The common characteristics of Buffett's heavy stocks should be the ideas, principles and conditions of Buffett's stock selection, and the following common characteristics of Buffett's core heavy stocks:

firstFMCG companies with never-ending demand for products

It has been recognized in the industry that Buffett has mainly focused on investment, consumption and finance for decades, of which consumption comes first. It's just that these consumer companies are fast-moving consumer goods, not durable and slow consumer goods. Buffett did not invest in real estate, nor did he invest in companies with long commodity replacement cycles.

Coca-Cola Company Buffett drinks a few bottles a day, the Washington Post has a new product every day, and the services and products of Procter & Gamble Co Gillette and American Express Co are all fast and repeated consumption. And these heavy stocks of products and services are almost endless in the life cycle, can not imagine that Americans no longer drink Coke, can not imagine that Americans no longer use express services, the life cycle of infinitely long fast consumer goods is the first feature of Buffett's core heavy stocks.

SecondBuy the big, not the small, the old, the new, the monopoly, the competition

Buffett buys big, doesn't buy small, buys old doesn't buy new, all heavy warehouse companies are the super leaders and absolute bosses of their industry, and these companies are also giants of corporate America. Buffett does not intervene in industries and companies that are in the stage of free competition, and he only buys super-core stocks in industries that have achieved a complete oligopoly. The Washington Post is almost the banner of American public opinion media; Coke, Procter & Gamble Co Gillette and American Express basically account for half of the entire industry.

These large enterprises are often regarded as weak growth, but the fact is that these enterprises are very stable because of the stable internal management system and mechanism formed by long-term operation, coupled with the monopoly of industry competition, and their growth is not inferior to that of other companies.

Buffett never held the so-called small and medium-sized stocks in his life. Buffett's stocks all have a long life course. Buffett intervened only after they had been operating for decades. Buffett didn't even take a look. New companies, small companies and companies with no history have never received the minimum attention and attention in Buffett's investment portfolio. And the old, historical, large-scale, industry leader has become Buffett's core company.

ThirdBuy simplicity instead of complexity

None of the companies Buffett bought are particularly dependent on science and technology. Coke is a filling product after adding some sugar to the water, there is no technical barrier, some people say that Coke has a unique formula, every beverage has a formula, and the formula is not a complicated and mysterious thing. American Express Co himself was born in express delivery, and express delivery does not have any skills. This is especially true for Procter & Gamble Co and Gillette.

The companies Buffett invests in are not complex companies, nor are they ever-changing industries. On the contrary, we can see that Buffett's core heavy stocks have been operating on a single product for decades.

All the heavy stocks have no business transformation or march into new industries in business history, and persevere around their own single simple product, which is most concentrated in Coca-Cola Company. In the course of nearly a hundred years, the production process of Coke has not changed, the company's main products have not changed, nothing has changed, that is, it has become a worldwide beverage giant on this bucket of small drinks. The same is true of several other companies.

FourthBuy light but not heavy

Buffett bought the further growth of revenue, the expansion of profits, the growth of enterprises basically do not need to invest huge resources and strength in manpower, material resources, finance, technology development, equipment investment, plant construction and so on. Most companies do not value the asset business, but light the asset business.

The Washington Post is very representative on this issue. The cost of a newspaper includes office, reporter, editor, typesetting and other expenses, but with the expansion of newspaper circulation, the cost does not increase at the same time. With the unlimited expansion of the scale of business, the cost is relatively locked. The cost of 10, 000 copies of the Washington Post is not much different from that of 1 million.

Munger once raised a question in the course of investment that if a tractor manufacturing enterprise wants to expand its business scale, it must first spend money on spare parts, build production lines, plant equipment, and train employees, and then produce tractors. It is not clear whether tractors can be sold, but to sell tractors must first invest in the production of tractors, and if you want to expand production, you must also expand capital expenditure at the same time. As a result, this kind of enterprise is not easy to grow.

Buffett clearly sees this kind of problem. His choice of heavy stock does not rely on a large amount of capital expenditure, human and financial input, and a small amount of investment in the process of business expansion, or even no investment can expand income and profits. as a result, most of the increased income in the process of enterprise development has been converted into profits.

We can take another look at Coca-Cola Company, the company. Coke is different from the Washington Post. In order to increase the sales of Coke, it is necessary to increase production workshops, factories and raw materials. For example, the process of Coke's expansion to China is to build a large number of factories in China for filling.

