This article was originally published on December 5, 2021, and one copy was transferred to Toutiao
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Some time ago, I shared seven articles in the earnings report series. Some students once asked, is it enough to invest in stocks and judge the company's fundamentals through financial reports?
Of course not!
The financial report is only the foundation, which is used to clear mines and judge the company's fundamentals. Company fundamentals are the basis of our investment in stocks, but they are not the whole story. If you can achieve excess returns by studying the company's quarterly earnings every quarter, then accountants and financial personnel should be the most successful people in investing in stocks in the market, but the result is clearly not. The trend of stock prices and financial reports are the basis, but they still need to be determined by the resonance of funds, policies, and technologies.
In essence, the essence of investment is the realization of cognition, and the construction of cognitive system is a long-term process, which will definitely not be exhausted in just a few articles. So this time, let's talk about a topic that everyone is most interested in - how to copy homework with Zhuang!
a) Unchanging humanity
When it comes to copying homework with Zhuang, we have to understand, who is Zhuang? Major shareholders, investment institutions, and even corporate executives who buy and sell stocks may be the Zhuang in our eyes.
Moreover, what is Zhuang's motivation?
We often say that to a person, listen to his words and watch his deeds. The fundamental reason for this is that in the financial market, there are many routines. A Zhuang's speech is often not an expression of his true opinion, and the purpose behind his high-sounding speech is likely to hide his true intentions. So, what is the most important thing about copying homework with the banker?
An insight into the true meaning behind "Zhuang"!
But how do you gain insight into this? Since human nature for the sake of profit is unchanged, the core point is to consider what is the motive of Zhuang's speech from the perspective of Zhuang and his own interests? In particular, it is necessary to look at his actual actions, not his words. Only then can we make correct judgments in the financial market.
Next, we will use two examples, one positive and one negative, to illustrate how to copy homework investment.
b) Keep up with the right people
Let's consider a scenario where there is a person who works hard to earn a salary, but knows a company very well, or that no one in the world knows the company's business better than him. And the man staked his hard-earned salary to buy shares in the company. It just so happened that this matter was also known because of some channel. Then this must be a very good opportunity to copy homework. So is there such a good thing in the world?
Some!
Who knows better than everyone else how a company is doing? It must be the core executives of this company. I discovered a stock in early August, Poly, and shared it with a small group of old Ant Financial colleagues I used to work for, as well as with some friends around me.
Today I share it in this article, we first found the company announcement from the Juchao Information Network:
On August 5, there were two announcements, namely the increase in holdings of executives and major shareholders. Which is more important? Of course, it is an executive, in essence, an executive is also a hard-earned worker, and his wealth is not worth mentioning compared with the major shareholders, often hundreds of thousands of times the difference, so the increase in executive holdings is generally to make money. There may be other purposes behind the increase in holdings of major shareholders, which we will talk about later. Let's first open the announcement of the executive's increase in holdings and take a look at the content.
We see that Poly's number one, Chairman Liu Ping's increase in holdings is 300~5 million. Other executives are in 50~1 million. Then we dig deep into Liu Ping from the Poly annual report, we can know that Liu Ping is an auditor, has worked in Poly for more than 15 years, and is now 52 years old.
Looking at the income first, Liu Ping's annual salary before tax is 5.85 million (there is it in the annual report, and the picture is not pasted). Among them, more than 1 million are equity incentives, and the remaining 4 million are cash. After deducting individual income tax, the overall is almost 3 million, and other executives are more than 4 million before tax and more than 2 million after tax. In other words, Liu Ping took more than a year's salary to increase his holdings of Poly's shares. Other executives took 3 months ~ half a year's salary to increase their holdings of Poly stocks.
Then looking at the stock of wealth, the market value of all Poly shares held by Liu Ping was 60 million yuan based on the stock price at that time. And of all the other executives, none of them exceeded 10 million. The wealth gap among executives has also created different options for the amount of money they can choose to increase their stock holdings.
If you are a part-time worker with 1.6 million yuan before tax and 1 million yuan after tax, assuming that you already have a lot of equity incentive stocks of the company, but you are still willing to spend half a year or a year's hard-earned salary to buy company stocks, then you must be very optimistic. Therefore, it can be seen from the willingness of executives to increase their holdings that the current price Poly must be very cost-effective. From the identity of the executives, we know that no one knows the business of Poly better than the senior management team of Poly. So, it's an excellent opportunity to copy assignments.
Finally, we use our own valuation logic to value Poly as a back-up. They are carried out from three perspectives: fundamental, technical and policy.
