2019年6月随笔

  1. Crypto Currency as Fiat money

The value of crypto currency as fiat money is backed by the support and faith of Internet community, aka, computer prorgamers/developers/hackers.

  1. The zeal for hot spot stock often last as long as the media attention is sustained at a high level

  2. Zeal Stock
    Attributes
    1) Tech Related
    2) Consumers Product
    3) New in the Market
    4) High Growth Potentional

  3. Market Consensus About The Future Price Movement of a Stock
    (Crowd Behavior, Herd Effect)
    Guess the attitude and action of other investors as whole and act upon.

Simple hypothesis (First degree inference) of other investors: the most superficially good prospect stock will be popular, because the public is not so smart as a whole.

Although a large number (even most) of individual market participants (professional or not) think the superficailly good prospect stock is not indeed good, but since the investment community as a whole will like it, the best strategy is go along.

First degree inference is enough in most cases. (Optimal strategy)

Typicall, a downturn consensus is harder to reach than a upward consensus due to the difficulty to borrow, higher expense and risk in short selling compared to long buying, especially when no real bad news about the stock occurs.

  1. Central Bank Lower Interest Rate
    Lower interest expand money supply and credit, but also supports the overall debt growth in economy.

  2. Cash (Currency) and other financial assets are in substance the same in terms of purchasing power, they are essentially IOUs (Claim to goods and services).

  3. 利率调整作为发达国家货币政策的一种工具,为什么没有在国内频繁使用
    利率市场化和金融体系尚未完全开放,利率传导作用有限

  4. Public Comapny Separation
    Spin off

  5. Sfun

Marketing services are the primary source of revenues for Sofun in the year of 2018. Listing services are in substance another from of marketing services.
(58 Model)

CIH --> Commercial Property Service
SFUN --> Residential Property Service

  1. June 28, 2019
    Russle 1000 Index, Component Rebalance

  2. Tomson Server System Shutdown
    11:05:24

019-06-25 11:26:35] System.Reflection.TargetInvocationException: 操作过程中出现异常,结果无效。 有关异常的详细信息,请查看 InnerException。 ---> System.Net.WebException: 基础连接已经关闭: 发送时发生错误。 ---> System.IO.IOException: 由于远程方已关闭传输流,身份验证失败。
在 System.Net.TlsStream.EndWrite(IAsyncResult asyncResult)
在 System.Net.PooledStream.EndWrite(IAsyncResult asyncResult)
在 System.Net.ConnectStream.WriteHeadersCallback(IAsyncResult ar)
--- 内部异常堆栈跟踪的结尾 ---
在 System.Net.HttpWebRequest.EndGetResponse(IAsyncResult asyncResult)
在 System.Net.WebClient.GetWebResponse(WebRequest request, IAsyncResult result)
在 System.Net.WebClient.DownloadBitsResponseCallback(IAsyncResult result)
--- 内部异常堆栈跟踪的结尾 ---
在 System.ComponentModel.AsyncCompletedEventArgs.RaiseExceptionIfNecessary()
在 Shadowsocks.Controller.UpdateChecker.http_DownloadStringCompleted(Object sender, DownloadStringCompletedEventArgs e)

2019年5月随笔

Productivity and Cost Efficiency

The success of tech innovations depend largely on its improvement of productivity and cost efficiency.

Leverage and Short Selling

Invest on leverage has two major characteristics: (1) As an amplifier of both gain and loss
(2) The investor can be forced to close position due to the fluctuation of market price.

Short selling is considered as using leverage in trade since the margin requirement is 150% which includes the sells proceeds, thus the actual consideration paid is only 50% of sells proceeds. The leverage can be as high as 2 is the account have only 50% of equity of the security short sold.

Leverage is considered as using borrowed capital in trade, short selling involves borrowed securities, the proceeds of short selling can be considered as the borrowed capital. The cover of a short position can be thought of as returnning of borrowed capital at a reduced amount.

