Compared to Warren Buffett and Anthony Bolton, Greg Spike’s halo is much bleaker for many investors, especially for Chinese investors. But unlike Buffett and Bolton, Spike is not only a successful investor, he is also an excellent writer and energetic. He summarizes the key points of investment into 115, which can be said to be tiresome and all-encompassing; for those For non-professional investors, for ease of understanding, he reduced these investment rules to 10 articles.
After reading through Spike’s investment blueprint, investors may have different understandings. For example, the third step is “buy only companies that can understand”. Due to different education levels, specialties, and especially the information they have, different investors There may be different understandings of the same listed company, and there are even vast differences. Similar ones include “best ideas”, “excellent companies” and “excellent management”. These are not fixed. The standard can be measured, and the answer will change at any time as the understanding deepens; so, like most other successful investors, in the last Article 10, Spike requires investors to “continue to learn.”
Only strict and proper investment blueprints and investment disciplines are not enough. Strict implementation in all aspects at all times is the most important.
Buying those high-quality, low-priced companies can be said to be a good example of the investment community, but what kind of company is a high-quality company and what kind of price is low? In this regard, Spike believes that it is the most important to understand the reasons behind the downturn in the stock price, and to understand whether the factors that affect the stock price are long-term or short-term, industrial or macroeconomic.
Spike believes that in order to be successful, investors need to choose an appropriate framework that has been tested by time and practice. To this end, he divided his investment blueprint into 10 steps: continue to find new investment ideas on a large scale, act like a boss, Only buy companies that understand, invest in companies that have good management, invest in companies with good management, buy at the lowest price, focus on the best ideas, patience in holding shares, avoid stupid mistakes, and keep learning.
Spike believes that this framework has been repeatedly practiced and proven effective by many of the world’s greatest and wealthiest investors, and has taken into account the impact of risk factors to achieve long-term success in the stock market.
Spike has said unabashedly that his investment framework and inspiration mainly come from Buffett and other successful value investors. After all, successful investors are the same, and unsuccessful investors have their own reasons.
The first step: continue to find new investment ideas on a large scale. This is a very boring process. Finding investment targets on a large scale is no different from finding a needle in a haystack. Before discovering real opportunities, investors need to research a large number of companies, read a large number of reports and news, and compare different companies. According to Spike, “In this respect, it is similar to the marketing funnel principle. In order to make an order, the salesperson may need to make 100 or more sales calls. Great salespeople must complete these basic tasks.” In terms of success, Buffett is a model. In the early days of his career, he not only read a large number of financial publications, but even looked at each listed company one by one according to the Moody’s manual. The good news is that in the era of big data, investors can already take advantage of the services of many data providers to simplify this step, instead of flipping through paper manuals like Buffett has just started.
Step 2: Act like a boss of a listed company. Ordinary investors should think of themselves as the owner of a company with a potential investment goal, rather than just holding a company’s stock for a few days or months. The investor’s goal should be to buy part of a good company and accompany it To realize the appreciation of wealth, even if there are slight fluctuations in the macro economy or the listed company itself, it cannot shake the determination to hold, that is, “long-term holding.” “A truly great business is probably the best way to protect and build investor purchasing power, it has nothing to do with the economic environment,” Spike said.
Step 3: Buy only companies that understand. Due to professional restrictions, investors should focus on industries that they can really understand, and they can only buy if they fully understand a company, which requires investors to conduct thorough research. This one may seem simple, but it is often violated intentionally or unintentionally by investors. “If most investors violate this principle because they don’t consider investment as part of a buying business; usually people buy a stock because it has previously risen and think they can make a quick profit by selling at a higher price, But keep in mind that every time you buy is because other people are selling, if you are not sure that you have the information advantage, you should give up. “” A fast detection method is to imagine that you want to ask many industry experts Explain the advantages of potential investment targets, and then answer their questions. If you can’t convince them, buying may not be a good idea. ”
Step 4: Invest in outstanding companies. Spike believes that a good company should have a large amount of cash available for distribution and can survive a downturn in macroeconomic conditions and external crises, but he acknowledged that “even when the best management team goes bad when the fundamentals of the company deteriorate It ’s also helpless, so-called inflection points rarely occur. ”In addition, good companies should also be able to provide higher returns for the invested capital in the long run, and the market share is steadily increasing; most importantly, investors must determine this. Whether a company has a lasting competitive advantage, “capitalism is cruel, and the process of creative destruction has always existed, enabling some successful industries and enterprises to always attract capital and increase competitiveness.”
