Why are there no more than 300 stocks worth studying?

The previous article, "understanding the channels, you can understand the investment in the consumer goods industry", analyzed Wuliangye and Yanghe, and thought that Yanghe's marketing ability and channel management ability far exceeded Wuliangye. Later, a reader asked me:

"then why is Yanghe so weak this year? "

This is actually a typical trading question, and the answer is not difficult: we should look at the fundamentals from a developmental and dialectical perspective.It is precisely because the gap between Wuliangye's marketing management ability and Yanghe is too big, as long as there is a slight improvement in this aspect, the effect of performance growth will be very obvious, and Yanghe has little room to get benefits from management.

This rise and decline is precisely this year, Wuliangye performance and stock price performance is far stronger than Yanghe important reason.

However, from this question, I have come up with a very important idea of stock selection. When you understand an industry or a fine molecular industry, should you choose Longda, Longer, or the latter company?

During the economic downturn, there is often an increase in industry concentration, you can choose either dragon or dragon two, if the ranking is relatively close, but also consider dragon three.As a result, the number of A-share companies you can actually consider has shrunk to 500.

In addition, due to the poor competition in many subdivided industries, or the technical route changes too fast, long Da long er long San can not buy, and then narrow the scope, there are no more than 300 worthy of study.

Is an industry worth studying in the end? Does it really matter whether long Da, long er or the pursuer? This involves an important criterion in stock selection-competition pattern.

The two extremes of the competitive pattern

First of all, please make a judgment: there are two sub-industries of alcohol. The whole market size of industry A has been declining every year since 2015, and industry B has been growing steadily by more than 5% a year. Which industry is more worth investing in?

At first glance, it must be a steady growth of industry B, but in fact, the decline of industry An is liquor, after 2015, the birthplace of Daniel stocks, industry B is yellow rice wine, most stocks basically bear for three years.

This is because the two sub-industries have completely different competitive patterns.

The word "competitive landscape", if it is in business school, may take a month, but from an investor's point of view, it is relatively simple:Is it possible for enterprises in this industry to make short-term actions that damage the company's profits because of the need of competition, including vicious price cuts, excessive technological upgrading, and so on?

When we say that the competition pattern of liquor is good, we mainly refer to three points:

First, the tip of the needle is of little significance to the Mai Meng competition.There is a big deviation in consumer taste. Maotai with Maotai flavor and Wuliangye with Luzhou-flavor flavor have their own preferences, and they will not change to another one just because the price has gone up. Both belong to Luzhou-flavor Yanghe, and they go to focus on "soft taste" to win over consumers in East China.

As a result, leading enterprises are easy to produce the taste of "I don't argue with anyone, and I disdain no one to argue with anyone."

Second, the result of competition is the increase of concentration.: a good competition pattern does not mean that there is no competition. After all, the overall growth rate is negative, and the competition of the whole industry is actually very cruel. Mao Wu Luyang eroded the local special qu market share step by step, and Lao Bai Gan killed the local light bottle wine. New competitors also failed one after another-Wa, which had such a strong channel before, failed.

This is like a group fight, other industries are dragon big, dragon two and dragon three, but liquor is just a few big ones, tacitly cleaning up the old, weak and disabled soldiers one by one.

Third, there will be no "self-handicapping competition" among leading enterprises.There is also competition between liquor leaders, but the method is more civilized. First, it depends on whose brand is strong and who can successfully raise prices. A few years ago, Wuliangye had too many miscellaneous brands, which affected the brand, and the dealers ran out of goods seriously, so price increases often failed. This year, sub-brands were cleared, dealers' control was strengthened, and downstream supplies were soon in short supply, so prices were raised smoothly.

Second, depending on the ability of the product layout, Yanghe raised its high-end prices too sharply last year, resulting in a price belt vacuum of more than 300 yuan in the Jiangsu market, and was seized by the opportunity of this world. so this year, Yanghe has strengthened brand publicity and marketing support in the double ditch of this price belt, rather than fighting a price war like other industries.