Including many chain enterprises, the outstanding growth stocks in history, such as Walmart Inc, SUNING and KFC, all seem to say that it is necessary to expand stores in order to expand their business volume, but in fact this kind of expansion is a risk-free replication. it does not need the innovation of business model, technology and mode of operation. It is the expansion of the infinitely mature and infinitely standardized business model and production process in different places and in the new market.

Generally speaking, there is almost no risk in this expansion, because it is the reuse of previous successes, it does not enter an unfamiliar industry, it does not need an unfamiliar process technology and management, it is the re-replication and reuse of a set of methods and principles that have accumulated the inherent success advantages of this enterprise for decades and have been fully proved to be feasible by the market.

Therefore, it is true that this kind of expansion requires some additional costs, but this kind of cost is guaranteed and replicated with a series of successful experiences, and the risk of the new store is very low. and share all the soft resources of the original company, information resources, brand resources, management resources, although there are some expenses in the process of expansion, but it is almost familiar with the re-replication. Thus the success rate is very high.

Therefore, appropriate expenditure of some costs, but the operation process of these capital is a repeat of the old model, there are no new risks, once the product comes out, it can be immediately converted into profits, this kind of enterprises are also light asset companies.

FifthBuy a company that you can contact at any time every day

Buffett holds companies that Buffett can access at any time. We find that there is no company in Buffett's core heavy stock whose products and services are not easy to access, which you can access every day. As long as you want to contact its goods and services at any time, it is very convenient to understand it, without cognitive difficulties.

This is Buffett's day.：

Buffett got up from bed in the morning and first went into the bathroom to freshen up with Procter & Gamble Co Gillette's products. Then Buffett came to the restaurant, drank a bottle of Coke, ate some hamburgers, and then picked up a copy of the Washington Post to read that day's newspaper. Buffett went out to run errands.

In the process of doing things, he settled with an American Express card and processed the funds in Wells Fargo & Co. In this simple and ordinary day, Buffett had convenient and even inevitable access to all the products and services provided by the company in which he invested heavily.

Many investors have proposed that Buffett's long-term investment success lies in his becoming a director of the invested company through a large number of shareholdings, which should not be unreasonable, but it should be pointed out that when Buffett first bought any company, he was not a director of this company, and Buffett bought a large amount of time. Obviously, Buffett's decision was completed before he became a director of the invested company. He made the strategic decision without becoming a director of the invested company.

This decision-making process is completed by Buffett as an ordinary investor. why is the investment decision made by an ordinary investor of such high quality? Because the invested company has the characteristics of being able to study, grasp, judge, touch and perceive, it is these characteristics that make Buffett easy to judge and avoid a lot of cognitive errors, which we need to attach great importance to.

SixthBuy companies with extremely simple upstream and downstream relationships

The relationship between the upstream and downstream of the heavy stocks invested by Buffett is very simple, and none of the companies are in the middle of a very long and complex industrial chain.

When we look at Coke, Coca-Cola Company's raw materials are water and sugar. we cannot imagine the scarcity of sugar and water, the two most important raw materials, nor can we imagine any complex changes in supply and demand between water and sugar itself. it is impossible to say that the supply of water is unexpectedly complicated. Sugar is also the most basic commodity and can be produced all over the world. It will never be monopolized by a company to force Coca-Cola Company to accept a certain high price. The reduction of sugar beet and sugarcane production in one area will soon be supplemented by sugar beet and sugarcane in another region. As a result, Coca-Cola Company can not be restricted by the upstream supplier, some upstream supplier has a problem, the new supplier will soon replace, this is the advantage of the short industrial chain.

We can take a look at the melamine incident in China's dairy industry and the clenbuterol incident in Shuanghui, the pork industry in China, which have seriously affected the operation and commodity reputation of enterprises, but in fact, these two incidents are not intentionally done by the enterprises themselves to harm consumers, but the suppliers and upstream raw materials of the enterprises have transferred the problems and troubles to the production enterprises, resulting in the difficulties and troubles of the production enterprises.

The industrial chain of China's dairy industry and pork industry itself is relatively complex and uncontrollable, so the problem of upstream suppliers has directly become the problem of production enterprises. Like the Washington Post, American Express Co, and several other heavy warehouse companies, they do not have raw material suppliers. They are not companies that make profits from the transformation of processing and production. They are companies that provide pure services. Their operating elements are social basic elements, and these social basic elements will not have serious risks.