Ex-ante and Ex-post

Ex-ante = Before the fact
Ex-post = After the fact

Fundamental Principle of Optimal Forcast

The forecast error must be uncorrelated with the forecast

Fundamental Research and Market Research

Fundamental research focus on determine the fair valuation of the firm in long-term perspective.
Market research is intended to evaluate the short and mid term overall stock supply and demand.

5月关注列表

  1. 百度(BIDI)
    关注理由,中美贸易战引发的中概股大跌,股价走弱,虽然中国经济随贸易战承压但公司盈利基本面并没有明显变化,随着2018年年报发布时间的邻近,在爱奇艺年报超出预期的情况下,在155价位的百度股票有中长期上升空间。在155 - 160价位区间可以考虑买入。

Methodologies

套利、市场热点发掘、短线交易

Short Term Market Sentiment

Short term market sentiment cannot be guarranteed to extend into mid term market sentiment.
Thus the profit should be protected by placing profit taking order no higher than a 5% gain.
Also, the potentional loss should be stopped by placing a stop loss order in case the short term market sentiment is not fully realized as market price or performed at all.

The source of gain comes from uptick orders triggered by short term market sentiment.

When the inflation rate is high as well as general stock price level, the real return is overestimated because of the same high interest rate.

中概股信息

智氪研究

VIX index

VIX指数实际上反映了市场观点的分歧程度

WWR Research Note

  1. The company acquired Turkey graphite mineral resources in 2015, but did not generate any revenue until the license was terminated in 2018, why is that.

英国退欧

  1. 英方的核心诉求在于享受欧盟权利却不履行欧盟成员国义务,这在欧盟看来是对其核心利益和秩序的侵犯,不可退让。 同时由于公投导致的退欧使得英方在谈判上的底线已然确定,直接导致了英国在谈判中的弱势地位。

经营现金流为负的公司

主导股价的主要是趋势影响而不是价值,负经营现金流使得盈利预测难以实现

Westwater Resources

https://www.bis.doc.gov/index.php/other-areas/office-of-technology-evaluation-ote/section-232-investigations

CENTENNIAL, Colo.--(BUSINESS WIRE)--

Westwater Resources, Inc. (WWR), an energy metals exploration and development company, commented on the recently completed Section 232 Investigation of Uranium Imports. President Trump now has up to 90 days from April 14 to decide whether to act on the matter, which can include quotas or tariffs, a timeline which concludes in mid-July.

The U.S. Department of Commerce initiated a Section 232 investigation in July 2018 to determine whether the present quantity of uranium ore and product imports threaten to impair U.S. national security. U.S. uranium production has declined significantly since 1987, with domestic uranium producers experiencing a major slowdown in operations and employment.

Christopher M. Jones, President and Chief Executive Officer, commented, “We believe that, regardless of the decision that will be made by the President, U.S. producers will benefit in the near term. The U.S. utility companies are expected to come back to the market and stock-up on fuel supplies even if the President decides to deny the petition. In the event that the decision is in favor of the Section 232 action, U.S. producers will see greater demand for domestically produced uranium. Either way, we expect the price of uranium produced in the United States to rise.

“The U.S. relies heavily on nuclear power for carbon free base load power. According to UxC, more than 20% of all uranium produced in the world is consumed in the U.S. Nuclear power represents the only electrical base load solution for global electric power growth driven by economic expansion and a focus on carbon reduction.

“Uranium remains a key strategic focus for Westwater. Westwater Resources controls extensive mineral holdings in New Mexico and Texas. In addition, WWR owns the Rosita and Kingsville Dome processing facilities in Texas, both of which are licensed for production,” concluded Mr. Jones.

Short-term and Long-term Stock Selectivity

Short-term: Timing > Pricing
Long-term: Pricing > Timing

2019年4月随笔

汽车制造业

汽车制造业为重资产行业,互联网打法不占优势

Why Drawdown Can Not Be Avoided

Drawdown is nearly impossible to avoid for a number of reasons.

