions and manage risks. My suggestion has always been that for high-tech industries, it is best to invest in science and technology theme funds and invest a small amount in specific companies.

analyzing stock valuation is like asking more questions on a blind date-how old are you? Any brothers or sisters? How many girlfriends have you had? How old are mom and dad at home? How many suites are there at home? Do you have a car? What brand? How much money is there? Where do you work? What is the annual salary? How many hours do you work every week? Do you have annual leave? ------。

ask n questions before we can give him a rating and evaluation.

when we study a company, we should also ask: where do you rank in the industry? Are you a cyclical industry? Is your business operation a leveraged model? Is your product seriously homogeneous compared with peers? Is your product a repeatable consumer product? Do you have the right to raise the price independently? Is your business asset-light or asset-heavy? Do you operate in the whole industry chain? -------。