Source: Barron Weekly

Investors all hope to find the law of investment. Xiao Zhigang, a former stock investment director of Tianhong Fund, tries to deconstruct stock investment from the four dimensions of "fate", "potential", "ability" and "luck". Find the comprehensive influence of factors such as valuation, supply and demand and Mr. Market on stock price. This article is selected from the second chapter of this book.

For the first time, the words "fate", "potential", "ability" and "luck" are used for fortune telling. Fortune telling is actually predicting the future, which is the same thing as predicting the future in time arbitrage. This is the interesting place to invest, and it is also the place that many people think is very mysterious. There is a gradual decrease in certainty in the four dimensions of "fate", "potential", "energy" and "transportation".

For a person, "fate" refers to internal and objective factors, which usually cannot be changed, such as gender, height, IQ, appearance and so on. For example, Jamaicans are born to run fast, that is, God appreciates food. Some people are born smart, whether born in war or business society, life will not be bad.

"potential" refers to external and objective factors, which can only be accepted and cannot be changed as an individual. For example, if a scholar encounters a period of war, he will not have a chance to take the exam. The resumption of the college entrance examination and reform and opening up in 1978, the "sea tide" after Deng Xiaoping's talk in the south in 1992, and the Internet wave that began in the 1990s are all opportunities that cannot be changed but can be seized for individuals. that's what it means to take advantage of the situation and adapt to the trend.

"fate" is an internal objective factor, "potential" is an external objective factor, and both are objective factors, which individuals usually can only accept but cannot change. Corresponding to these two objective factors is the "energy" that reflects the subjective factors of the individual. For individuals, all the factors that can be done subjectively are included in "energy", which is generally called subjective initiative. For example, many people are smart from an internal and objective point of view, and in terms of external environment, all kinds of examinations are relatively fair. Some people have been admitted to good universities because of diligence, while others have failed because of fun. The difference is reflected in the dimension of subjective initiative.

The opportunities brought about by the Internet wave over the past 20 years are the same for many people, with some entrepreneurs seizing them and others ignoring them. The opportunities brought by electric cars are the same for car companies. BYD, Geely, Great Wall and other companies have tried to seize them, while more companies have given up.

The last dimension is "luck", or luck, which represents a kind of chance. "fate" and "potential" are objective, "energy" is subjective, and all three are inevitable. Coupled with the accidental "luck", it constitutes a complete explanation and prediction system, which can be used to explain and predict a person's past and future, and can also be used to explain and predict an enterprise's past and future.

If for individuals, "fate" refers to the inherent characteristics such as gender, height, IQ, appearance and so on, then the "fate" of an enterprise is a business model. If we want to explain clearly the business model of an enterprise and its importance under the framework of "fate", "potential", "ability" and "luck", we need to make a clear distinction between "fate" and the other three. In the study of enterprises, some investors say that to invest in enterprises is to invest in people, and it is worth investing in good entrepreneurs. There is no sunset enterprise but sunset industry. Some investors say that choice is more important than effort, and that a good track trumps everything, such as the Internet, new energy and so on. The policy dividends and policy risks encountered by education and real estate all show that a grain of dust of the times is a mountain of enterprises, and the efforts of enterprises in front of the general trend are negligible. Since most of the management of the enterprise is relatively stable, not only the team is stable, but also the team ability is relatively stable, it is unlikely that there will be a sudden change in management ability, which will lead to significant changes in performance, so, investors focus most of their forecasts on the dimension of "potential", such as predicting industry prosperity, regulatory policies, technological changes and so on.

For example, after the popularity of iPhone, investors often think of who to look for to supply Apple Inc, and then choose Lixun Precision. This is typical in the "potential" dimension of research, in fact, iPhone contains greater opportunities, the achievement of some new and dynamic business models, such as Wechat. After Wechat is popular, investors will look for enterprises that benefit from the ecology of Wechat from the dimension of "potential". If you look at the "fate" dimension, you may find that Wechat has achieved more new business models, such as Pinduoduo, and then there is extreme Rabbit Express.