First, both macro and micro economy systems has inherent cycles, including security market, where price got pushed up by up-tick buying forces for a variety reasons and drove down by subsequent asset monetization encouraged by price rise.

Second, we all frequently make mistakes when trading, either in stock pick or timing. The reality that we cannot realiably predict both market and specific stock movement makes drawdown normal.

Credit

Credit can be divided into two broard categories:
1. The credit of currency (The goodfath of government monetary authority)
2. A claim on currency

CHGG

The future profitability of CHGG lies on the R&D and monetization of technology driven online learning system. Current valuation level can be justified by evolutinoal educations solution, which remains unclear in both product design and market reaction.

First Order Consequence

The most direct consequence
Second Order Consequence : The most indirect consequence. Which is the consequence that is result as the first order consequence. Thus, a cause-and-effect chain.

盘内交易

前一个交易日拉升,第二个交易日散户入场抬高股价,主力缓慢退出获利,主力退出速度不能太快,防止股价暴跌,导致没有买盘。
开盘后2小时交易量高涨,后续交易量逐渐放缓。

大涨时交易量放大,股价抬升,缓跌时交易量缩小,交易节奏放缓。

做投资要有想象力

投资是反人性的

Thoughts

Both Chinese and U.S. stock market can be followed, but only short U.S. general stocks, and long/short for U.S. non Chinese company stocks.

Trading strategies for China market should be niche position, advance position in potentional niche industry sector stocks. Niche finding can be localised in China, or from niche in the U.S. market.

Trading strategies for U.S. market should be short selling following various signals, reports plus self-analysis result.

For China company stock in U.S. market, cutting edge can be possibly obtained from information advantage.

For U.S. market, buying IPO hot stock and dump at the end of IPO day may be a viable strategy, since U.S IPO has no stock subscription limit.

WorkOut Deal的成立条件

  1. 有价值洼地
  2. 有可预测的股东行动

Price Impact of Follow-on Offering

If the offering price is higher than the market, the market price will be pull up.
If the offering price is lower than the market, the market price will decline due to the possible short sell arbitrage oppertunity to thoes who receive stocker in the offering.

价值投资对市场未来走势预测的态度

做出走势的大致判断,但不依赖该判断

关于投资工具

中国券商投资工具在交互体验和易用性上大幅领先美国市场同行,源于中国软件免费,市场信息免费的商业氛围,相比之下美国券商的市场信息和投资工具获取门槛更高,交互体验更弱。

美国银行股的跳涨

说明了我个人的判断与美国最新的市场共识接近, 开盘未公告财报的银行股也普涨,说明BOA和JPM财报公布提升了市场对整体银行板块的盈利期望。

关于交易量和股价走势的关系

交易量下降通常伴随着股价下行

April and May Goal

Double $ 200 in day trading Chinese Concept Stocks. When value declined below $ 100, declared failure and start over with reflections.

Money Market Fund

A股打新策略
美股A股票热点迁移策略

short 30 shares of CLWT

低吸高抛的短期投机,不能以基本面为由而不及时止损抛出。

根据信息进行报价,不被大盘主导

股价变化动量在达到市场期望价格前只会被新的消息影响,新的消息包括其他其他市场参与者的仓位变化

Trend following, in a short term trend, the probability of trend continuing in the next day is larger than discontinue.

追求潜在热门题材但不追次要股,同时,作为投机型交易,股价走势与预期相反时不及时抛出,导致了被套浮亏,要及时止损

纵然投入量少,被套的损失有限,但从仓位角度来看被套就意味着失去后续交易机会,绝对金额的小并不影响投机认赔快进快出的原则

想法没有用实盘收益验证过前,贸然全仓压入,意图博取超额收益,不明智。

总金额的多寡不影响投资或投机中的风控原则

任何单一标的投资,半仓都是极限

净资产高于市值的公司机会

The dynamic of stock price burst for small cap companies.

