Values Under The Current Financing Rules: Testing The Speed Of Life And Death

We all agree that the valuation system of the A shares is distorted, but is there some reason for it? Some people answered that the 100 times price earnings ratio is more valuable than the 20 fold investment value because of scarcity, such as the shortage of new shares, so scarce leads to speculation. Or, small cap stocks are scarce and easy to get backdoor, so the valuation is high.

According to statistics, in the past 10 years in 06 years, 5% of the stocks with the lowest market value were bought at the beginning of each year (for example, 102 in early 11 and 1 billion 600 million in the market value), the average annual yield (compound interest) was as high as 40%, and the market value increased by 63 times from the end of the 06 year to the end of the year. If the 5% market share with the highest market value, the market value increased only ten times in the ten years.

It's totally different.

Over the same period, the average increase in all stocks was 7.6 times.

The only market for high market capitalization to win low market capitalization is 06 years.

However, it is not worth writing this article merely because of the scarcity of the reasons for high priced stocks, because the reason is too simple.

In fact, there are too many cases in the A share market to support my view.

In particular, those new industries with high growth are going through a horse racing enclosure and need to burn money to establish their status.

Some companies that underestimate the value of the company will not be able to get the money at all.

At present, the so-called shortage of asset allocation in China has provided an excellent opportunity for some listed companies to issue additional financing.

That is why the refinancing scale of the A share market over the past two years is greater than that of IPO.

IPO is subject to price limits (guidance price, not more than 23 times PE issuance, and A shares' median earnings to 100 times), and queuing is also needed.

We found that more and more overseas stocks were privatized and then returned to China.

The reason is very simple. These companies have been left in the cold abroad, not only at the level of valuation, but also difficult to refinance abroad.

Seeing that the second class enterprises of the same trade can easily make money in the domestic capital market and expand their territory, can they balance their feelings? This feeling is like that of a group of top students who have excellent academic skills in China to study and settle in the United States.

If you invest in underachievers, they will give you a much higher rate of return.

Then, 100 times.

Stocks are more investment value than 20 times stock. Is that 100 times high growth stocks with investment value? Of course, this is an important factor, because PE is a static valuation index, and PE/G (price earnings ratio divided by profit growth rate) is more reasonable, for example, a company's PE is 20, G is 10%, PE/G is 2, another company's PE is 100, G is 60%, PE/G is 1.67, obviously the latter has more investment value.

But for a slightly more professional investor, this principle is also understood, nor is it what I want to express here.

Or because of the scarcity of individual stocks, or because of the high growth of individual stocks, or because of special opportunities, some stocks can enjoy an overvalued value.

These are actually easy to understand. So, should we not give different valuations for the same stock? In fact, it is not necessarily that, in addition to A shares and different shares of B shares and H-shares in China, many investors with the correct value investing idea believe that the share price of the H-shares or B shares which are much lower than the A shares are more investment value.

Therefore, when B shares are open to domestic investors, or when Shanghai and Hong Kong pass, they will buy the B-shares or H-shares with lower share prices.

But what is the truth? For example, a company that has been incorporated into Shanghai and Hong Kong through the Shanghai and Hong Kong links, the price of its A shares is 7 yuan, H-share is HK $3.5, A/H is two times (without considering the exchange rate difference), value investors will buy H-shares.

But how is the price of investment so far? The company's corresponding H-share has risen by 40%, while the A share has risen 3.7 times.

Maybe value investors think that in the long run, the share price of A, B or H should be connected. So how long is this long term? 10 years is long enough.

But B shares have been open to domestic investors for 14 years, and the A/B premium is still huge.

What is the reason? Maybe it is the difference between the two market investors.

However, stocks with high price earnings ratio should be bought at the same price.

Cause.

And I want to explain where the investment value of high price earnings ratio stocks is.

I think of a phrase that regulates the family: money is more, people are stupid, come quickly.

To describe the current situation.

It's not exact, but it's a bit of an image.

However, in fact, if we want to make clear the following reasons, we will find that domestic investors are not stupid.

For example, two twin companies listed in the same high growth industry are identical in terms of profits, size, market share and so on, but the PE corresponding to a share price is 20 times, and the other 100 times (roughly the investor relations process is better). Then the two companies are also offering additional financing. Obviously, 100 times PE companies can merge more funds than the other under the current refinancing rules.

This means that the company that has more financing can expand more, and can expand the market share through mergers and acquisitions, or may finally beat another undervalued company.

Therefore, to see whether an enterprise has investment value, we can not just look at the price earnings ratio, but also look at the unique rules of the game and the unique development plan of the company.

Companies with high P / E ratios are more likely to get positive incentives.