Source: Brokerage China Author: Qu Hongyan Recently, China Yangtze Power hit a historical high and once again showed the slow bull stock trend of "tripling in ten years". The slow bull market has left behind many passers-by and brought good returns to the steadfast investors. It is "rare for those who triple in one year to be like carp jumping over the dragon gate, while those who double in three years are few and far between." On the other end of the investment world, however, violent collapses are also deafening, with many financial products suspected of "Ponzi schemes" ceasing payments, leaving investors with no hope of recovering their investments. Both positive and negative cases illustrate the importance of forming a suitable mentality towards money in one's lifetime; otherwise, sooner or later, you will divorce yourself from your money. "I call this the money mind, a person's IQ can reach 120, 140, or even higher levels, and perhaps some people's minds are good at doing one thing, while others are good at doing another. They can do things that most ordinary people can't do. But I know some very smart people who make very foolish decisions because they lack the money mind." Buffett once said so. The so-called money mind refers to believing in common sense, believing in compound interest, being cautious and rational, thinking independently, prioritizing security over return, not dealing with people with questionable character, not easily guaranteeing for others, not believing in windfall profits, and not trying to cross legal norms for extra benefits. In today's world of ubiquitous information, everyone's wealth may become the "prey" of those with ulterior motives. Only with the money mind, can one form good behavior habits and shield oneself from separating from one's wealth. Do not entrust your wealth easily. Wealth is easy to lose but hard to accumulate, and trust is a vital reason leading to the rapid loss of wealth. "Do not allow anyone else to manage your business unless you can watch their every move closely and understand their behavior; or you have strong reasons to believe in their character and ability. For investors, this criterion determines when you can let someone else make investment decisions for you." Graham's criterion written eighty years ago is so clear. Almost all the investors who lost their wealth in the financial products have violated the above two criteria. They did not have the ability to closely supervise the whereabouts of their funds, nor did they have sufficient reasons to believe in the character of the product issuers. They easily invested their own wealth solely based on others' glib tongue and a piece of commitment paper. They did not act as gatekeepers of their own wealth and ended up with nothing left even if the government punished the wrongdoers. "An ounce of prevention is worth a pound of cure." This is a phrase Munger often says. Destiny must be in one's own hands, and investors with a suitable money mind will try their best to find suspicious points in their investments to protect the safety of their principal. For example, whether the manager is trustworthy, whether the underlying assets are profitable, whether oneself can timely monitor the risks in the investment process, and whether the sales staff is obtaining large commissions. As long as any unreliable signs are found, these investors firmly will not invest their money. Do not desire to get rich quick. As in the capital market and anywhere else, making money is not easy, and desiring to get rich quick will lead to quick loss of wealth. In the capital market, the desire to get rich quickly often leads to investors over-allocating specific stocks, industries, or assets at the worst time. For example, buying high-risk stocks that can gain huge returns once an adventure succeeds, but the chance of success is very small, also known as "whispering stocks" by legendary fund manager Peter Lynch. "They often tell investors a story with explosive effects. These 'whispering stocks' have a hypnotic effect on people, and it is easy for you to believe that the story the company tells has an emotional appeal that can easily confuse you." This is like hearing a very tempting "sizzling" sound, making you salivate, but you did not notice that there is no steak on the grill. In the eyes of investors who lack the money mind, stable yield provided by blue chips such as China Yangtze Power cannot meet their demands. However, historical experience clearly shows that buying stocks lacking in safety solely based on imagined high yields is unwise. The long-term average investment return of general stocks is 9%-10%, which is also the average investment return of stock indexes in history, a benchmark to measure one's investment performance and the benchmark to measure fund investment performance.
Author: Shi Qian. Will this be the arrival of the "real wolf"? The consumption tax rumors suddenly spread in various investment groups yesterday after the close of trading. There are reports that a trillion-level consumption tax reform will be approaching, and luxury goods and high-end services may be the first to test. As of the close of trading this morning, consumer stocks suddenly rebounded collectively, and retail and duty-free areas led the rise. Among them,
Things have changed quite quickly!
Today, the stocks starting with the middle letter in the stock name have experienced a widespread decline in the market. $CHINA COMM CONS (01800.HK)$ Falling more than 7%. $CHINA RAIL CONS (01186.HK)$Please use your Futubull account to access the feature.$COMEC (00317.HK)$ All experienced a sharp drop of more than 6%. $CHINA RAILWAY (00390.HK)$Please use your Futubull account to access the feature.$MCC (01618.HK)$Please use your Futubull account to access the feature.$CHALIECO (02068.HK)$Please use your Futubull account to access the feature.$CHINA CRSC (03969.HK)$ Waiting for the full-line sell-off.
From a graphical perspective, these stocks beginning with the middle letter performed relatively well in the first half of last week, mostly in an upward channel compared to small-cap stocks. However, starting from the second half of last week, most of them have entered a selling mode.