News incentive attracts speculators buys in bulks of stock, which pulls up stock price and attracts community attention, primarily individuals investors from Chinese mainland and Hongkong. The speculators then slowly close their position, sell stocks to late entry individuals. The stock price would not dramatically fall after the main players close their positions. Rather, it would slowly going upward flueculy. This happens because late entry individuals are expecting further price growth. The dynamic continues in the same pattern until price is bid to a unsustainable level, leading to a irreversible slipping.

1/5仓位低点买入当日暴涨中概股,股价上升20%后抛出,附加market on close order

不能被想赚情绪左右交易决策

加强关注股的财报发布时间节点

follow company constantly to search for trading opportunities

The purpose of equity and market research is to find great trading timings.

IPO Subscription

IPO subscription requires to buy at least 1000 shares.

The cause of IPO failure

The greedy of private investor and underwriters together with lack of public interest is the cause of IPO failure.

Pinterest Trading Guide

  1. 90% gain target if trading is hot = $ 36.1
  2. 30% gain target if not so hot = $ 24.7

The margin of safty of Trend Follow Speculation can be improved

The momentum of trend realization is longer than expected by inspection of recent trading activities

Dalio's 5-step Process

  1. Have clear goals
  2. Identify and don't tolerate the problems that stand in the way of your achieving those goals
  3. Accurately diagnose the problems to get at their root causes
  4. Design plans that will get you around them
  5. Do what's necessary to push these designs through to results

Inflation

An increase in inflation rate reflects growth of demand is faster than the growth of supply.

Increase in inflation indicates a higher economic activity.
Inflation rate also influence the inflation expection of market participants, a mildly growth inflation means the general price level will grow, which leads to the cost of revenue. The market participants are more willing to spend and invest under the expection of future inflation due to its impairement effect on buying power. This is partially to boost future economic return.

2019年3月随笔

中概股问题

与欧美公司相比,中概股各种行业的上市公司均有严重的公司治理问题,漠视中小股东利益的行为很普遍。
少部分行业垄断性公司股价突出,收到市场追捧,其他公司股价低迷,长期处于股价下行阶段。

另外,由于法律环境和商业文化的不同,中概股低价退市和私有化等有损中小股东利益的行为屡见不鲜,且实质上不受到相关美国规则约束。

与美国本土上市公司相比,中概股股票的收益权属性更为突出,所有权属性几乎无法体现,二级市场投资人的长期投资在最终退出上有极大的不确定性。

以上种种均导致了非优质中概股在投资上的天然折价现象,以及普遍的做空盈利空间。

搜狗的控制权问题

虽然根据协议,搜狐以少于50%的投票权对搜狐董事会拥有控制权,但搜狗赖以营利的核心资产是腾讯赋予其的腾讯系流量入口。从这个意义上讲,腾讯对搜狗的影响力不亚于实际控股。

搜狗的腾讯系入口 (38%流量, 2018财年):
1. 腾讯网(www.qq.com) 搜索栏
2. PC版QQ问问个人中心
3. PC端QQ浏览器默认搜索引擎
4. 手机端QQ浏览器默认搜索引擎
5. 腾讯网址导航daohang.qq.com
6. 腾讯网址导航hao.qq.com

腾讯感冒,搜狗打喷嚏

搜狐的估值折价问题

搜狐市值 < 搜狐持有的(搜狗+畅游)股票市值
(绿色: 搜狐, 蓝色: 搜狗+畅游)
搜狗v.s.搜狗+畅游

搜孤的股价波动系统性的晚于搜狗+畅游股价的简单算术和,有被用来套利的空间

搜狗的流量获取问题

搜狗的主要盈利方式是广告,而在流量获取上,搜狗依赖手机制造商的软件预装业务来支撑其流量的扩展,非自然流量,存在成本上浮侵蚀盈利空间的隐患。

游资热炒题材的问题

游资选择题材股进行炒作,需要结合当前政策热点和新闻热点选择股票。 热点的目的是拉高股价后,热点本身会作为讨论和传播的"题材"在散户和机构之间传播和扩散,使得股价走势产生动能,方便游资后续获利退出。

Where Does the Profit of Speculative Trading Come From ?