When the financial crisis occurred, many machinery manufacturers encountered difficulties, which were caused by two aspects: first, the financial crisis caused a serious contraction in demand. Second, machinery manufacturing enterprises have a large stock of steel, copper, aluminum and other metal materials, which cannot be quickly converted into commodities due to shrinking demand, while the prices of metal materials have fallen sharply under the influence of the financial crisis. as a result, the value of raw materials in many machinery manufacturing enterprises has depreciated sharply, resulting in material losses.

For example, some famous machinery manufacturing enterprises, such as Zhenhua Port Machinery, have been hit by the financial crisis in this way. the fundamental reason behind this blow is that their industrial chain is relatively long and complex. Many machinery manufacturing enterprises are in a very complex industrial chain as a link of this industrial chain, whether upstream or downstream of the industrial chain has problems. As an intermediate link, the company is immediately affected by the fluctuation of the industrial chain.

If you look at Buffett's heavy stocks, this situation does not exist at all. the downstream consumption of all heavy stocks is directly facing mass consumers, and these products are necessary to the public, regardless of the financial crisis. no matter what changes take place in society, the goods provided by Buffett's heavy stocks are not easily affected. As a result, Buffett's heavy stock business environment is relatively stable, but also does not rely on a very complex supply chain, so that problems in the industrial chain will not be transmitted to enterprises, which is an important feature of Buffett's heavy stock.

We know from the above article that Buffett's stock selection is characterized by buying the FMCG industry and buying the super leader (especially the super leader in the monopolistic competition industry?) Buy short industrial chain, buy product process is simple and product single company, buy light but not heavy. So what is the truth behind Buffett's stock selection principle?

The following is a discussion of the reasons:

firstWhy buy a FMCG company

The so-called enterprise growth, in short, is the continuous increase in net profit. How can the net profit be increased? What is the basic prerequisite for the continuous increase of net profit year by year? The answer is: the main income increases continuously year by year, and the cost does not increase significantly.

If a company's main income does not increase, in extremely special circumstances, the company can also achieve an increase in net profit, that is, substantial control of costs and expenses, but this situation is very rare and difficult to sustain. Sustainable growth is a significant increase in a company's net profit is always due to a sustained substantial increase in main income, only a strong and sustained increase in main income will lead to a sustained large-scale increase in net profit.

What does the increase of main business income depend on? Of course, it depends on the increase in the volume of main business (sales volume), the increase in product prices, or the increase in product prices and sales at the same time. To a considerable extent, the continuous increase in main income mainly depends on the increase in sales, and the inherent requirement of the increase in sales is the repeated consumption of this product, which will not be saturated soon after consumers have bought it. It must be that consumers consume it soon after they buy it, and then new demand is generated again immediately, so that sales can be increased and main income can be increased.

Sustained growth in main income cannot and will never happen in a business where demand shrinks, demand is saturated, or demand is hot in the short term, but once consumers have completed a purchase, demand will no longer be generated quickly.

Therefore, the reason why FMCG is easy to create growth stocks is that it provides endless and sustainable demand, which provides conditions for the increase of the main income of enterprises. That's why Buffett wants to buy heavy positions in fast-moving consumer goods.

SecondWhy buy a super leader in a monopolistic and competitive industry

If there are 10,000 enterprises competing in the cola industry, although the consumption of cola is fast and the demand for cola is infinitely long-lasting, because there are nearly 10,000 enterprises in the industry that produce cola at the same time, although the demand is growing and lasting, but this demand will not necessarily increase the sales of all enterprises, and the industry demand will not be transformed into the sales growth of the companies you invest in. The company you invest in can absorb the huge demand of the industry, it must be that the industry has formed an oligopoly, there are few competitors, and your investment company is the leader and super leader.

A famous saying by famous industry economist Mike Porter: the future of an enterprise depends on the industry characteristics of the enterprise, and only those industries that are conducive to growth can give birth to good companies.

At the same time, the future growth of the enterprise also depends on the position of the enterprise in its industry. If the position of the industry in which an enterprise is located is obviously at a disadvantage, then the industry is not good. This is why Buffett bought high-monopoly oligopoly FMCG companies.