So what exactly happened? Obviously, they were affected by the mid-year report. However, looking at the 2024 mid-year performance, although the profit levels of these stocks have declined, the total net income is not very poor. However, the cash flow that measures the quality of net income has shown a rare decline.
A rare scene
Today's market, due to $ABC (01288.HK)$Please use your Futubull account to access the feature.$SINOPEC CORP (00386.HK)$ The rise in stocks like China Central Head has somewhat masked the plight of large-cap blue-chip stocks. In fact, the performance of large-cap blue-chip stocks today is very bleak. The China Central Head Index fell more than 1.3% at one point, but this is not enough to fully reflect the performance of this type of stock.
Since this morning, the atmosphere has become somewhat off. This morning, some China Central Head stocks have been oscillating lower, $CHINA COMM CONS (01800.HK)$Please use your Futubull account to access the feature.$CHINA RAIL CONS (01186.HK)$ falling over 6%, $COSCO SHIP DEV (02866.HK)$Please use your Futubull account to access the feature.$CGS (06881.HK)$Please use your Futubull account to access the feature.$CRRC (01766.HK)$ As the market continued to decline, the decline of these stocks intensified by the close.
From the news perspective, there is no obvious bearish news. However, the industry itself does have some problems. According to China Galaxy Securities' data, the construction industry's business activity index in July was 51.2%, a decrease of 1.1 percentage points from the previous month; the new order index for the construction industry was 40.1%, a decrease of 4 percentage points from the previous month; input price index for the construction industry was 50.4%, an increase of 0.8 percentage points from the previous month; sales price index for the construction industry was 49.3%, an increase of 0.3 percentage points from the previous month; employment index for the construction industry was 40.2%, a decrease of 2.7 percentage points from the previous month; and the business activity expectations index for the construction industry was 52.9%, a decrease of 1.8 percentage points from the previous month. In July, some regions entered the rainy season, leading to a further decline in the construction industry's business activity.
In addition, there are rumors that today's stock sell-off is related to anticorruption and audits. However, there has been no corresponding official announcement.
Semi-annual report data attracts attention
In fact, what is worth paying attention to is the interim report.
Taking China CSSC as an example, the company's 2024 interim report, which was disclosed recently, showed that during the reporting period, the company achieved operating revenue of 36.017 billion yuan, a year-on-year increase of 17.99%. Among them, the operating revenue of shipbuilding and marine engineering business was 34.446 billion yuan, a year-on-year increase of 22.39%. The net income attributable to shareholders of the listed company was 1.412 billion yuan, a year-on-year increase of 155.31%. The non-recurring net income attributable to shareholders of the listed company was 1.198 billion yuan, turning losses into profits year-on-year.
In theory, this is a pretty good interim report, but the stock price has fallen the most. Analysts believe that although the profitability level is good, there are certain issues with the quality of profitability. The best indicator for measuring the quality of profitability is the net cash flow from operating activities. In 2024, the company's net cash flow from operating activities was -3.814 billion yuan, a decrease of 8.636 billion yuan year-on-year. At the same time, the company's free cash flow in the first half of 2024 was -3.082 billion yuan, compared to 4.03 billion yuan in the same period last year.
Looking at other A-share stocks, the same phenomenon basically exists. According to Wind data, the net cash flow from operating activities in China State Construction Engineering Corporation's interim report this year was -108.769 billion yuan, compared to only 10.56 billion yuan in the same period last year, and the company's free cash flow this year was -83.2 billion yuan. Similarly, China Railway Construction Corporation also experienced a sharp decline in operating cash flow and free cash flow. The same is true for China Communications Construction, Power Construction Corporation of China, China Railway, and Metallurgical Corporation of China. Although the net income attributable to equity shareholders of these stocks is still at a high level, the quality of profitability has clearly declined.
Looking at the sub-index data of the Purchasing Managers' Index (PMI), the PMI for the construction industry in August fell slightly compared to the previous month. The new order index rebounded slightly but still remained in a low range of business activity. The order expectations and construction pace are still weak. In July, the year-on-year growth rate of infrastructure investment slowed by 0.5 percentage points to 4.9%, structurally, water conservancy management, aviation, and railway investment continued to perform well, with year-on-year growth rates of 28.9%, 25.5%, and 17.2% respectively. Municipal investment performance was weaker, with a cumulative year-on-year decline of 4.7% in public facility management investment. In order to maintain the growth rate of infrastructure, projects need to continue to be implemented and quasi-fiscal instruments need to be further utilized.
Soochow Securities believes that the Central Political Bureau of the Communist Party of China held a meeting to review the "Several Policy Measures to Further Promote the Formation of a New Pattern of Western Development". It is expected that the promotion and recommendation of related policies will accelerate the infrastructure and urbanization development in western regions, thus driving construction investment. The growth rate of revenue of central state-owned construction companies in the second quarter of 2024 significantly slowed down, reflecting pressure on infrastructure investment and the construction industry in the second quarter, but it can still be seen that the market share and operating quality of central state-owned enterprises continue to improve.
Editor/Rocky