The irrationality of market participators provides profits for speculative trading. Just like in Texas Hold'em Poker game.

The majority of market participators are casual individuals, whose trading decisions are largely dominated by personal emotions. They are the amplifier of market trends.

The High Valuation of Marijuana Stocks

At price 70 USD per share, TLRY is being valued at over 100 Price/Sales multiple and seems to be something other than marijuana fan's zeal for pursuing marijuana related subjects. There is a considerable portion of speculative investors involved in holding TLRY at current price level. Their logic behind the current position is vital for the understanding of marijuana stocks.

The valution of marijuana stocks share similarities with Internet stock in its potentional of high speed future growth. Typically at a rate of 300% to 1000% annual growth in key operation metrics for the next 3 to 5 years. The investors valuing TLRY at over 100 Price/Sales ratio must be expecting a future performance like that. As the legal marijuana
market is not exist until a few months ago, everything is in the reasonable imagination.

However, it is a question whether the marijuana industry inherently similar to the Internet industry. Will the marijuana industry be naturally concentrated as the Internet industry, where a few companies owns over 80% of the market. In my opinion, the answer is no. The two industries differ greatly in the marginal production cost. The primary product of marijuana industry is a phsical substance that requires cultivation, production and transporation. While the Industry industry deliver online service that has nearly zero marginal cost per additional user, as compared to other industries.

The possibility of a marijuana business to achieve a annual growth of 300% to 1000% is remote, given the nature of the product as well as the intensive competitions from other market participator. This is especially true as recreational marijuana products from different companis are very similar in nature, which makes competitive advantage very hard to be built.

Chinese Stock Market

Practicing along with the market for the investing of A shares in Chinese stocks is not acceptable. A comprehensive strategy needs to be developped. Available traing styles including herd behavior speculation, market-trend forecast, value investing and news driven speculation. Trading simulation is essential for the verification of strategy.

淘手游的胜利

淘手游赢在差异化竞争和现金流

中国商品房土地供应

中国商品房土地供应市场是单边垄断市场,政府是唯一的供应方,理论上放开土地供应会压低市场房价,但放开土地供应的举措与1. 土地计划经济体制 2. 政府对土地供应的控制 相矛盾,故土地供应在可见的将来不会放松管制。

租金是购房收益的货币收益部分,但其他非货币收益也不容忽视,如与商品房绑定的户口、子女入学、社会福利;同时,随适龄青年结婚组成家庭,继而产生的对稳定居所、以及婚后改善住房条件的客观需求,也是购房收益的一部分。

From Ray Dalio's Economic Framework

Economic Activatity = Direct Product/Service Creation + Product/Service Transportation (Trading)

Ray Dalio oppose using the traditional supply and demand framework to analysis the market. The traditional supply and demand framework focus on the balance of supply and demand of product by the same quantity of exchange, but ignores the motivations, identity and total amount of spending of the purchaser.

Market Price

Market price is determined by the total amount spent by buyers divided by total quantity sold by sellers, in which buyers are the driving force of price movement. Dramatic price movement happens only when there is both purchasing power from buyers and available unit for sell by sellers.

Market Participants

Producers, Traders, Consumers

Sohu, Cyou和Sogou

三家公司均未按时发布2018年年报(与往年相比已晚了20多天),同期股价下跌5%左右

Planning For April

  1. Focus on shorting strategies research
  2. Research historial shorting opportunities, what their signals look loke, what's the best strategies at the time
  3. Find more signals to find shortable stocks
  4. Double U.S. portfolio

Profile of Chinese Stock Market

参与者:
1. 散户 - 追逐热点
2. 游资 - 制造、炒作市场热点
3. 私募 -
4. 公募

2019年2月随笔

  1. 互联网产品的地产属性

互联网产品的地产属性是虚拟的,无法购买但可以租用,对住客(用户)免费却对商家 (广告商)收费。
互联网产品的推广犹如城市间人口的自然和非自然流动,其住客群体覆盖重度互联网用户群。

当线下生活场景和活动被搬迁到线上时,线下生活变被线上生活所替代,与时间一起被同步覆盖的还有消费

  1. Future and option contracts
    Future contract gives the buyer the obligation, not right to purchase a specfict assets at a specific price at a specific date.

