Chapter 65 [Investment Concept - Buy at the rising point! 】

Source: https://www.facebook.com/100063294665283/posts/703274168459066/

[James’ Origin and Today] Chapter 65 - [Investment Concept] - Buy at the rising point! (09/14/2023)

In the past investment, although it cannot be said that there were very brilliant results, it still roughly beat the market. It seemed like good performance, but it missed many key opportunities to get rich. Looking back on the past, rather than saying that the performance was good, I still feel that there is a lot of room for improvement. (So, investing in index funds does not have such a problem).

In the past investment years, the first stock that made me rich was Starbucks, but I have not held Starbucks until now. If I had held Starbucks with 100% of my capital and did not do any operations, just like Buffett did when I bought a good company and then never sold it, then my accumulated wealth should be at least many times greater than my current wealth.

Therefore, buying the right indexes and companies and never selling them is the key to getting rich. That is to say, not operating is the key to getting rich through investment.

How to avoid repeated mistakes in the past, "Buy at the rising point" This book and Buffett's concept of long-term holding of value stocks will help you avoid making the same mistakes in future investments.

"Buy and then go up" is how to buy right.

"Buffett's long-term holding" means fighting to death and not selling.

Buffett sometimes sells because individual stocks will go bad, or because he realizes that he picked the wrong stock in the first place. But when investing in U.S. large-cap index funds, there is no such thing as "breaking" or "making mistakes".

The focus of the book "Buy at the Rising Point" is how to choose a potential growth stock. Buffett said that growth is part of value. The key point is whether you can truly see the value of the company's growth and it is within your ability. Don't force yourself to pick stocks, and admit that you don't understand and can't do things that are strong. If you need to ask someone which company to invest in, or you ask someone about the company you invest in, then you shouldn't invest in individual stocks, because you still don't understand.

A value growth stock worth investing in must possess the following four qualities (BASM):

1. Business model (Business)

2. Assumptions

3. Strategy

4. Management

5. Business model (Business)

Simply put, it is the way to make money. A company must have a long-term growth and profit-making business model. This is a company worthy of our investment. When we think about a company, we must first ask ourselves how this company makes money.

When we can clearly study the way each company's business model makes money, we can know whether such a company's money-making model can continue to grow.

Usually I see that the business model of a company with unlimited potential must have a "paradigm shift", which means overturning the past business model and establishing a new and unique business model.

Such a company has a lot of room for growth because there is no other company with the same business model. First, the company's business model can last a long time. Second, in this way, the company’s initial growth rate can be above 100%.

I don't recommend that you buy individual stocks, but if you personally want to hold individual stocks, you must start from this perspective.

2. Assumptions

It is crucial to use imagination to imagine a company's business model and whether it has room for growth. This is related to whether the company's future growth can be sustained in the long term. This means that you understand the company's future prospects better than the company's CEO. If you can't imagine a company's future, you don't have the ability to pick stocks.

For example, let’s take Facebook a few years ago. We can know that Facebook’s most important revenue at that time was advertising. Where should Facebook’s growth come from at that time? Can Facebook be an audio-visual platform, do online shopping with [AMZN], [eBay], or be an audio-visual streaming platform like [NFLX], and achieve higher profits? Facebook can also do Facebook Finance, personal mobile payments between friends can be completed on Facebook, whether Facebook can do small loans, Facebook payments, these are all the imagination of Facebook's business model a few years ago.

Unfortunately, Facebook (Meta) has not moved forward according to the business model that I originally imagined to be closer to the existing business model. Although mobile payment has been started, it has not been persisted. The business model I expected has not been realized by Facebook. Therefore, doing Meta now has deviated from the original standards for stock selection. You should give up.

But even if you analyze Facebook's business model so clearly, there are still things you don't know. So far, Facebook has continued to grow and its stock price has continued to rise. So why is it so difficult to invest? It's because you think that what you know is not necessarily everything about the company. There are still many things you don't understand about the company. Usually, due to the decline of the market, your analysis will move in a pessimistic direction, and you will eventually sell your holdings and lose the opportunity to make long-term profits. Therefore, many investors do not buy company stocks or sell individual stocks based entirely on their own analysis of the company. Instead, they operate on the basis of optimism when the stock price rises and pessimism when the stock price falls. This is the most difficult part of investing in individual stocks. When investing in individual stocks, the devil often appears. This devil will make you buy when the price is high, and will also make you sell when the price is low. Investing in large-cap index funds in the United States will eliminate these suspicious problems and allow you to hold them for a long time. Long-term holding is the key to investment.

