We all know that for a company, P=E*PE, where E stands for earnings per share, and PE stands for valuation. Earnings are a measure of the quality of the asset, and valuation is a measure of whether the asset is expensive or not. In the final analysis , We attribute the factors that affect the stock market to these two dimensions, that is, profitability and valuation, both of which are indispensable, and then measure the cost-effectiveness of different styles of the same asset.
If the asset quality is very good but the price is high, the price/performance ratio is not high. For example, at the beginning of this year, many stocks have good geology and outstanding performance, but the valuation is very high. This will face two situations, either high performance Gradually digest the high valuation, or go down to digest the valuation;
If the asset quality is average but the price is very cheap, and the price/performance ratio is not weak. For example, under the nineteen-year-old market divergence in the past two years, many small and medium-cap stocks with the same quality have weak performance and are not welcomed by the market, but with the best The prices of companies in China have gradually risen. These companies that are not excellent but have good quality will have a better price/performance ratio;
The best state is that the asset quality is very good and the price is very cheap. It usually occurs after the panic caused by the big drop. This kind of opportunity requires people with the courage and knowledge to make smart choices and buy when it is underestimated. High-quality assets
The worst condition is that the asset quality is not good but the price is super expensive. It is generally a bull market where junk stocks prevail. For example, in May and June of 2015, it is difficult to harvest, and it will never rise back.
Of course, there are companies with poor quality but cheap prices. This is a value trap. Don't touch them because you never know where the bottom is.
Next, let's take a closer look at the discounted cash flow model of the stock market:
The most important part of this formula lies in the stock market analysis framework and philosophy. It grasps the main contradictions and core logic of the stock market, avoids blind people from touching the image, uses partial or very small parts to judge the whole, and attribute intricate influencing factors to profit and valuation.
Among them, the molecular part, that is, the cash flow part, uses dividends (free cash flow can also be used, which cash flow is not important, it is important that we understand that the core of cash flow reflects the future profitability of the company) ; Secondly, the denominator part, that is, the valuation, is mainly determined by the risk-free rate of return (how much liquidity, how much money) and the risk premium (the level of sentiment).
In order to make everyone more clear, a few conclusive explanations of the above model:
1) The core factors affecting the stock market can be summarized as profit and valuation, and valuation is mainly affected by risk-free rate of return and risk premium. In fact, from a long-term perspective, profit is the core factor, but the focus is within one year From the perspective of the dimensions, under certain circumstances, changes in liquidity may also become the main contradiction in phases. For example, the central bank cut interest rates many times in 15 years, forming a big water buffalo with liquidity, but the economic performance at that time was not good; 2020 In the first half of the year, a huge amount of money was released, liquidity became the main support, and valuation increased substantially. Therefore, in reality, we cannot separate profit and valuation, but analyze the combined force of the two.
2) When any impact event occurs in the market, we can analyze these two aspects. For example, in the first half of 2020, the global central bank released a large amount of water, the liquidity is extremely loose, and the global 10-year government bond yield (no The risk-yield ratio) dropped sharply, and the valuation increased, and the stock market rose. For example, after May last year, China’s 10-year Treasury bond yields began to rise, but the market still performed well, mainly due to the increase in earnings growth expectations. The market is rising; for another example, when the market transactions are hot or extremely hot, the market will often continue to rise inertially for a period of time, risk appetite is high, investors are more willing to participate in investment, risk premium (this part reflects the risk compensation for investors, The higher the sentiment, the lower the risk compensation) will be lower, and the valuation will increase.
Therefore, any factors that affect the market can essentially be attributed to the two directions of profitability and valuation. The best environment for the stock market is to increase profits and valuations (abundant liquidity), which is commonly referred to as Davis double-click ( If there is only one item that performs well, then you need to specify which item is the main contradiction at the current stage.
3) Analyzing the stock market must be analyzing the difference in expectations (the gap between reality and expectations). Existing facts have been reflected in most of the market prices, so expectations become very important. Only when expectations continue to receive positive feedback can there be an upward trend. This kind of positive feedback comes from the positive feedback of profit expectations and the positive feedback of liquidity; the existing facts are actually used to judge where the bottom is and how much downside space there is. If the market performance is too far away from reality, it will go down. There will be a lot of space, and if the market’s rise is actually supported, the downward space will be controllable. We have to roughly judge the main contradiction at a certain stage, and then adjust and modify the market view based on the expected difference, so as to decide what action to take next.
The above is the analysis method of the stock market based on the discounted cash flow model. I hope it will be helpful to everyone's operation. Remember to pay more attention to me.$特斯拉(TSLA)$ $AMC院线(AMC)$ $游戏驿站(GME)$
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