  2. Work-out and Value Investing

The value of work-outs depends on business valuation of the target firm from the point view of an acquirer in acquisition. The type of acquirer can have an impact on the price offerred. Strategitic investment is very different from financial investment in terms of valution structure.

2019年1月随笔

Wedbush Securities, Inc. 2019-1-14 AAPL Researh Report

The Wedbush report extensively discussed the future growth of AAPL's service segment. The FY2019, FY2020 revenue projection of AAPL made by Webbush was primarily based on the perspective operating result of AAPL's current business strategy.

The realiablility of Webbush's valuation analysis on AAPL, which is based on future growth projection, is questionable due to its speculative nature out of uncertainties.

ION Geophysical Corporation

The intransic value for ION is determined by the potentional acquisition price offerred by another company. When no such offer currently exist, the price can be estimated by comparing similiar mergers in industry.

Statutory Merger and Statutory Consolidation

Statutory Merger: one of the entity exist as a business entity after merger
Statutory Consolidation: both of the entities are terminated and replaced by a successor organization.

2018年12月随笔

  1. Fundemental Issues of a Company
    Aside of earnings, many details are worth noting in the fundemental health of a company. Short-term liquidity issue is a typical case.

  2. The repayment of fixed income securities

The repayment is never guaranteed, but involves certain degree of defaults.

  1. Mutual Fund
    Mutual fund has two basic functions:
    a. pooling of risk
    b. agent of ownership

Through pooling, an investor of a mutual fund enjoys corresponding pieces of ownership of a varitiy of securities through the mutual fund.

  1. All other things equal
    The per share price of a stock will keep increasing if no dividend is paid from retained earnings. That is to say, the retained earnings kept pile up or reinvested into the business.

  2. The rise and falls of ETF fund prices

Prices tend to rise before the dividend distribution day. Then fall immediately after the dividend distribution day.

  1. Lending and Borrowing

Lending is a temporary surrender of control of economic resources so as to seek possible economic benefits.

Borrowing is acquire of control of economic resources so as to seek possible economic benefits.

Part of the value of a company are belong to the creditors.

  1. Future Value and Present Value
    The future value of certain amount of current cash depends largely on the realizable rate of return.

Normally speaking, the future value and present value are referring to a rate of return that is riskless.

Riskless time value of money refers to the discount rate (cut... that reflects a decline in buying power).
(Cut... Under current fiat monetary system, As riskless interest rate is set by the central bank, thus the riskless interest rate is actually the artificial decline in buying power enforced by central bank policy (Really SO ?)).

  1. Economic Value of Technology Breakthrough = Impact of Potential Application/Implementation Difficulity

  2. 债券发行时的Yield to Maturity由无风险利率+预期通胀率+预期风险溢价之和决定,然后YTM决定了债券发行价格(可能每个买家不同)
    之后YTM由债券的市场价格波动决定

The YTM is defined as the interest rate that makes the present value of a bond's payments equal to its price. (Assuming coupon payments are reinvested at the same rate as the YTM)

  1. High operating or financial leverage is the source of net earnings fluctuations.

  2. Corporate Intransic Value Discount Rate
    U.S. treasury bond rate; Federal Fund Target Rate; Federal Fund Rate

  3. 数量型宏观调控政策
    比如:以M2,M3等货币量为调控目标,调整存款准备金率

  4. Buffett's Oppertunity Cost
    Focusing on oppertunity cost is another way of maximizing the long-term return expectation.