Step 5: Invest in a company with good management. Investors should look for companies led by talented, well-performed, and highly honest management. “Excessive management salaries, imperial offices, and actual theft can hurt shareholders. ”
Step 6: Buy at the lowest price. Even if there are many companies that can pass a variety of criteria, investors must buy at the lowest price available. “For the capital you invest, after time adjustments, you must be able to get the most cash return.” In this regard, Buffett also has a “different story”, “even the best companies have prices.”
Step 7: Focus on the best ideas. For many great investors, it is not easy to find one or two good investment ideas each year, let alone ordinary investors. “When you find one, you obviously should invest heavily in this company. Your The margin of safety is definitely derived from your understanding of a small number of great companies, and you will see your assets double over time. ”
Step 8: Patiently hold the shares. Whether it is looking for investment ideas, investment targets, or already bought, investors need to be patient. “Big money is earned by sitting motionless. A great company will not stand still with the cycle of the quarter, but stand out from the competition with the passage of time. This kind of change takes time and huge wealth. Need to be patient. ”
Step 9: Avoid stupid mistakes. During the investment process, investors will make a lot of mistakes, especially newbies, such as buying stocks beyond their capabilities, investing in low-return stocks without thresholds, buying too high prices, using leverage, and not conducting research in advance, etc. “The most common mistake is to determine the value of the investment target based on market prices, rather than determining its value through your own homework.”
The margin of safety definitely comes from your understanding of a few great companies.
Step 10: Continuous learning. Only by continuously reading and learning, and making yourself a learning machine, can you fully understand an industry, but it must not be broad and affect the depth. Many great investors only focus on a few industries to be successful. “Investment methods are constantly evolving. What worked 20 years ago may no longer work. Companies are constantly changing. Investors need to learn and accumulate.”
About high quality and low price
Spike believes that if investors find an undervalued stock, it’s important to figure out why it is undervalued, because it may be that you “overvalued” its intrinsic value, not the market “undervalued.”
Spike also summarizes the reasons for the undervaluation of the stock into 10 aspects: 1. The entire market is down, this is the most obvious reason for the stock to be undervalued, and usually occurs during periods of poor macroeconomic forecasts; 2. The industry is in a poor state A typical example is that the medical reforms carried out in the United States in the 1990s led to the decline of the entire healthcare sector stocks in the U.S. stock market; 3. The macroeconomic conditions in the area were poor, and the US economy experienced a recession in 1990-1991. Influence and depression, Buffett used this opportunity to buy Wells Fargo; 4. Short-term factors rather than long-term, the classic case is Buffett bought in the financial scandal of American Express in 1963, the related issues can be resolved without harming American Express Brand advantages; 5. The company no longer focuses on core business with higher returns, but diversifies, for example, Coca-Cola began to diversify in the 1980s, such as shrimp farming and movie making with lower returns; 6. The company does not pay dividends or Reduced dividends, which is why Buffett bought the Commonwealth Trust in 1958; 7. Companies that nobody cares about; 8. Companies that have just undergone spin-offs, new The company may have a bright future, but it is unknown; 9. The company was reorganized after bankruptcy, the market did not recognize the value of the newly formed company, the new company had no debt burden and other remaining issues; 10. the company’s business was too complicated, and Seth Karaman likes this type of investment the most, because there are few competitors when buying, and savvy investors have the opportunity to participate at low prices.