Fundamentals: Real estate is a cyclical industry, and the revenue recognized by the real estate company is included in the financial report before the delivery of the house, so the financial report is often lagging behind, so the pre-sale is a more advanced indicator. But for the sake of simplicity, we can look directly at PB. PB is a valuation metric that excludes cyclical revenue and profit fluctuations.
The bottom green line in the chart is a line with PB=0.7 valuation, and at the time of the announcement, Poly's PB valuation was the lowest in a decade. That is, the stock price has been the cheapest in a decade. Then we scan the earnings report again to make sure that there are no systemic risks such as excessive debt. After the fundamentals are confirmed, let's look at the technicals.
Technicals:
On the day of the announcement, the stock price trend has deviated significantly from the yellow 60-day moving average (23% deviation), and even without the announcement of the executive increase in holdings, there is a technical requirement for a short-term rebound from a technical analysis perspective.
Policy aspects:
As there are already difficulties in selling land in many places, which will affect fiscal revenue, it is expected that there will be no more stringent policies at the policy level.
To sum up, the day of the announcement is an excellent buying point, so the opening call auction is directly linked to the price limit to buy (the price limit represents the transaction at the market price of the call auction, not the price limit, and the price limit is only to be able to buy stocks).
Judging from the stock price in the later period, the stock price broke through the 60-day moving average on the fifth trading day after the announcement, and has always been in an uptrend, and several pullbacks have not effectively fallen below the 60-day moving average. Therefore, it can be held until the end of the uptrend (a substantial break below the 60-day EMA indicates the end of the trend). Based on Friday's closing price, the cumulative increase since the announcement has reached 57%.
Summary: If we look at the increase in holdings, the collective large increase in holdings of executives is the strongest signal. If it is only a few executives who increase their holdings, or if the amount of their holdings is too small, it may be an individual action, and the fundamentals of the company itself need to be re-examined. In addition, although the increase in holdings of major shareholders and the repurchase of companies is also a positive signal, since major shareholders are generally worth hundreds of billions of dollars, increasing their holdings of shares is not entirely to make money, and there are many other factors to consider. More on this later.
3) Scenarios that are not suitable for copying homework
Let's look at a negative example, the major shareholder has increased his holdings. In May this year, Mr. Deng, the major shareholder of Zhongshun Jierou Holdings, proposed that employees increase their holdings of the company's shares.
Let's take a look at the specifics:
What do you mean? That is, if you go to buy stocks, all the profits are yours, and the losses are considered major shareholders, and Mr. Deng, the major shareholder, will compensate you for the loss. Are major shareholders so confident in the company's stock price? If you are so optimistic, why don't you buy it yourself?
As we said earlier, we look at the so-called good news of increasing holdings, and we should look at what major shareholders do, not how they say. Mr. Deng, the major shareholder, has a net worth of tens of billions, and it is impossible to increase his holdings without money. Let's take a look at his equity pledge.
The pledge is 0, which means that the major shareholders are not short of money, and because inaction is just lip service, we are suspicious of this signal. Then let's look at the company's annual report to see what is the attitude of all the executives who work part-time. Looking at the year's annual report, we found that all the executives were reducing their stock holdings, and none of them were overweight. Well, compared to the major shareholders, the executives are poor, and it seems that they are more concerned about their money.
Finally, we review the late trend of Zhongshun Jierou.
It can be seen that after the end of the initiative in May, the stock price plummeted, and when I checked the company's financial report, I found that the revenue growth rate slowed down sharply from the second quarter report, and the net profit growth rate was negative and fell sharply. Major shareholders and executives will most likely know the business situation in advance, but it is impossible for you, as a retail investor, to know the business situation in advance.
4) Analysis of the reasons for the increase in holdings of major shareholders
Today we have given two positive and negative examples to illustrate how to copy homework and how to copy homework. Finally, by the way, the major shareholders increased their holdings. A special reminder:
The increase in holdings by major shareholders cannot be used as a basis for buying, but can only be used as a reference.
As we said earlier, executives who work for a living increase their holdings are using their hard-earned wages to buy stocks, basically to make money. If the executives collectively increase their holdings and the amount is not small, it is a very strong positive signal. Then there may be other reasons for major shareholders to increase their holdings in addition to being optimistic about the company. For the sake of space, I will not give examples. You can explore from the following angles.
1. What is the pledge situation of major shareholders, and whether the margin of safety of the pledge is maintained by increasing the stock price by increasing holdings.
2. Whether there is an additional issuance of shares in the future, and whether it is an escort for the additional issuance.
3 Whether it is for the purpose of competing for a controlling stake.