  5. Political Conflicit
    The cause of political conflicit: Fight for benefits attached to the organizational power.

  6. The Central Position of Cash in Valuation
    Cash is the most generally accepted medium of exchange, which has the universal purchasing power. The nominal value of all other assets are measured and expressed in a certain amount of currency, which essentially is cash. In a boarder sense, in cash means realiable transaction (v.s. in credit).

Accounts receivables and payables are cash inflows and outflows that were to be realized in the near future. Other non-current assets and liabilities, excluding "accounting" assets (prepaid expense, etc), are cash inflows and outflows that were to be realized in further future, whether intended or forced.

Cash flow is systematically lagged behiend revenue expense flow in timing but they can reconcile in amount. Cash flow figures measure transactions that were realized but revenue expense figures measure past transactions that are both realized and unrealized, in actual or estimated number.

The earning performance is more accuratly demonstrated in cash flow than revenue expense, as cash flow is based on transactions that are realized.

  1. Ex-dividend Price Drop
    Cause: a. dividend distribution may decrease the ex-dividend future return of the security
    b. If the stock price was pushed up under the expectation of possible dividend distribution, it is natural for price to return after the distribution is realized.

Berkshire Hathaway Letter

Warren Buffett

According to related descriptions in wikipedia, buffet sold a co-owned business when he was a sophmore (year 1945) in high school for around $1000. If we assume his savings was 10 times of the business he sold 10 years later, then by 1955, his savings would be $10,000. A second description in wikipeida stated that buffet finished college (after 5 years) with a saving of $9,800, which collaborates with our first estimation in terms of magitude. A concervative estimation of buffet's wealth when he founded Buffett Partnership, Ltd would be around $100,000 (around 6.3 Million RMB)

1957 to 1959 Letter

In these three letters, buffett stated an annual portfolio return of 8% to 30% depending on the general market performance (as measured by percentage change of Dow Jones Industry Average). It is unknown whether this return is superior in the investment community at a portfolio size of multi million USD. It is unknown whether a 8% to 30% return is hard to achieve for a fund size of multi thousands USD. My guess is that a higher return (30% to 100%) is achievable assuming certain level of risk.

1957 Letter

In buffet's view, the market is in general priced above intrinsic value. This view relates to blue-chip securities. Buffet stated that if this view is accurate, it is possible that a substantial decline in all stock prices, both overvalued and undervalued, is to happen. As it is very unlikely that current market level will be thought of as cheap 5 years from now. Even a full-scale bear market won't hurt the current work-out portfolio. In buffet's plan, if the general market were to return to an undervalued status, he would invest in the undervalued general issues. It should be noted that, for Buffett at this time, debt financing is an option for the fund needed for general issue investment under this condition. If the general market were to move to a higher level (overvaluation), Buffett plan to put more capital on work-outs.

In Buffett's view, a market decline followed by general decline in earning power is a normal market behavior and it should be. Any market decline not in the same magnitude with the decline in earning power can be considered as "moderate".

Buffett Talks about "current market level", but how does he determine if the current market level is overvalued or undervalued ? Perhaps he was using average PE ratio as a reference to make the judgement.

When dicussing market declines, Buffett use the word "moderate" to describe the market decline in 1957 because the decrease of corporate earning power was worse.
Buffett identify market price, corporate earning power and intransic value as specifically three seperate concept.

I assume that "corporate earning power" refers to the earning power of the company for the next few years. "Intransic" value refers to a longer period, say 30 years.

Does the Buffett position "work-out" stocks before or after corporate action announcement ?

1958 Letter

1958 year, In Mr Buffett's view, is a year with huge number of amateurs entering into the market, pushing up the general market level. The public enthusiasm on stock market will eventually cause trouble, affecting even undervalued stocks. Commonwealth Trust Co. of Union City is the stock our partnerships has large stakes on, we hope its price to remain stable or even decline, so we can purchase more shares for a reasonable price. This would hold back our overall portfolio performance.

