Ding Feng·guan | Wang Xiaogang: Experience Buffett's 2012 Shareholders' Meeting
The previous Buffett shareholders meeting. Picture from: Network
The annual pilgrimage to Omaha will begin again soon. This Saturday (May 6th), this small city in the Midwestern United States will welcome more than 40,000 financial elites who have come from all over the world to attend the 52nd Berkshire Hathaway General Meeting. Li Linjun, general manager of Dingfeng Assets, Tian Chao, a fund manager, and Wu Qiwei, a researcher, have attended the conference in the United States.
In 2012, Wang Xiaogang, deputy general manager of Ding Feng Assets and fund manager, also went to Buffett’s shareholders meeting in 2012 and reread Buffett in advance, refreshing his understanding of “value investing”. The following is his current investment sentiment, re-released today, to share with you Mr. Wang Xiaogang's understanding of the true values of Buffett's "value investing".
Author: Ding Feng Capital Partners, deputy general manager Wang Xiaogang
At the end of April 2012, a few days before I went to the United States, Bin was always in Shanghai. I was fortunate to have him, Shi Bo, He Zhen, Yan Kun, Zhang Gao, Gao Mingfei, and other excellent private equity managers gather for dinner. Asked them a puzzle that I would like to resolve before going to Omaha: How does the growth stock strategy combine Buffett's value investment? The most important theory that I learned in college is compound interest, plus my own book of securities enlightenment: Peter Lynch's The Rise on Wall Street. Shortly after entering the industry in 1994, I had a simple idea: picking stocks was only high. growing up.
Stock price = earnings per share multiplied by the price-earnings ratio. Assume that the market does not rise or fall (the price-to-earnings ratio remains unchanged), if the earnings per share rise, the stock price should also increase with the same proportion (assuming a share of profit increases by 50% every year, the price-earnings ratio is unchanged, then the stock price can rise 50% each year); if the market falls The price-earnings ratio has decreased but if the earnings per share rises, the stock price may not drop (assuming a 33% decline in the broader market, the stock market's earnings ratio also fell by 1/3, but earnings per share increased by more than 50% year-on-year).
Based on the above understanding, I have always liked high-growth stocks. The higher the growth rate, the better. In practice, I have been the subject of key investments and tracking for stocks that have grown at over 50% in the next three years. However, there is a problem with high-growth stocks: valuations (price-earnings ratio) are generally not cheap. But in the impression, Buffett likes to emphasize the margin of safety and emphasize low risk.
Therefore, the domestic market is generally so divided: growth stocks/value stocks. Growth stocks mean high compound growth and high valuations; value stocks mean that they are growing at a low rate (P/E).
So, I have created the above question: How does growth stock investment combine Buffett's investment philosophy? The result of the discussion with the audience here on this day was:
1. Most of you here like high growth, with a particular emphasis on value stocks;
2. The number of genuine high-grade stocks in the country is also small, mostly pseudo-growth.
Before I went to the United States, I often read about Buffett's books. Among them, Liu Jianwei's "How Buffett Selected Superstar Stocks" answered my confusion. He mentioned that "growth stock investment is Buffett's mainstream investment strategy in the later period."
The core of Graham's value investing is to buy only bargains whose stock price is significantly underestimated relative to their intrinsic value and which has a large margin of safety. As Buffett’s respected teacher, it is generally believed that Buffett’s value investment strategy is “cheap”. At least before I went to the United States, so did I.
But in fact, since 1973, Buffett has slowly abandoned the original method of focusing on cheap goods under the influence of Munger and began to try to invest in good companies for a long time.
In 1989, Buffett recounted his investment career in the past 25 years and said: "Buying an extraordinary company at a normal price is much better than buying a general company at a very good price." It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. Charlie consult this early; I was a slow learner (letter to shareholders 1989)
In 1988, Buffett bought one stock he earned the most money in his lifetime: Coca-Cola. Since then, cumulative purchases of Coca-Cola's shares have reached $1 billion. By 1998, Coca-Cola's stock investment earned Warren Buffett $12 billion.
In 1990, Buffett continued to conclude: "This investment method - looking for superstar stocks - provides us with the only opportunity for real success." (But this investment approach - searching for the superstars - offers us our only chance for real success)
This shows that the gathering of superstar stocks has only made Buffett's success and greatness a success. Compared with the teacher's "smoke-type" strategy, investing in "super-star stocks" is the fundamental reason that Buffett is better than blue.
For superstar stocks, Buffett summarized several features, one of which is an important one: the prospect of sustained earnings growth.
Isn't this what we call growth? Although Warren Buffett is known as the “stock god”, he is one of the most successful investors in the history of stock investment. Unfortunately, the vast majority of investors are as before: I have not studied Buffett's investment in depth and mistakenly interpreted his teacher's investment method as an orthodox value investment. But at the same time, I am very happy that although we have not studied Buffett's books very carefully, investing in high growth is an instinctive choice for most professional investors, including myself, and Buffett’s investment success. Winning success.
The problem is: understanding of growth stocks, judgments about the future, everyone has their own different methods, resulting in the same method, the results are very different.