The first trap is that the company's board of directors, board of supervisors, and senior managers (referred to as directors, supervisors, and senior executives) sell stocks in large quantities. This may well indicate that there is something wrong with the company itself. Therefore, when analyzing quarterly and annual reports, in addition to keeping an eye on the company's operating conditions, we must also pay more attention to changes in shareholders.
The second trap is that directors, supervisors, senior executives or major shareholders occupy company funds. In May 2000, a software company raised nearly 1 billion yuan through an additional issuance. Later, it claimed that it had 10 billion yuan in assets and three listed companies, becoming a stock market leader. However, the chairman abused his operating control and occupied a large amount of company funds. There are three operating methods: one is direct occupation, transferring a large amount of funds between related companies; the other is providing guarantees, and a software company uses market value to provide guarantees to obtain loans to related companies; the third is acquiring related party assets at high prices and issuing additional funds. The 1 billion yuan is used for this kind of acquisition. In 2004, the regulatory department of the China Securities Regulatory Commission began to inspect a certain software company, and later the listed company was labeled ST (Special Treatment).
The third trap is that if the company changes its accounting firm, after auditing the financial report, the general accounting firm will issue a standard unqualified opinion, an unqualified opinion with an emphasis on matters paragraph, a qualified opinion, an opinion and a disclaimer of opinion. One of the reports. Only companies with standard unqualified opinions are worthy of us continuing to look at financial reports. Companies that have issued other types of audit opinions can be directly excluded. Therefore, the general management will require the accounting firm to issue a standard unqualified audit report, but the accounting firm cannot sign it casually, otherwise it will bear responsibility. Therefore, many certified public accountants will refuse to sign for self-protection, so the accounting firm cannot issue an audit report, and the management has to change to another accounting firm. Therefore, we need to pay attention to whether the company has changed its accounting firm. If this happens, the company will generally have serious financial problems.
The fourth trap is that companies frequently change senior managers, especially financial directors.
The fifth trap is that a group guarantees each other to borrow and pledge. This situation is likely to involve sacrificing the interests of some companies for profit transfer and preserving another company.
The sixth trap is that the proportion of non-recurring profits in the income statement has increased significantly. When an investor buys a company, he or she is buying a business, and a business relies on its main business income to make money. Once a company's main business stops making money, investors must be extra careful by selling houses or land to increase profits.
The seventh trap is abnormal changes in accounts receivable. If the indicator of accounts receivable suddenly increases significantly, it means that others have written a lot of white notes to the company, which should attract our attention. In particular, the significant increase in other receivables makes this situation even more suspicious, and good companies have absolutely very few receivables.
In short, many investors regard financial reports as the only way to explain a company's operations. This is actually a serious misunderstanding. Financial reports are only the starting point for raising questions, not the answers themselves. The purpose of their existence is to allow us to discover problems. When we find a problem, we have to think and explore. Only in this way can we find out whether the company has investment value or is lying. When we study a company, we should first start with the industry and its own business in which the company is located to see whether it is in line with the general trend of future development. When the right time, place and people are available, then look at the financial report. Therefore, financial reports Analysis can only play a supporting role and be used to vote against, but cannot be the sole basis for our investment decisions.
And investors do not need to know the meaning of every subject like an accountant, let alone the accounting method of every money. Investors should be more like a referee. They don’t need to know how to play football, as long as they can watch the ball. For those that you don’t understand or have too many questions, just throw them aside and don’t participate. We just need to find profitable companies with the smallest problems, the simplest financial reports, and the simplest business models. Great investments are often simple.If you can't tell how a company makes money, then it's probably not a good company. It's that simple.