When I first chose to invest in Tesla, I imagined whether, in addition to self-driving electric vehicles, I could make robots, and whether I could make global barrier-free mobile phone communications. Now, like the cooperation between Tesla's low-orbit satellites and T-Mobile, it is easy to set up mobile phone base stations anywhere. Tesla also has a charging station business model, an insurance business model, etc...

Those who invest in Tesla should not only look at the current electric cars, but also look at whether Tesla deviates from the growth track and creates derivative new business models in the future to increase the company's growth speed and breadth. I don't want to advise everyone to invest in Tesla, but when Tesla fell from more than 400 to 100, did you continue to hold on tightly? Just like ordinary retail investors, there are rumors that Tesla has cut prices, that Tesla is not selling well, and that Tesla’s autonomous driving is nothing more than a castle in the air. When the stock price has dropped so much and there are so many monsters and legends, can you hold on to the Tesla stock? Many people have invested in Tesla, but few can hold on to it for the long term. I didn’t say whether Tesla is good or bad, but it is thousands of times more difficult to hold on to a good stock and not sell it than to hold on to the U.S. large-cap index fund and not sell it. So as long as you can buy the U.S. large-cap index and not sell it, the chance of you becoming rich is relatively high, and the challenge is relatively low.

Therefore, the imagination space of a company's future business model and whether the company's CEO has the execution ability to complete or create it are the key factors that determine whether the company's future growth can be sustained or whether it can grow rapidly in the long term. But these are not as important as whether you fight to the death or not to sell. To be successful in investing, in addition to buying the right thing, you must firmly believe in the investment and fight to the death.

3. Strategy

Companies with unique and sustainable business model characteristics are worthy of our attention. Next, we have to see whether the company's operating strategy is in line with the company's expertise and focus on moving towards innovative and profitable business models.

The negotiation model of a growth company cannot be leapfrog or random mergers and acquisitions. Facebook does many innovative business models that Facebook and IG can connect but does not implement them. However, Mata is a leapfrog negotiation model that cuts off the roots, or jumps too far at once without a pedal, which is risky. However, Facebook continues to grow, and its stock price continues to rise. It is difficult to judge whether our analysis is correct, and it may take a lifetime to know. Therefore, the risk of investing in individual stocks is very high. There are many things that we don’t know about individual stocks that exceed what we know about individual stocks.

From online stores to cloud computing to logistics, etc., AMZN is expanding its business model in tandem with its industry. Tesla's business model expansion is also consistent, which makes it easier to succeed.

AAPL is coherent and interdependent from mobile phones, to cloud services, to payments, etc.

TESLA has also gone from electric vehicles, to autonomous driving, to solar energy, to artificial intelligence, to car insurance. This is why TESLA's business model and business innovation have not left the core of the industry.

4. Management

The last and most important point is whether the company's top management is very focused on his work, loves the company more than you do, and reports new business models and his vision to shareholders every time at shareholders' meetings. This is a good company management.

The above is based on the four points of this book on how to choose a growth value company worthy of investment in the long term. In addition to investing in indexes, if we can invest in one or two such long-term growth value companies, hold such good companies for a long time and never sell them, it can also bring us great wealth. (However, being rich does not necessarily require you to pick individual stocks.) The challenge of investing in individual stocks just begins when you buy it, but investing in U.S. index funds will continue to move towards success when you buy it, as long as you don't sell it.

"People have the ambition to conquer the sky, but without luck they cannot achieve it by themselves!"

A horse has a journey of a thousand miles, and no one can stop it!

Tokiya! Life! Good luck! It’s not something I can do!

A capon's wings are as big as a bird's wings! A centipede cannot move as well as a snake!

Tokiya! Life! Good luck! It’s beyond my power! 』