The pursuit of certainty, everything is not credulous

The most important feature of novice investors is "believe what you hear".

Analysts said that the gap between supply and demand led to a high economy, and short-term product prices are expected to remain high-- good, buy, buy.

According to the financial reports of listed companies, the lower-than-expected profits this quarter are due to the strengthening of the sales network and increased investment, coupled with the large expenditure on research and development, which is expected to enhance the competitiveness of products-- well, of course, choose to forgive him and increase the position.

Big V said that the market competition has slowed down, the inflection point is approaching, and the pre-dawn darkness cannot be deceived by the main force-- good, good, friends of time, and bet on all the last positions.

Only when you have suffered a few great losses can you understand the hardship of the world.In the end, the beautiful vision of most companies can not be fully realized. Only a handful of companies that never let people down have the most valuable thing in investment-certainty.

It is precisely because it hardly surprises investors that Haitian Flavor and Ayre Ophthalmology have such high valuations, while Longji shares and Guizhou Moutai's quarterly results are disappointing and will not be abandoned by investors.

Think about the past, the young do not know the "certainty" is good, mistakenly regard the "high growth rate" as a treasure, think that the high certainty of the company, the growth rate is not sexy, the valuation is expensive, it is difficult to make a lot of money.

But deterministic investment earns "money for performance growth".

Companies with high certainty will hold for a long time, and even if they are overvalued by 30% and hold shares for more than five years, it is not a big deal to level them out. For those companies with general certainty, it would be nice to hold them for a year, and the impact of high valuations on earnings is fatal.

Only by understanding the beauty of certainty in investment can investors enter a period of maturity and find business logic that is difficult to change in all kinds of data, including industry space, competition pattern, business model, and so on. I have written about how to judge the certainty of an enterprise.

When the pursuit of certainty is firmly imprinted on the subconscious of investors, the biggest change for investors is that they don't believe in anything.

How can this company have such a high gross profit margin? how can it maintain it?

Rapid expansion of channels? Is it possible that before the profit comes out, it will be dragged to death by the cost? And can the management ability keep up?

Double production capacity? Is there so much demand for the future?

The product is in short supply and the price rises again and again. Is the product in the hands of consumers? Or are they all hoarded by dealers?

With such picky, you can only buy well-known white horses, these companies fluctuate in high positions most of the time, and sometimes there is a valuation bubble because of the "certainty preference" of the market. unless you boldly increase your position in the case of systemic risk, it's hard to make excess returns.

So, even if you understand the importance of certainty in investment,After pursuing certainty for a period of time, most investors can't help but try a more challenging investment method-poor expectations.

Our view, which is different from that of the market, is that...

There is a saying: investment is the realization of cognitive ability. Then how to cash it? Judging certainty is one way of thinking, while finding the difference in expectation is another way of thinking.

Everyone has his own view, the general view of the market, the result is the formation of the stock price, the change of opinion leads to the fluctuation of the stock price. The difference in expectation is to look for places where you are smarter and more accurate than the general perception of the market, and to see what most people can't see, then you have the opportunity to buy before the stock price goes up and sell before it goes down.

Therefore, there is a page in many research newspapers: "the general concern in the market is …"... "," and our view, which is different from that of the market, is that. "

This part is about poor expectations. Money with poor expectations is hard to make because you need to know what the market thinks of the company and have your own different views. By contrast, to make certain money, you only need to study the company and do not need to care about the market.

After December last year, the stock price of the Ningde era fell into a high shock for half a year because of the problem of market capitalization space. Some securities firms pointed out in the research report:

Worried that the high growth rate brought about by the future market demand and the company's production capacity will not be sustainable and cannot absorb the current high valuation, we believe that the future market space for energy storage batteries and the company's leading advantage will be enough to keep the high growth rate for a longer period of time. Find room for market capitalization.

This is a typical expectation gap, and the two increases in June and October this year have a lot to do with the fact that the logic of energy storage batteries has been accepted by more people in the market.

The difference in expectation can be divided into three categories.One is poor performance expectations, the other is poor valuation expectations, and the third is poor expectations of industrial trends.

How was the dark horse born?

Let's take a look at the first of the most common: poor performance expectations.

Researchers who study a company, no matter how amazing the big logic, will eventually produce a profit model that includes at least two things:

1. Forecast the operating income in the next few years according to the downstream demand, price, production capacity and capacity utilization of each business.