ThirdWhy only buy light asset companies

If the main income is increasing, will the profits of the enterprise certainly increase? The answer is no! Common sense tells us that only when the huge income of the enterprise is not swallowed up by the larger cost and expense, can the enterprise turn the growing main income into profit.

If the income of the enterprise is increasing, and the cost is also increasing at the same time, even the cost is more than the income, then the profit of the enterprise not only does not increase with the increase of income, but is likely to decrease and decrease. Only when the income increases substantially and the cost basically does not increase or increases slightly can the profit of the enterprise increase.

This is the fundamental reason why Buffett buys light asset companies. The most basic operating feature of light asset companies is that the cost expenditure of enterprises does not grow at the same time as the growth of income. Enterprises in a small part of the expenses will lead to large income growth. A heavy asset company, in order to make a profit income growth, it needs a lot of investment, so a large number of costs, expenses, wages engulfed the main income growth, unable to form profit growth.

FourthWhy only buy short industrial chain companies

We can take a look at the melamine incident in China's dairy industry and the clenbuterol incident in Shuanghui, the pork industry in China, which have seriously affected the operation and commodity reputation of enterprises, but in fact, these two incidents are not intentionally done by the enterprises themselves to harm consumers, but the suppliers and upstream raw materials of the enterprises have transferred the problems and troubles to the production enterprises, resulting in the difficulties and troubles of the production enterprises.

The industrial chain of China's dairy industry and pork industry itself is relatively complex and uncontrollable, so the problem of upstream suppliers has directly become the problem of production enterprises. Like the Washington Post, American Express Co, and several other heavy warehouse companies, they do not have raw material suppliers. They are not companies that make profits from the transformation of processing and production. They are companies that provide pure services. Their operating elements are social basic elements, and these social basic elements will not have serious risks.

When the financial crisis occurred, many machinery manufacturers encountered difficulties, which were caused by two aspects: first, the financial crisis caused a serious contraction in demand. Second, machinery manufacturing enterprises have a large stock of steel, copper, aluminum and other metal materials, which cannot be quickly converted into commodities due to shrinking demand, while the prices of metal materials have fallen sharply under the influence of the financial crisis. as a result, the value of raw materials in many machinery manufacturing enterprises has depreciated sharply, resulting in material losses.

For example, some famous machinery manufacturing enterprises, such as Zhenhua Port Machinery, have been hit by the financial crisis in this way. the fundamental reason behind this blow is that their industrial chain is relatively long and complex. Many machinery manufacturing enterprises are in a very complex industrial chain as a link of this industrial chain, whether upstream or downstream of the industrial chain has problems. As an intermediate link, the company is immediately affected by the fluctuation of the industrial chain.

If you look at Buffett's heavy stocks, this situation does not exist at all. the downstream consumption of all heavy stocks is directly facing mass consumers, and these products are necessary to the public, regardless of the financial crisis. no matter what changes take place in society, the goods provided by Buffett's heavy stocks are not easily affected. As a result, Buffett's heavy stock business environment is relatively stable, but also does not rely on a very complex supply chain, so that it will not be transmitted to enterprises because of problems in the industrial chain.

The probability of risk of short industrial chain and simple industrial chain is low, and its dependence on the environment is poor. Because it is not particularly dependent on upstream and downstream, it will not be affected and affected when the environment is turbulent. If it is in a complex and long industrial chain, any problems in any link of the industrial chain will inevitably affect the invested enterprises. Therefore, Buffett chooses short industrial chain mainly to avoid risks, increase certainty and reduce uncertainty.

FifthWhy buy single products and simple process enterprises

The purpose of continuous operation under single product and simple process is to ensure certainty and reduce risk. If you work on a job every day for decades, you can finish it with your eyes closed, because you have been doing it for decades, you are too familiar with it, no one is more familiar with it than you are, and there is nothing you don't know or don't know, so you won't make mistakes.

Simple production and simple process reduce the possibility of errors, and long-term operation makes the experience and ability of enterprises in this industry accumulate and precipitate for a long time, so it is extremely difficult to make serious mistakes and mistakes.

As a result, the probability of uncertainties and accidents in the invested enterprises is greatly reduced, so that the short industrial chain, single product, simple process and long-term operation comprehensively realize the certainty and guarantee of the invested object. it also excludes a variety of potential and unpredictable risks.