From iPhone to Wechat, from Wechat to Pinduoduo, and then from Pinduoduo to extreme Rabbit Express, this is a typical research enterprise from the "fate" dimension, while from iPhone to Lixun Precision is a typical research enterprise from the "potential" dimension.

The correct research order in stock research should be carried out in the order of "fate", "potential", "energy" and "transportation". Just because for most enterprises, their business model is basically unchanged, and the external environment is unpredictable, investors often forget that they should pay attention to the business model first. Just like for many people, the inherent objective factors such as gender, height, IQ and appearance cannot be changed at all. At best, they can only think from the dimension of "potential" that choice is more important than effort. For example, SUNING's business model had a strong vitality before 2010, and then its business model was gradually weakened by the Internet. No matter how good the team is, it is useless. The impact of the Internet on offline retail is not only the dimension of "potential", but also to the reconstruction of the business model, think of those disappeared air tickets, train ticket sales outlets, we can better understand.

Understanding the logic of these four dimensions will help us to explain the success and failure of enterprises more objectively. For example, Gree Electric Appliance's past success, regardless of the stability of the manufacturing business model, is it the general trend of real estate or the excellence of the management? Obviously, first of all, the former is more important. Do not attribute Gree's success only to the excellence of management, so as to superstition that this excellence can make up for the loss of real estate.

Admittedly, entrepreneurs such as Wang Shi, Dong Mingzhu and Jack Ma are excellent, but the success of the corresponding enterprises is first of all because of the good business model, followed by China's good economic situation in the past 20 years, and thirdly, the excellent management. Finally, they also have a bit of luck. If Wang Shi leads only a construction company that works as a coolie for developers, Dong Mingzhu only manages a home appliance parts company, and Jack Ma only founded a delivery company, no matter how capable they are, they can't be as successful as they are today.

Therefore, when we summarize the success or failure of the enterprise and predict the future of the enterprise, we must not put the cart before the horse. In the logic of "fate", "potential", "ability" and "luck", we should not overestimate the low-dimensional factors and do not underestimate the high-dimensional factors. The so-called era without Jack Ma, only the era of Jack Ma, refers to this truth. For individuals, because everyone's internal objective "fate" has long been doomed, it is very difficult for most people to make efforts from the dimension of "fate", but only in the dimension of "potential", "ability" and "luck". Therefore, it is often heard that "choice is more important than effort", which reflects that "potential" is in a higher dimension than "ability". The dimension of "luck" is often interpreted as looking for dignitaries. Of course, if there is an opportunity to change "life", everyone will attach importance to it, and the characteristic reflected in the business level is exorbitant profits. For example, it is often said that those who sell brain tonic to children, beauty to women, and longevity to the elderly belong to the simple and brutal business of changing their lives.

From the logic of life, potential, energy and transportation, a good investment should be based on the business model, choose the best business model, and then choose enterprises with excellent management to invest in the stage of the trend for the better. People like iPhone, Wechat and Pinduoduo are brand-new business models. We all know the importance of business models. But for most enterprises, the business model is stable, is it necessary to start from the business model? To put it simply, the business model determines what kind of money the enterprise earns. There are many dimensional differences in the business model between traditional industries and enterprises.

For example, in the whole real estate chain, developers are the masters of profit distribution, while builders, building materials manufacturers, decoration companies, design institutes and other units are dominated. When the general trend is good, those who are dominated drink some soup and leave the meat to the developers. If the general situation is not good, those who are dominated will become those who are defaulted, and there will be no soup. Another typical is Apple Inc Company and its suppliers, the distribution of benefits has the typical characteristics of priority and inferior. When mobile phone sales are good, suppliers give priority to making some hard money, leaving most of it to Apple Inc. When the sales of mobile phones were not good, Apple Inc became a priority, first ensuring Apple Inc's profits, and the suppliers became losers. Therefore, there will be good mobile phone sales, and the supplier's share price can not rise more than Apple Inc's. Once the mobile phone sales get worse, the supplier's stock price will fall much faster than Apple Inc's, becoming a typical stock with beta but no alpha.