2. Forecast the profit in the next few years according to the empirical values such as cost, gross profit margin, expense rate and so on.

Many securities information software form market consistent expectations based on the average forecast of many institutions, which directly affects the stock price.

If you have your own research on the fundamentals of the company, research the downstream demand, consult a professional (or you are a professional) about the company's technology, capacity, and so on, and end up with a performance that is higher than the consistent forecast, it forms an expectation gap based on performance.

The picture below is the consistent forecast of the Ningde era. Since the third quarter of last year, securities firms have continuously raised their performance forecasts, especially the 2022 performance forecast, by 122% in one year, while the share price of the Ningde era has risen by almost 150% during this period. So it looks like the money is up, but in fact, almost all of them are "poor performance expectations". If you start last year and always give a higher forecast for 2022, you can make this money.

It can be said to be the most reliable investment method to accurately predict performance, but it is also very difficult.Take a simpler revenue forecast as an example, you need to understand the company's plans for capacity expansion in the next few years, and you need to predict capacity utilization, which requires you to have a comprehensive understanding of the company's capabilities; you need to predict market demand and price changes, which requires you to have an insight into the competitive landscape of the industry.

In particular, the white horse with high market attention is watched by senior researchers (or even the chief) in the industry, have a personal relationship with senior executives, and even Dong Mi is a former colleague, it is hard to say that you are more accurate than them.

Therefore, it is easy to see poor performance expectations, which are usually the third-tier dark horse companies that institutions cannot cover.

For example, St shares cannot be bought by large public offerings, and research institutions are not enthusiastic. once the fundamentals change, the investors who are the first to discover will be able to make poor expected money.For example, the former ST, ST Jiangte and ST Fushi are all Daniel stocks this year.

The other is the small companies in the large industry trend, once there is a product or business breakthrough, the performance is prone to poor expectations.

For example, most of this year's N-fold Niu shares, Hubei Yihua (Lithium Iron Phosphate), PVDF, VC, BIPV, Shi Da Shenghua (battery solvent), and so on, all have the same characteristics:

1. The expected performance of these companies has skyrocketed as a result of marginal changes in the new energy industry.

2. Because the past performance is too poor or the industry is not sexy, the large research institutions have not been covered for many years and the response is insufficient.

3. It was first explored by some long-term followers in this field, Big V.

4. The difference in expectation attracted the attention of private equity or hot money buyer researchers or fund managers, resulting in the first wave of stock price rise. after the rise, it triggered the coverage and recommendation of many research institutions, and then triggered the second wave of rise, before and after the performance was cashed. and triggered a third wave of rise.

A brief summary:The performance expectation of the big white horse is poor, the opportunity is few, and the demand for investors is very high; the performance expectation of the dark horse is very obvious, but it needs to predict the industrial trend and is very familiar with the products of the unknown third-tier companies in the industry.

Poor performance expectations are not easy to find, but the accuracy is high, while another kind of "poor valuation expectations" is on the contrary, easy to find, but low accuracy.

Poor valuation expectation

The second type of expectation gap is "poor valuation expectations", in which you think the market misunderstands the company's business model, competitive landscape or industry space, resulting in stock prices being undervalued or overvalued.

"poor valuation expectations" is the easiest expectation gap for investors to find. Every now and then I have been told that real estate is undervalued (no one has said it recently), the big four banks are undervalued, and Chinese construction is undervalued. In fact, this is a misunderstanding of "poor valuation expectations".

In a company, there are always some people who are optimistic and some people are not. The stock price is the neutral reflection of the market view. Unless you happen to be neutral, you either feel overvalued or undervalued. This kind of "poor valuation expectation" is actually just a position, not an original opinion.

The real "valuation expectation gap" is the valuation logic that can be accepted by most investors but has not yet been accepted, and it usually does not take too long-too long is falsified.

For example, in my official account article in March last year, "Why is Maotai only regarded as a high-end consumer goods, the market capitalization is greatly undervalued?" The logic that Maotai should be priced at 40-45 times the valuation of 'luxury goods' was not reflected in the stock price at the time, but two months later, it did. The sharp fall this year just fell to the valuation in June last year, indicating that the market has recognized the valuation range of Maotai's "luxury goods".

