The Shanghai and Shenzhen markets surged and declined again and again this week, and I suggest that consumer stocks such as liquor, pharmaceuticals, food and beverage, which everyone firmly holds, as well as leading new energy stocks, have all risen sharply. Individual stocks have even continued to hit record highs, creating a strong profit effect.
Last week, due to the short-term recovery of funds by the central bank and the rise in short-term interest rates in the market, there were also large differences among some investors about the higher valuation of Bailong Ma stocks, which led to a wave of adjustments in Bailong Ma stocks. Many people are worried that the market may fall sharply. I firmly say to everyone that every round of adjustments is a time to cut back on the bottom of White Dragon Horse stocks, and there is nothing left to be done. Last week was the best chance to get on the bus. This week, Bailong Ma stocks rose sharply, especially liquor, pharmaceuticals, and new energy. Stocks in all three industries reached new highs. The stock prices of some leading stocks in the food and beverage sector, where growth in consumption is more certain, such as food and beverage, and duty-free, have also risen sharply, and even hit new highs.
It can be said that the current market split between 28 and 8 is already very obvious. As I told you before, the A-share market is gradually entering the era of institutional investors, and it is inevitable that the A-share market will have a pattern of 28 to 8 divisions. In fact, mature markets such as US stocks have a nineteen year pattern, which means that capital is increasingly favoring well-performing white dragon horse stocks. In the past, a lot of capital was piled up in stocks with mediocre qualifications, and even in some themed stocks and underperforming stocks. The general trend in the market has now changed, and it has changed since 2016.
I call 2016 the first year of value investing. Since '16, this process has been happening, that is, from underperforming stocks, outflows from stocks with average qualifications, and capital is being transferred to White Dragon Horse stocks. Because this transformation process is a long-term process, not a short-term one, it is far from complete even though it has gone through five years of transformation. The next five to ten years will still be such a process; this is actually an ecological change for the A-share market.
That is, in the past, large amounts of capital were piled up in stocks with poor performance; now, these funds will flow out one after another. Prophet Seer's capital has already been transferred to Bailongma stocks, and later aware's capital is still being debated. Therefore, when the market questioned the high valuation of Bailong Ma stocks some time ago, I mentioned that it is a good thing that there are differences in valuation, which shows that the market for Bailong Ma stocks is far from over, because there are still many people who have not bought it.
We only need to see from the development trend of the real economy that the final state of development of any industry is towards oligopoly. In other words, the top three in the industry account for most of the market share. Some small Internet industries are winner-takers, and may eventually concentrate on one enterprise.
The current epidemic has further widened the gap between leading enterprises and non-leading enterprises, so the market share of leading companies has further increased. This pandemic has been a test of life and death for all businesses, and has accelerated survival of the fittest. This is reflected in the capital market where leading companies in the industry have risen sharply, rather than leading companies stepping down or even falling continuously. The trend in the stock market actually reflects changes in the real economy.
Amidst the controversy, I firmly believe that the investment value of Bailongma stocks is long-term. All of the debates revolve around price and valuation. In fact, there is no dispute about the fundamentals of these Bailongma stock companies; everyone agrees that these Bailong horse stocks are good companies. For example, Mao Laowu, the leader in liquor, the leader in traditional Chinese medicine and innovative medicine, and the leader in new energy vehicles and photovoltaics. In fact, there is no disagreement about the fundamentals of these companies; they all know that they are good companies. The only difference is how high or low their prices are.
Munger said to Buffett, “I'd rather buy a great company at a relatively high price than a mediocre company at a cheap price. This is the biggest inspiration for us. In fact, short-term prices can be digested through time in exchange for space, and through the growth of these companies. In the long run, the value that good companies bring us often exceeds expectations; in turn, let's look at these underperforming companies.
There is a saying: if you are not afraid of ignorance, you are afraid to compare goods. We can sleep well while holding a white dragon horse stock, and we don't have to worry about a sudden thunderstorm when we wake up. Let's take a look at how many underperforming stocks have recently announced large losses. Whether accounting for loss of inventory or impairment of goodwill, some losses are astonishing, even exceeding the market value of a certain company. In other words, the entire company has lost money. Isn't it right for everyone to have a certain premium on Bailong horse stocks in order to sleep well and enjoy steady happiness?
Investors live longer than anyone else. The so-called leftovers are king. This leftover is what's left over; it's not a victory of victory. You might win the game in the short term, but if you want to win in the long run, you have to buy great companies, so having arguments isn't a bad thing. People who look at blank Longma stocks are often people who step on the blank dragon horse. These bearish people are actually not really bears, but potential bulls, because they all have capital and wait to bottom out when White Dragon Horse stocks fall.
They're not really bearish on these companies, but because they haven't bought them, they want a better chance to get on the bus. If this were the case, it would be difficult for these White Dragon Horse stocks to fall sharply, because people who are already on the bus won't throw out the high-quality chips in their hands. Buffett once famously said: Never sell your high-quality chips at any time. Another sentence is: Never be greedy to buy bad companies at cheap prices.
My investment philosophy is very clear: let everyone stick to value investing, be good shareholders of the company, and stay away from underperforming stocks and subject stocks. Everyone must have firm confidence whether they buy high-quality funds to hold these white dragon horses indirectly or buy these white dragon horse stocks directly. Consumption and new energy are the two major directions I have always been optimistic about. The former represents good companies that can continue to grow in traditional industries, and the latter represents the direction of economic transformation.
Recently, technology stocks have experienced a sharp decline. Many people don't understand why technology stocks suddenly took turns to plummet when there were no downsides. Actually, the crux of the problem is still performance; in the current market, performance is king. Most tech stocks have been abandoned by some investors because of their lack of steady performance. For foreign investors, US stocks are definitely preferred for allocating technology stocks, because US stocks do have more leading technology stocks, while A-shares actually do not have many companies with core technology.
Therefore, the decline in technology stocks, the rise in consumer stocks, and the rise in new energy sources actually reflect the essence of the problem, that is, everyone now values performance and deterministic growth. Former US Treasury Secretary Robert Rubin wrote a book called “An Uncertain World.” We all live in a world of uncertainty, particularly in financial markets. The only sure thing is uncertainty, and what we need to do is find the most definitive thing in this uncertainty. In other words, everyone is willing to pay more to reduce the uncertainty of performance.
This can explain why consumer Hakuba stocks with good performance are constantly being sought after by capital. Leading liquor stocks in questioning have reached new highs, leading stocks in traditional Chinese medicine have reached new highs in questioning, leading duty-free stocks have reached new highs in questioning, and leading NEVs have reached new highs. In fact, it is because everyone has realized that these companies have grown deterministically and that their definitive performance is worth owning.
In summary, the current structural division of the market is inevitable. Everyone must deeply understand the changes in the economic structure, the rules of industry development, and truly understand the changes in the A-share market ecology in order to seize mainstream market opportunities. Actively embrace Bailongma stocks, so as to seize the golden opportunity of the A-share market for ten years.