Buffett stated that the performance of thier portolio, due to their strategy, would be better in a bear market than in a bull market. He is well statisfied to match the advance of the general market in a bull year.

The partnership has large stake in the Commonwealth Trust Co. of Union City, New Jersey. For reasons including not paying dividends and etcs, the market price for the Comonwealth's stock is $50, while the intransic value of the company is $125 under Buffett's estimation.

The acquiring period of undervalued stock (here Commonwealth Trust Co. of Union City, New Jersey) can be as long as a year. Buffett was building up a position with great patient, buy in shares in good price multiple times.
Buffett chose not to do block trade because of the mangitude of his target position is high, over 10% of target floating shares. Block trade will push up market price for the target stock, which hurt investment return.

1959 Letter

To the extent possible, invest in situations at least partially insulated from the behavior of the general market. This policy should lead to superior results in bear markets and average performance in bull markets. (In modern sense, a low beta, high potential alpha policy. By this policy, an investor can minimize the adverse influence of the general market which he cannot control, therefore the uncertainty of the investment is minimized.)

1977 Letter

  1. Capital Gain
    It is improper to include capital gains and losses when evaluating the performance of a company for a single year, they are an important component of the longer term record.

Buffet admits that

2018年11月随笔

  1. Share-based compensation (options, etc)
    不消耗公司资金,但增加了流通股数量,降低公司EPS, 同时增大了股票下行压力(被奖励人套现)

  2. FCF (Free Cash Flow) Formula
    FCF = (Sales - OPEXP - DEPEXP)(1-tao) + DEPEXP - Delta WC - CAPEXP

  3. 宏观经济的研究框架
    以利率为出发点,通过把握整体信贷环境、银根的松紧程度、宏观信用和债务风险来评估当前所处的债务周期阶段;进一步引申出制造业和第三产业的投资以及扩张意愿。
    制造业和第三产业的投资及扩张意愿会直接影响中产收入增长和消费意愿,从而引导下游终端企业的生产和投资计划,形成闭环。

  4. Marketable Securities: Intransic Value v.s. Market Price
    The intransic value of a stock often reveals when negotiated at a merger or acquisition.

  5. Buffet's long-term value investing is under the assumption that excellent business results by corporations will translate over the long term into correspondingly excellent market value and dividend results for owners, minority as well as majority. This assumption is very unlikely to be true for most public companies in China.

  6. Price Volatility can be represented by Coefficient of Variance, which avoids the maginitude effect when using std/variance as measurement. Price Volatility can be compared over an aggregated long-term period, or over the average of the separate daily cov result.

Moreover, the price volatility is shown by observing the daily percentage change of the quote.

Std/Variance or cov is designed to measure a statistical population which may or may not observed from a single entity. When the research objective is a single entity with periodically continueous value (hourly, daily, etc), percentage change is a more understandable measurement.

  1. Non-voting shares as the certificate of beneficial interest
    As opposed to controlling interest.

  2. 价值观和评价体系与客观物质环境紧密相关,中西方的贫富差异决定了国内更注重金钱等物质财富的创造和积累,而西方注重文化、体育等非物质财富的创造。在这种背景下,中西方社会群体对个体行为选择的评价方式也产生了极大差异

  3. 赚钱的几种方式:
    跪着赚钱、躺着赚钱、站着赚钱

  4. Bargin Purchase

A typical bargin purchase targets a company for which the future appears neither distinctly promising nor distinctly unpromising. Uncertainty can be avoid by making decisions other than the future growth of the company. In addition, a good bargin purchase only considers company which is unlikely to have a substantialy decline in earning power. Combing the two previous criteria with a bargin price under conservative evaluation of the intranic value, a margin of safty can be established in the investment.

  1. Earning Power
    Earning Power of the Company = EBIT (Earnings excluding interest and taxes)
    Earning Power of common shares = Net Income

  2. G20 Observation

President Xi seems to be short in personal connections with other world learders. One evidence will be the lack of casual conversations while wating for the class photo taking.