By contrast, yellow rice wine is a typical industry with poor competition:

First, the leader Guyue Longshan, no matter in terms of price belt, brand image, cost structure or scale, is no different from long er long San, and it is easy to lose market share when raising prices.

Second, the bibcock is not strong, relative to the dragon tail is not weak, due to the growth rate of the entire industry, it will cause "no one can live well, no one can die" dilemma, resulting in market-oriented mergers and acquisitions is very difficult.

For an industry with a good competition pattern, Dragon, Dragon, Dragon and Dragon three must be differentiated competition and can be bought in the long term, while Longda cannot buy an industry with a poor competition pattern. Even if it is optimistic about this market, it must wait patiently for the competition pattern to improve before it can get involved.

Of course, liquor and yellow rice wine are the two extremes of the "competition pattern", and most industries are between them. At this time, there is a certain difference between Dragon Dragon, Dragon Dragon and Dragon three.

Under what circumstances should I buy Longda?

First of all, it is necessary to define "Longda" and "Longer", which are generally calculated according to market share. Longda's scale must be larger than that of Longer.

Starting from this premise, we can solve the problem of buying Dragon University or Dragon II.The answer is why the scale of this dragon is relatively large. Can this scale be translated into faster growth? Can it retain this advantage of scale?

The first example is the slaughtering and meat processing industries.

The upstream of this industry is aquaculture, and in a typical periodic industry, prices go up and down, leading to great changes in costs downstream. Only brand companies can pass on price increases to consumers, so downstream brands, including Shuanghui, Yurun, Merlin and New Hope, are not weak, and the difference lies in the breadth of channels.

Among these, Yurun mainly sells East China, New Hope sells Southwest, Meilin layout Shanghai, Longda Meat is North China, only Shuanghui is the national layout.

This is the most common reason for the large scale of leading enterprises in the consumer goods industry-the national layout of sales channels.

But this does not mean that the competition pattern is good, because Dragon two and Dragon three may also compete through channel sinking or cross-provincial expansion, or price war is inevitable.

However, there is also a key link in breeding and meat processing-slaughtering. the competitive means of Shuanghui is to minimize the profits of the slaughtering link.

In the past, pigs in this industry were all transported to a certain place for centralized slaughtering after a long distance, but after African classical swine fever, the countries banned transporting pigs across provinces and had to be slaughtered nearby. in this way, they have to be close to consumers, and only Shuanghui, which is distributed throughout the country through the sales channel, can ensure sufficient slaughtering capacity.

Through the bottleneck of the slaughtering link of the industrial chain, Shuanghui broadens the moat and turns its scale into a competitive barrier.

Another typical example is the dairy market, where Mengniu Yili, which chooses the national layout of room temperature milk, completely crushed Shanghai Guangming and Beijing Sanyuan, which need cold chain support, after 2010.

Guangming launched an explosive Moslian in 2012, and many people think that Guangming is about to turn around, but room temperature yogurt is a very suitable product for the national layout. Yili, with stronger channel capacity, did not give Guangming this once-in-a-lifetime opportunity, immediately launched Amushi, sales came from behind, Guangming fell into long-term mediocrity after a short growth in performance.

In a consumer goods industry suitable for the national layout, once there is a competitive pattern of "national companies" beating "regional companies", at least a few years ago, the latter is completely untouchable, no matter how good its products are.

In the consumer goods industry, the more homogeneous goods, dairy products, meat products, paper towels, and so on, the more dependent on the channel of goods and strong exposure. Longda's scale advantage, if caused by channel advantages, is often difficult to change in a few years. Longda is a better choice.

At this time, Longda's valuation is often much higher than long er, but this high is reasonable, precisely because the market believes that the excess cash flow brought by the advantage can be maintained for at least five years.

So is it impossible to choose Dragon II? Of course not. Longda was chosen because it can maintain the advantage of scale, soThere are two directions for choosing Dragon II.：

First, make use of the differential competition of products to surpass Longda in scale

Second, although it can not break Longda's scale advantage, it surpasses Longda in terms of profitability.