In recent years, A-share popular value stocks, white horse stock investment, most of the long-term good companies, in fact, in the business model, most are the masters of profit distribution, such as Yili shares, Haitian flavor industry, Hengrui medicine, Haikang Weiwei, Vanke and so on. There are not many long-term bull stocks in the companies dominated by them. Excellent enterprises such as Oriental Yuhong and Lixun Precision, which are dominated by the model, have much higher requirements for the ability of management than those in front of them. Only Tan Xuguang, a great hero of the heavy truck industry, managed to change Weichai from a wholly owned subsidiary of Sinotruk into the controlling shareholder of Sinotruk, and the engine manufacturer became the dominant and the whole vehicle factory became the distributor. Because the automobile industry has always been the whole car factory as the master of profit distribution, there are basically no big bull stocks in A-share auto parts companies and auto distribution companies. Under this mode, if there is a "change of fate" from being dominated to being dominant, it must be an opportunity to be cherished, such as the Ningde era, Hengli hydraulic, Fuyao Glass Industry Group and so on.

In different stages of the enterprise, the importance of "life", "potential", "ability" and "transportation" is also different, or in different stages of the enterprise life cycle, the leading factors will change. In the early start-up stage, the main contradiction is "life", that is, exploring business models and striving to form a stable profit model is the top priority of start-ups, as for management, performance, KPI, etc., but it is really fatal if the business model is not found.

After the enterprise has solved the problem of survival, it is necessary to consider the problem of development. At this time, it is necessary to strive to seize all the opportunities that can be seized, that is, to ride the wind and waves as much as possible, so that it is possible to grow rapidly. When the enterprise is strong enough, such as IPO, or even become the mainstream of the industry, management, performance, cost control, corporate culture and other fine management has become the main contradiction. Because most of the money that can be earned by the external market is earned by the enterprise, then we need to get benefits from the internal market.

It is understandable that the primary market investors pay more attention to the business model, while the secondary market investors pay more attention to corporate governance and management team. In other words, enterprises at different stages transmit different messages to the outside world. For example, when communicating with startups, the entrepreneur should not talk much about cost control, KPI and other issues, because his energy is mainly on the construction of the business model, management issues do not have the energy to think about. And large listed companies, the management has reached the level of refinement, they will not talk about the business model, because the business model has long been stereotyped. For example, Shanghai Airport, Changjiang Electric Power, Gree Electric Appliances, Yili shares, Vanke and so on.

It should be noted here that although the business models of most listed companies have been stereotyped, they don't really just need to look at management. It is still necessary to study enterprises from the business model. Because the wheel of the times rolls forward, the business model is not constant for thousands of years, start-ups come forward one after another, and winners rise on the basis of subverting their predecessors, which is destructive innovation. For example, e-commerce destroys the retail business model such as SUNING, Wechat destroys the telecom operator model, and iPhone destroys the business model of mobile phones, digital cameras, radios, navigation, watches, calculators, audio recorders, MP3 and so on. Opportunities and risks are conceived in these destructive innovations.

Finally, the economic policy that people pay more attention to when investing, including monetary policy and fiscal policy. Both at the media level and at the research level, monetary policy is talked about more frequently than fiscal policy. From the perspective of "fate" and "potential", monetary policy mainly affects "potential", while fiscal policy is more likely to affect or even change the "fate" of enterprises, that is, business model.

For example, financial subsidies allow the business model of new energy vehicles to be established, and tariff adjustments will change the business model of the duty-free industry. There is also a need to pay special attention to the retention or abolition of export tax rebates in the future, which will affect the business models of more enterprises. Fiscal policy has little impact, but it has a far-reaching impact.

By contrast, monetary policy is widespread and its impact is a bit like sprinkling pepper. Therefore, from the perspective of investment, our attention to fiscal policy and monetary policy needs to be treated differently. Considering that investors pay too much attention to monetary policy, it is suggested that investors should pay more attention to fiscal policy.

Edit / Viola