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Use Buffett'S Eyes To Select A Shares

2011/7/19 16:36:00 26

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Buffett'S Eyes Select A Shares

After a continuous fall,

Blue-chip share

The price is much cheaper.

Just six months ago, the blue chips that we were chasing after buying the stars were all low.

At this point, all the people are thinking of a question: should we copy the bottom?

But at the same time, we cannot help but weigh in mind another indicator: are our A shares cheap enough?

According to statistics from China Merchants Securities, as of last weekend, A shares had a rolling price earnings ratio of about 33 times, while the Dow Jones industrial average price earnings ratio was 14.9 times, and the Hongkong Hang Seng index was 17.8 times.

Compared with the price earnings ratio, our A shares have fallen a lot, but they are still more expensive than others.

At this point, in the face of A shares, it is necessary for us to do one thing: learn from stock god and learn from his experience.

Make a hypothesis: if Buffett comes to A shares, what will he do?

From Buffett's letter to shareholders in 2008, we learned: what is a great company, what a good company is, what a bad company is.

Grasp the standards of these three kinds of companies clearly, then we will look at our blue chips, and we should have a balance in mind.

(1) the definition of "greatness": Great

company

Pay a very substantial interest rate, and will grow with time.

(2) the definition of "excellence": if an excellent company increases your savings, interest will also be attractive.

(3) the definition of "bad": bad companies are not only disappointing in interest rates, but you have to constantly pay to maintain this pitiful return.

The three definitions are written in comparison with Buffett.

(1) a great company: Buffett's ideal enterprise prototype, the See 's candy company.

Although its boxed chocolate industry is disappointing: consumption per capita in the US is extremely low and rising slowly.

But the reason why See s is called greatness is that, from 1972 to now, Buffett spent $25 million to acquire See 's, and spent another $32 million on reinvesting it. At that time, its pre tax income was less than $5 million, and its pre tax income has now reached 1 billion 350 million US dollars, while in the US, the profits of an enterprise increased from 5 million to 82 million US dollars and needed about 400 million dollars of capital investment.

All of these revenues, except that $32 million, were sent to Berkshire, and Buffett used tax earnings to buy other attractive companies.

See 's's contribution is to "open up more new sources of finance", which is "Buffett's ATM" by the common saying of our A share.

(2) an excellent company: the example is FlightSafety.

1996

Buffett

The takeover of the flight international company had a revenue of $111 million the year before, and a net investment of $570 million on fixed assets.

From the day of Buffett's acquisition, asset depreciation has reached US $923 million.

But capital expenditure has reached US $1 billion 635 million, the vast majority of which is used to provide aircraft simulators that are still being updated.

The total value of Buffett's fixed assets after depreciation is US $1 billion 79 million.

Pre tax income in 2007 was $270 million, an increase of $159 million compared with 1996.

It has been very good to make such an increase through an additional investment of 509 million dollars, but for Buffett, it is obviously far inferior to See 's.

(3) a bad company: the worst company is a company that develops rapidly and needs a lot of capital to sustain its development, but its profits are so small that it can not even earn money at all.

The example is Buffett's least favorite airline: from the day of the birth of the first aircraft, the industry's greed for capital is already doomed.

Investors have invested a lot of money in this bottomless pit, attracting their profits, but they may never get them.

(4) what is a losing business: of course, worse than a bad company is this bad.

Business

In 1993, he bought Dexter, a shoemaking enterprise, for $433 million worth of Berkshire stock.

This time it cost 400 million dollars instead of 3 billion 50 million dollars.

In fact, Buffett was most distressed by the fact that he used a 1.6% of a good company, now worth 220 billion, to replace a worthless rotten company.

The single business could be the worst case in Buffett's mind, not just because he bought it wrong, but because he paid the price not money, but a more valuable stake than money.

Looking back, let's think about the popular way of thinking that some A share companies "look after the sale as a business without money". This is definitely a wake-up call.

Look at the above four companies, learn Buffett's investment way, and then look back at our blue chips: China Ping An, China Merchants Bank, Vanke, China Petroleum, and the upcoming mobile china mobile. Is there a clearer way of thinking?