Two Policies that Must be Followed to beat the Average

a. Inherently Sound and Promising Prospects for A Security
b. Not Popular on Wall Street

The Restrictions of Security Analysis

a. The conclusion of the study is only a nearly correct version of the past
b. The information used in the analysis may have lost relevance by the time acquired
c. The conclusion may become obsolete by the time the market is ready to absorbe it.

Topics that Must be Covered in the Study of Corporate Income

a. Accounting aspect: What are the true earnings for the period studied ?
b. Business aspect: What indications does the earnings record carry as to the future earning power of the company ?
c. Invest Finance aspect: What elements in the earnings exhibit must be taken into account, and what standards must be followed, in endeavoring to arrive at a reasonable valuation of the shares ?

Tests for determining "bargin" issues

  1. The indicated value by appraisal is at least 50% more than the current market price
  2. The value of the business to a private owner, the realizable value of the assets.

Tow major sources of undervaluation

  1. Currently disappointing results
  2. Protracted neglect or unpopularity.
  3. The market's failure to recognize its true earnings picture.


  1. 成交价总是order book里的卖1或买1价格
  2. 只考虑限价单,卖1大于买1则无成交
  3. 卖1是买入证券时的可能最低价,买1是卖出证券时的可能最高价

Security Analysis读书笔记

Portfolio Theory and Value Investment

The core difference is the definition of "Risk". Portfolio theory takes "Risk" as the price volatility of securities. In contrast, value investment treats "Risk" as the inappropriate valuation of securities.

The underlying logic for defining "Risk" as volatility is the need of frequent measurement of asset portfolio in market value. The emphasis on the liqudity of security.

Value investor does not focus on market value of their holdings but rely on long-term value realization instead.

About The Timing of Selling

It is questionable that a value investor should sell a security when it reaches full value. As good asset provides long-term cash flows that are difficult to completely converted into current value based on available information. A value investor may rely on such assets to survive different economic conditions, especially downturns.

Invest for Certainty

A good value investment should involve certain judgement for key elements.

Uncertainty of future falls into several categories, internal uncertainty and external uncertainty.

Principal Obstacles to Success of the Analyst

  1. The inadequacy or incorrectness of the data
  2. The uncertainty of the future
  3. The irrational behavior of the market

Two Assumptions of Analytical Work

  1. The market price is frequently out of line with the true value
  2. There is an inherent tendency for these disparities to correct themselves

Market Modelling: Voting Machine instead of Weighing Machine.

The market price will not reflect the value of each securities in an exact and impersonal mechanism. Rather, it reflects the choices of countless individuals partly of reason and partly of emotion

Trend Essentially a Qualitative Factor

No limit may be fixed on how far ahead the trend should be projected; and therefore the process of valuation, while seemingly mathematical, is in reality psychological and quite arbitrary. For this reason we consider trend analysis as a qualitative factor in its practical implications, even though it may be stated in quantitative terms.

A Test of Distinction Between Investment v.s. Speculation

Safety: An asset is only safe only if it is assured, or at least strongly indicated, by the application of definite and well-estabilished standards.

Definition of Investment

An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.

Past Performance V.S. Future Assessment

The traditional view was that prudent bond investing must be based on solid inference from past data as opposed to speculation regarding future events. However, the motivation of inferencing from past data was exactly trying to has know about the possibility of future.
Thus the real difference is really about whether we should judging a firm's future perspective based exclusively on historical data (concervative); or we can forward-looking at the quality and possibility of business.


Forward-looking analysis can be profitably applied to instruments of all sorts.

About Investment Risk

The supposed acturial computation of investment risk is hardly practical. Investment losses are not distributed fairly evenly in point of time, but tend to be concentrated at intervals, which is incalculable.

Four Principles for the Selection of Issues of the Fixed-value Type

  1. Safty is measured not by specific lien or other contractual rights, but by the ability of the issuer to meet all of its obligations.
  2. This ability should be measured under conditions of depression rather than prosperity
  3. Deficient safety cannot be compensated for by an abnormally high coupon rate
  4. The selection of all bonds for investment should be subject to rules of exclusion and to specific quantitative tests corresponding to those prescribed by statute to govern investments of saving banks.

Old Equity Investment (Common Stock) Theory - Threefold Principle

  1. A suitable and established dividend return
  2. A stable and adequate earnings record
  3. A satisfactory backing of tangible assets

P/E Ratio and Bond Interest Return

A PE ratio of 25 is equivilent to a 4% coupon ratio corporate bond. Both pay 4% on yield plus face value of the security when held to maturity/sold.

U.S. Economy Cycle

1929 - 1933, down
1934 - 1937, up
1937 - 1938, down
1939 - 1943, up
1944 - 1947, down

Dividend Policy

Liberal Dividend: A policy to distribute a major part of earnings as dividend to shareholders

Conservative Dividend Policy

Conservativem means following the current tradition.

Three Traits of Human Nature:

  1. aversion to boredom
  2. a tendency for emotions to overwhelm reason
  3. greed


Operating Leverage

OL = %Change in EBITA / %Change in Sales

PPE investments will result in fixed assets. An expansion of PPE investments will increase the per year depreciation expense together with production capacity. However, the bottom line will be hurt if the production capacity is not reached due to lack of sales. In this case, the depreciation expense become the fixed cost in production.

Analysis Framework

  1. Industry Life Cycle
  2. Sector Rotation
  3. Business Cycle

JF读书笔记 – 2018年8月

Unscheduled News and Market Dynamics

In a limit order market, the price information (limit orders) are the only information that market participant can be efficiently used to communicate with others.

Optimal Order Submission

  1. Order Price
  2. Execution Probability
  3. Pick-off Risk

The optimal order submission is a trade-off between these three factors.





拼多多 – Research Memo





Money Supply and Interest Rate

Federal Funds Effective Rate

The weighted average of the negotiated federal fund lending rate among banks.

Federal Funds Target Rate

The target federal funds effective rate set by the Federal Open Market Committee.



经济运行的逻辑 – 读书笔记


  1. 未来并非过去的重复
  2. 即使未来是过去的重复,准确的预测需要对现实和历史全面和没有重要遗漏的认识和把握


  1. 如何看待逻辑
  2. 如何看待历史



  1. 严密,能解释现实现象的逻辑
  2. 基于逻辑作出的预测
  3. 通过对证据系统性的梳理来验证预测


  1. 中国可贸易部门在经济中占比很大;成熟经济体虽然高度开放,但制造业占比很小
  2. 主导中国CPI的食品类价格以及驱动农户通胀预期的生产资料价格不存在明显的价格粘性
  3. 中国生产资料价格变化主要反映企业生产能力的余缺和资本存量的多寡;成熟经济体产品和服务价格变化的背后多反映劳动力市场的松紧和工资增长的快慢


  1. 基于中国深度介入国际生产分工的事实,依靠国际收支模型和国外经济数据对中国经济现象进行解读/预测
  2. 对具体的生产资料价格、供给/需求等要素的分析采用排除法,圈定唯一的合理可能因素
  3. 基于经济指标的内涵的相互因果关系,依托经济数据展开分析,支持2中的分析路径


Claim: 成熟经济体虽然高度开放,但制造业占比很小,基本上可以看作封闭经济体来处理, why ?