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the retaliatory rebound is coming. do you still believe in the value at the low point?

under the influence of multiple favorable combinations, a-shares finally experienced a retaliatory surge. especially on september 27, the a-share market set many records. the chinext index rose 10%, the largest single-day increase in history, and the transaction volume of nearly 440 billion yuan also hit a record high. as of the close, the shanghai stock exchange index rose 2.89%, the shenzhen component index rose 6.71%, and the chinext index rose 10%.

history is a mirror, and the story of graham, the "father of value investing," has strong reference significance for the present. the account he managed suffered a staggering loss of 50.5% in 1930, 16% in 1931, 3% in 1932, and the cumulative loss in three years reached 70%. it was not until 1936 that the company's asset portfolio was able to recover its capital.

during these five years, graham failed to make money from the capital market and could not receive a penny of performance income from the company, but he did not lose his belief in value investing.

graham made a comeback in the following years. from 1936 until his retirement in 1956, his graham-newman company's annual return was no less than 14.7%, which was higher than the overall stock market return of 12.2% during the same period—— that performance ranks among wall street's best-ever long-term returns.

trust common sense

even with a loss of more than 70%, graham still maintained the courage not to be defeated by the market. in 1932, he published a series of articles sharply pointing out that the current market was "selling america at half price."

"more than one-third of manufacturing stocks are being sold on the open market at a discount to net assets, and a large number of common shares are being sold at a price below the cash on the company's books." graham said that a large number of stocks are selling at a discount to net assets. sell ​​at a price lower than the value of the company's cash on hand or quick-frozen assets, and it is not even necessary to calculate the value of assets such as factories with less liquidity.

graham didn't give in to market trends in bad down markets. his rational thinking is at work, and he understands that shareholders are actually the owners of the company, not just the owners of the stock code. when the market value of a stock is seriously lower than the intrinsic value of a listed company, the listed company can distribute excess cash to shareholders through dividends, buybacks, special dividends, etc., so that the stock price reflects the company's intrinsic value.

no matter how tyrannical "mr. market" is, graham believes that stock prices will ultimately reflect the company's intrinsic value. in 1955, in response to a question about how the value discovery process works, graham said: "this is a very strange phenomenon in our industry, and it is as mysterious to me as it is to anyone else. we know from our experience that market price will eventually catch up to value, it always happens, one way or another.”

the market may move in any direction, and good investors will not be surprised or panicked by it. "even if they hold high-quality targets, investors should understand that stock prices will fluctuate, so they should not be anxious when prices fall, or overly happy when prices rise. there are no barriers to stock trading, and this can be exploited or ignored. . ” as graham said.

firm character

the great depression of 1929 was not the only bear market graham encountered. from 1973 to 1974, the market value of american industrial companies evaporated by 40%, and the average price of stocks fell by about 70% compared with the peak period.

in september 1974, graham emerged from retirement to address a group of securities analysts, urging them to heed the "regeneration of value" he had discovered. graham said, "investment may not be the exclusive preserve of geniuses. investment requires the following qualities: the first is rationality and wisdom; the second is sound management methods; the third and most important point is perseverance. character.

he said every investor should be financially and psychologically prepared for the possibility of short-term underperformance. “in the stock market decline of 1973-1974, an investor might have suffered a paper loss, but if he had persisted, he would have recovered his losses in 1975-1976 and gained an average of 15% over the five-year period. "return."

after hundreds of thousands of years of development, human genes have a tendency to follow the herd. the "herding effect" can often be seen in the stock market, and people can easily join the ranks of panic or madness. but as the contrarian philosophy believes, you can't achieve excellence unless you do something different than most people do.

excellent investors have their own anchors, do not care about the judgment of others, and do not follow the crowd. this is exactly what graham said, "you are right or wrong, not because everyone agrees with you. you are right because your information and reasoning are correct." most players get away from being group acceptance or pleasure comes from a sense of belonging to a group, whereas a good player derives pleasure from his ability to cope with various situations in the game.

pessimism will always pass

from 1924 to 1949, the stock index rose at an average annual rate of only 1.5%, so by the end of this period the public had no interest in stocks. graham proposed that because things must reverse when things go to extremes, the time is ripe for the largest bull market in history.

graham said that in 1948, more than 90% of investors disapproved of buying common stocks. about half gave the reason that buying stocks was "like gambling and unsafe"; yes, "not familiar with this."

ironically, at a time when the public generally believed that all stock investments were highly speculative and risky, stock prices were actually quite attractive and soon saw their largest gains ever. on the contrary, buying stocks is called "investing" when, based on past experience, stock prices have been pushed to dangerous heights.

the u.s. stock market continued to rise throughout the 1950s, with the overall stock market rising by 325%. when most people held the same optimistic attitude towards the stock market, graham warned that "danger lies ahead." graham was especially concerned about hot companies in hot industries warn that “there’s no such thing as a free lunch.”

“things that are declining now may shine again in the future. those that are favored now may be eclipsed in the future.” graham summed up his research by saying: “it sounds like timing, but when you think about it, you you will find that this is not about timing at all, but about buying and selling stocks through valuation. if the securities you buy are cheap enough, your position will be safe even if the market continues to fall. if you sell the securities at a relatively high price, you will be safe. it's just as smart to do so even if the market continues to rise."

graham believed that true value investors would take advantage of the recurring over-optimism and over-worry among the speculative public to make investment decisions. all a value investor has to do is identify undervalued stocks, buy and hold them until they increase in value to the point where they are overvalued, and then sell them at a profit; if the stock continues to show promise that it will continue to increase in value in the future, then it can remain in the portfolio indefinitely.