On June 27, due to the announcement of the reduction of holdings by South Africa's major shareholder Naspers/Prosus, Tencent suffered an intraday flash crash, which caused bleeding for several consecutive trading days. I originally wanted to share my thoughts on this that day, but unfortunately I have been too busy at work recently, so it wasn’t until the weekend that I found some time to spare.
Frankly speaking, I am writing this article now, so it is a little behind in timeliness. However, in addition to discussing the matter, what I want to express is what kind of mentality and attitude should we have after encountering unexpected events in the stock market. way of thinking to deal with it.
There is no need to say anything implicitly. Tencent is one of my heavy holdings. The recent poor performance will definitely have a greater negative impact on my holdings and , especially when the overall market situation is good and I see others rising. The price is falling, which will affect your mood to some extent. But people have had a lot of experience in the market, and there are some things that they must get used to. This is also one of the basic skills of stock market investment - maintaining a calm and calm attitude.
Whenever we encounter an unexpected event that affects stocks, we must first fully understand the cause of the event. Why did Naspers/Prosus reduce its holdings in Tencent this time? According to the announcement, it probably believed that its own stocks were significantly undervalued, and planned to use the money from reducing its holdings in Tencent to repurchase its own shares to enhance shareholder interests. Originally this seemed to be a pretty normal reason - major shareholders need money, but the weird part is that there is no timetable for this reduction plan, and there is no specific target amount. The only quantitative standard is that the daily selling volume does not exceed the daily sales volume. 3%-4% of trading volume. Because
is so unclear, it really makes many people feel panicked. On the one hand, Naspers has reduced its holdings in Tencent twice, in March 2018 and April 2021, and both happened to be sold at relatively high levels. It is easy for people to think that Naspers has some superb sense of smell and feels that Tencent is currently It will be even worse, so we need to implement a larger reduction in holdings. On the other hand, Naspers has no clear target amount and no specific timetable for this reduction of its holdings. Does it mean that it will completely liquidate its holdings? You must know that Naspers, as the largest shareholder, holds 28.8% of the shares. If it has been It is unimaginable how much pressure the continuous selling will put on the stock price.
My opinion on this is two points: 1. Value investing pays attention to the company itself. As a purely financial investor, whether Naspers reduces its holdings will have almost no impact on Tencent’s operations. The management is still and Xiaoma Ge . Each of us is still inseparable from WeChat. WeChat payment is still used instead of banknotes in transactions. Enthusiasts will continue to play their favorite games, and advertising should be done. It won't stop there. The impact is nothing more than the supply and demand of stocks in the secondary market, but from a long-term perspective, does this really matter?
2. Naspers holds 28.8% of Tencent's shares. Based on the current daily trading volume of about 10 billion, 5% is sold every day. Assuming that the stock price does not fall, it will take 8.7 years to sell out all the shares. So this also means that Naspers actually has the same interests as our ordinary shareholders, and does not want the stock price to fall excessively, because the smashing of the market will not only hinder shipments, but also cause heavy losses to itself. The motivation for selling Tencent may really be like mine. As you said, you need money to buy back your own stocks. As for why I don’t set a timetable and target amount for reducing my holdings, I personally think it may be for the purpose of stabilizing my own stock price. This can at least give the market a feeling that I can obtain a steady stream of repurchase funds by successively reducing my holdings in Tencent. , you can take in any amount of selling, thereby stabilizing the market's confidence in your own stock price at this stage. Obviously, the motivation isn't very scary when viewed this way.
A few days ago, I saw someone on snowball saying that what worries the market most about Tencent now is that traffic has peaked and growth has dried up. Regarding this point, I think it is precisely the issue that does not need to be considered at this stage. The famous Professor Siegel once accurately defined - long-term returns from investing in stocks do not depend on future growth, but on the gap between actual growth and market expectations.
At this stage, Tencent’s total market value is 2.91 trillion yuan, corresponding to PE value is 13.79 times. If the entire company is bought, based on the net profit of 224.822 billion in 2021, it only needs to achieve an annual growth rate of 5% in the next ten years, and the market value cost can be recovered through the cumulative net profit in ten years. Considering that the actual inflation rate may be 2-3 points every year, it is obvious that the market's current expectation for Tencent's future is that its growth has been completely lost. Then, in contrast to Professor Siegel’s original words, if Tencent ultimately exceeds market expectations in the future and can maintain moderate growth, you will obviously make a lot of money by stepping in at the current price; otherwise, unfortunately, everything is true as the market said, and Tencent will indeed lose money afterwards. In order to achieve growth, you actually did not pay any premium, and there is a high probability that you will not lose money in the long run. I think maybe this is the legendary safety margin.
(Risk warning: The views mentioned in this article only represent personal opinions, and the subject matter involved is not recommended. Buy and sell based on this at your own risk.)
