Original Xiao Wang MoneyKing
2022 is about to end, and this year it has basically fallen for a whole year. Fortunately, it has recovered some blood in the next two months.
Whether it is a great vision narrative or a profound investment philosophy, it is not enough to heal the pain caused to investors by the withdrawal of more than 20% of the net value.
Sometimes looking back at history, looking back at what happened in capital market , and seeing how the big guys persist in difficult times may be able to recharge some faith for themselves.
Today I will talk to you about John Neff, who is the administrator of Windsor Fund.
Windsor Fund As a famous mutual fund in the United States, its nature is similar to that of domestic public offerings. John Neff's operating experience has stronger reference significance for us to study public offering funds .
John Neff was born in the grassroots field and worked as a securities analyst at Cleveland National Bank for 8 years, studying the automobile manufacturing, chemical industry, finance and other industries.
gradually became the leader of the research group due to in-depth research on automobiles and successful exploration of Polaroids. Later, he went to Wellington Fund Company "to pursue greater challenges" (make more money) and began to manage the Windsor Fund the following year.
Before John Neff began to manage the Windsor Fund's portfolio, Windsor Fund mainly made "trend investments".
Buffett said that investment is like playing basketball, and Windsor bought a lot of the companies that were chasing a while ago and are now garbage. John Neff compared this to "chasing the ball".
By conducting a detailed investigation of the poor performance of Windsor Fund, he discovered the common fact that
Windsor Fund paid "over-high valuation" when buying stocks, and John Neff is a practitioner of the undervalued strategy.
1. John Neff's low price-to-earnings ratio stock selection principles
Low valuation below 40%-60% of the average value is John Neff's basic criterion, but many investors currently have some misunderstandings about low valuations, believing that it is self-deception of picking up garbage and the powerless defense of missing out on great growth stocks.
" Goertek shares 10 times valuation, why not buy it?"
in fact, undervalued is not simply to be cheap. It still needs to be combined with the company's fundamentals . If a company's fundamentals are really hopeless or there are inestimable negative possibilities, you will definitely not be willing to buy it.
At the same time, the low valuation must be linked to high dividends. Without a good dividend level, the low valuation actually does not have much meaning.
For this reason, John Neff created a concept of total return, total return = (growth rate + dividend rate)/P/Equity ratio . Companies with this ratio exceeding the market average are John Neff's first choice.
Undervalued investment is often accompanied by people abandoning me. Whether it is performance, stock price, or investor sentiment, cyclical stocks are a difficult category to grasp.
Many investors often stay away from cyclical stocks, but "buying when no one cares about it" is in line with John Neff's investment philosophy, so cyclical stocks usually account for 30% of Windsor Fund's position .
The gameplay of cyclical stocks is completely different from that of growth stocks. Growth stocks are as long as their theoretical profits continue to grow, and their valuations continue to increase. However, when the profit peak of cyclical stocks comes, when all indicators show that they should buy, they should instead sell.
2. Basic requirements for growth
John Nef needs the company to have a certain growth potential. The basic requirements for the growth rate are no less than 7%, but it may not be a star high-growth stock that is continuously higher than 20%, because that kind of company is too expensive.
Generally, the momentum that supports the rise in stock prices is the growth of corporate profits and people's expected growth.
Graham pointed out in " Smart Investor " that high-growth stocks are prone to "a slight difference and a thousand miles away". As long as there is a quarterly profit expectation of to fall, or the high growth of does not reach the expected level , the stock price will usually fall sharply.
The greater the hope, the greater the disappointment. Even if the performance of high-growth stocks meets expectations, if they do not exceed expectations, the stock price will not rise sharply.
low-valuation stocks are different. They have almost no psychological expectations, and people rarely give them excessive punishments, but once there are signs of improvement in the prospects, they may stimulate investors' popularity.
This is probably a textbook that is lying flat and scattered.
Similarly, persistent search for ten times stocks is not applicable to John Neff, because most well-known growth stocks are usually highly valued.
The stock price rise continues to attract people, which in turn pushes up the rise of their stock price. If the purchase cost is paid too high, it means that the company must continue to grow at a high level in order to form considerable returns.
But this process always has its limits. John Neff does not want to escape when their performance returns to normal and their growth rate returns to mediocrity, and he does not want to be the final takeover.
So it’s good to pick up these beautiful growth stocks when they fall from the altar, but even then you have to be restrained and strictly control the buying ratio.
3. What we should look at is the value
1999 Nasdaq Index valuation is as high as 152 times, and the bubble is in full swing.
Retired John Nef tampers with a slogan from Kersenton during the 1992 presidential campaign at the Barron Weekly roundtable forum, and bluntly expressed his opinion: "Idiot, what you should look at is value!" Remind this is the most overvalued market he has ever seen.
, but the market did not reflect it in time. It was not until half a year later that Nasdaq collapsed, but it fell by 78% at most.
Countless bubble stocks will always return to zero, and even if they are really good companies, they will usher in a long road of recovery for more than 10 years.
"I think success does not come from personal talent or stupid intuition, but from frugal nature and understanding of learning from various lessons. My long-lasting investment principle is rooted in this, and this principle has the advantages of an indelible price-to-earnings investment strategy."
I hope everyone will encourage each other and hope that everyone will have a good harvest in 2023.
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