Looking back at Buffett's stock selection principles, they can be simply divided into two categories. One is the principle of ensuring the growth of the enterprise; the second is the principle of ensuring that the enterprise has a high definition of low risk and risk-free. The dialectical unity of the two principles chooses the investment object with high certainty, low risk but sustainable growth for Buffett.

The basic view of securities investment is that the investment object is the best only in the case of high growth and low risk. Buffett's stock selection not only focuses on growth, but also emphasizes low risk on the other hand. Thinking not only from the perspective of risk, but also from the perspective of growth, the combination of the two created Buffett's investment myth.

The best investment opportunity is the least risk and the largest return. To seek the best from the relationship between risk and opportunity, income and risk are the relationship between the palm of the hand and the back of the hand, which can never be separable. Only by knowing the degree of risk and overcoming the risk can we get the benefit. If there is no effective understanding of the risk and does not pay attention to the risk, the direct pursuit of income is often harmed by it, and the income is the gain after crossing the risk, while the risk is the loss when the income can not be cashed, which is completely integrated, interdependent and rooted in the same body. We must look at it in terms of risk and return.

As we can see, that is to ensure high growth and low risk at the same time.Buffett pays attention to the growth of enterprises，But Buffett also pays more attention to the stability and deterministic growth of enterprises at the same time.。Instability and uncertainty are risks.，Half of Buffett's stock selection ideas are used to chase growth.，Including the principle of fast moving consumer goods、Super oligopoly principle、The other half of the light asset principle is used to chase low risk.，Including the principle of short industrial chain、The principle of product process simplicity、Principle of product singleness。

In investment practice, we must adhere to the combination of growth factors and risk factors, while paying attention to dialectical unity. Buffett's stock selection principles attach equal importance to high growth and low risk, which is the root cause of Buffett's long-standing heavy stocks.

In fact, the principle of buying big, buying monopoly and buying light assets is not only to ensure the growth of enterprises, but also to reduce the risks of enterprises. The anti-risk ability of large companies with high monopoly is stronger than that of small companies, which is the basic common sense of the industry. Light assets cause fewer risks and problems because there are few assets. Light assets are not only conducive to rapid growth, but also not easy to produce too many problems and risks.

These companies have the following basic characteristics：

first, industrial manufacturing, asset-heavy industries do not have very good returns

We can see that industrial manufacturing enterprises, oil enterprises, Buffett himself does not hold much, but the proportion of these industries that do not make money is relatively high, so from the perspective of industry distribution, the loss rate of industrial manufacturing, oil and other heavy assets enterprises is relatively high.

Buffett invested in eight industrial manufacturing and oil enterprises in his life, one lost money and three made a small profit. The enterprises with combined losses and small profits account for the XX%, of the whole industrial manufacturing and oil enterprises invested by Buffett, so the characteristics of the industry are very obvious, and these industries with heavy assets do not have a good return.

SecondThe less Buffett is involved in the industry, the higher the loss rate

We can see that there is a pharmaceutical company that we know is the only pharmaceutical company Buffett has ever bought in his life, and this enterprise is Buffett's company that has lost a lot of money. In other words, Buffett bought only one pharmaceutical company in his life, and this one company made Buffett lose a lot. The same is true of others, industrial manufacturing and oil companies also have a small amount of their own investment, but it has a high proportion of losses.

So here again we can see an investment rule, that is, the principle of capacity circle. Buffett's capacity circle does not lie in industrial manufacturing and oil, so he invests very little. But he has a high loss rate. This means that as long as you do not understand the industry, you may inevitably lose money, and Buffett can make money because Buffett knows these industries very well.

Buffett's success is the success of the choice of investment object, the premise of your choice is that you have the ability to choose. Therefore, the more rarely involved in the industry, the higher the loss rate, the stock god has actually proved the horror of breaking away from the circle of ability.

ThirdCompanies that do not make money and make small profits are industries and companies that lack growth.

In terms of industrial manufacturing, beer, pharmaceuticals and other major losers, these industries and companies generally seem to have lost their growth, and their future growth potential is not particularly high, regardless of whether it can be said that companies without growth are not easy to make profits, but at least several of Buffett's loss stocks and low-profit stocks reflect that their own growth potential is poor, and it is more difficult for companies without growth to make money.