Some investors think that a certain vote is undervalued and eventually goes up, but it is really just an industrial trend, or an improvement in performance, rather than a change in valuation logic. This kind of profit belongs to sowing beans and reaping melons, which is accidental and cannot form a stable investment system.

The difference between expectations is better than certainty in that it can be quantified, whether it is performance or valuation, unlike certainty, which is always so mysterious.

But the expectation gap also has a fatal flaw. It is the enemy of time-even if your expectation gap is correct, if it is not fulfilled for a long time, it will not exist once the company itself has changed.

This is because the operation of most companies is itself an uncertain black hole, full of hidden bad debts, complex social relations and the private desires of management.In order to avoid these uncertainties, many investors begin to pursue the third expectation gap-the poor expectation of industrial trends.

Poor expectations of industrial trends

The first two kinds of expectation gap are bottom-up research, and the third kind of expectation gap is the top-down study of the industry, usually when an industrial trend is just rising, or when you encounter setbacks, your judgment of the future scale and time is different from the mainstream view of the market.

This kind of industry trend investment is not generally seen as poor expectations, but it is very similar to "poor expectations": you earn money that you perceive to outperform the market.It is just that it pays more attention to the judgment of meso-industry and needs to grasp the structural changes of macro policy at the same time.

For example, the trend of lithium battery has just started in the second half of 2019, the Ningde era is still around 80 yuan, and then the stock price has risen all the way, while the performance has been negative for a whole year until the third quarter of 2020, when there are always voices of skepticism in the market. stock price valuation is always one step before most people recognize it, and many people lose the opportunity to get on the bus in hesitation.

In addition, Xingquan Fund, which increased its positions against the market in the new photovoltaic deal in 2018, is expected to be poor in the industry trend.

The expectation difference of this industry trend is very different from the first two, and returns to the deterministic investment system to a certain extent.

Expectation gap is a kind of investment that "pays attention to both odds and winning rates". It needs to calculate how much the final "difference" is, how big the probability is, and whether it is worth fighting for. It is a kind of quantitative investment.

Certainty is a kind of investment in which the probability of winning is higher than the odds, and it is a kind of qualitative investment.Pay more attention to the deduction of business logic, do not need to calculate the profit very accurately, pay attention to "vague correctness", and pursue the investment realm of "heavy sword and no edge".

The early stage of the industrial trend is certainty, which is based on a judgment:The certainty of macro policy is better than that of industry, and the certainty of industry is better than that of individual stocks.

In order to pursue certainty, the expectation difference of the industrial trend also weakens the judgment of the rationality of the current valuation, which is a betrayal of the quantifiable principle.Just as some people mocked CICC's reasonable valuation of Ningde based on its 2025 performance expectations last year, it was "vaguely correct".

In the end, many investment experts return to "certainty" after the stage of pursuing "poor expectations".

See the mountain or the mountain?

Compare the difference between the investment system based on "certainty" and the investment system based on "expectation gap":

The investment period of the expected difference is relatively short, and the effect is quick.Expectations can be fulfilled in three quarters at most through one or two quarters of results, the market is wrong, you earn, the market is right, you admit the loss is out, so it is oneA kind of investment method with high return but average winning rate and uncertain number of opportunities.On the other hand, the deterministic investment is not in the pursuit of running water, and what it is fighting for is the compound interest brought about by endless and long-term growth.

The difference of expectation has a certain color of game.The argument is "you are wrong and I am right". In the era when investors are becoming more and more professional, the information channels are getting richer and richer, and the investment is becoming more and more teamwork, the opportunities for poor expectations are bound to be less and less, and those opportunities that seem to have poor expectations are basically just your mistakes.

On the other hand, deterministic investment depends on business experience and business insight. Kung Fu is outside poetry, and the line between investment and management is very blurred. On the contrary, there is no need for teamwork and specialization (refers to investment major).

After going through the stage of pursuing "poor expectation", many investment experts return to the investment system of "certainty". They found outThe probability that investors are better than the market is really too small, or they should be based on "certainty" and honestly earn the money that is not bad as expected.Don't always think that Mr. Market is wrong, don't always think about making valuation money, don't always think about making money that exceeds expectations.

Return to certainty, not to defeat the market, but to defeat most eager investors with patience. From "seeing a mountain is a mountain" to "seeing a mountain is not a mountain", returning to "seeing a mountain or a mountain" can also be regarded as a kind of investment "going back to nature".