Ceiling means that the products (or services) of enterprises or industries tend to be saturated, reaching or approaching the state of oversupply. Before investing, we must make clear which of the following situations the enterprise belongs to, and give corresponding investment strategies according to different situations. When judging, we should not only pay attention to the industry prospects, but also pay attention to the quality of enterprises.
1. Industries that have reached the ceiling-extremely saturated industries (such as steel industry). Investment opportunities come from the low-cost merger of enterprises with monopoly operation ability with inferior enterprises, which can expand market share and reduce the marginal cost of product production and sales, thus further building market barriers and gaining the pricing power of products.
If M&A can't reduce the marginal cost, it can't be regarded as a good investment target. For example, the merger and expansion of state-owned enterprises promoted by administration is not carried out in accordance with the principle of market pricing, so political significance is greater than economic significance, and such state-owned enterprises do not have investment value.
Those enterprises with good cash flow and strong competitiveness at the end of the industry recession have great potential investment value when a large number of similar enterprises are in trouble. Judging the inflection point of industry or demand is the key, focusing on M&A opportunities of large enterprises, such as the four major domestic steel enterprises.
2. Industrial upgrading creates new demand, the old ceiling is deconstructed, and the new ceiling has not been or is being formed. Such as automobile industry and communication industry. These industries are usually mature, and their investment opportunities lie in the new demand brought by technological innovation. "Innovation"-will break the original industry balance and create new demand. Paying attention to the balance between old and new forces, enterprises representing new technologies and new productivity will stand out, and their products and services will gradually or even completely replace old products, such as the impact of innovation of Tesla Electric Vehicle (TSLA) and Apple (AAPL) on their respective industries.
3. The ceiling of the industry is still unclear. These industries either belong to emerging industries, the demand is forming, and the future market capacity is difficult to estimate, such as new energy-saving materials; Either it belongs to "fast-disappearing" products, such as pharmaceutical products and services that improve the quality of human life and prolong human life. This kind of industry has always been the cradle of great enterprises, and bull stocks emerge one after another. We should pay attention to those outstanding enterprises that are in the leading position in sub-sectors-that is, large companies in small industries.
Through the above three points, we can fully understand the industry status and future imagination of a company from the company and industry reports. The point is clear: 1. Is there a ceiling? ; 2. Facing the ceiling, what did the enterprise do?
Second, the business model
Business model refers to the products or services provided by enterprises, and the ways or means by which enterprises charge fees to earn commercial profits. Manufacturing, for example, makes profits by providing customers with products with practical functions. Sales companies make profits through various sales methods (direct sales, wholesale, online shopping and other business models) and so on.
The significance of studying business model lies in: 1, is it a good business? 2. How long can this business last? 3. How to stop other entrants?
These three problems correspond to each other: business model, core competitiveness and business barriers. The trinity of business model, core competitiveness and barriers constitutes the future investment value of the company: the former refers to the profit model of the enterprise, and the core competitiveness refers to the ability to realize the former. Barriers are the price of trying to stop other companies from entering.
For example, the products sold by Dell and Lenovo are not much different in essence, but the profit model of Dell's computer direct sales is different from that of traditional computer sales, and its corresponding core competitiveness is its global direct sales online management system. If Lenovo wants to rebuild this platform, the cost is too high, which may be much higher than that built by Dell, so this direct sales network has become a barrier for Dell. However, PC saturation is Dell's ceiling, which limits its development space.
Baidu's profit model is to achieve search traffic. The continuous progress of search technology is its core competitiveness, and the huge database and a large number of application software built by the first-Mover advantage are its barriers; It is the business model of Qihoo 360 (Hu Qi) to realize the flow through free antivirus. Strong R&D ability and quick service response ability are its core competitiveness, and the rapidly accumulating huge user group constitutes a competitive barrier. 360 strives to enter the search field with a huge number of users, but has never seen a breakthrough in technological progress that can challenge the huge data and application barriers accumulated by Baidu, so in contrast, 360 does not have the ability to subvert Baidu.
In addition, the traditional bank's business model is interest margin, and the key points of competitiveness are low-cost storage capacity, lending capacity and high credit. Barriers are the foundation of users. Banks in China are guaranteed by government credit, and the labor cost is low, so it is difficult for foreign banks to compete with them. Once the deposit insurance system is introduced, the credit of small and medium-sized joint-stock banks will be questioned, so the four major banks are the first choice for foreign investment, reducing the proportion of investment in mainland joint-stock banks.
Brief scenario analysis of business model;
What makes money? Product or service? Earn whose money? Is it to tap and compete from existing sales, or to create new demand? How much is it? How many links are there between product production and terminal consumption? Is there any way to minimize intermediate links? Has the enterprise made any efforts in this regard? With the expansion of sales, will the marginal cost decrease? Wait a minute.
Generally speaking, we try our best to invest in enterprises that can explain the business model in one sentence. Further analyze the position of business model in the industrial chain? Is it upstream, midstream or downstream of the industrial chain? What are the different business models in the whole industrial chain? What is the key difference? Who are the companies with the most pricing power? Why? Is the relationship between enterprises and customers sticky? Wait, these determine whether the business model can succeed.
Third, the core competitiveness of enterprises.
Anyone can imitate the business model. However, there are always a few winners. The key to an excellent enterprise is to have corresponding core competitiveness in the construction of business model.
The content of core competitiveness includes: shareholder structure, leading figures, team, research and development, professionalism, management mode, information technology application, financial strategy, development history and so on.
1, specificity
Single-mindedness is not the same as "singleness", but refers to the ability of enterprises to deeply explore and expand products or services in a certain field. For example, Shuanghui is absolutely exclusive in meat products, and industries other than meat products are not involved. Its product line is rich, and it has the ability to dig deep and expand meat processing products such as hot fresh meat, cold meat, frozen meat and sausage. In contrast, Yurun Food, which is also a leading meat product enterprise, has been involved in non-main businesses such as real estate and tourism for many years, with scattered management and poor performance. Therefore, the main direction and development strategy of the enterprise are determined by single-mindedness, and perseverance will succeed.
2. Innovation ability
Excellent R&D team, advanced technology and technology that can provide high-standard products and services, or invention patents, etc. Pure technology does not constitute permanent core competitiveness. The technical barriers in a certain field (such as patented technology) can maintain the leading edge of enterprises for a period of time. In addition, technological advantages will bring advantages in production efficiency and production cost, and enterprises with technological advantages will be able to obtain returns higher than the industry average. The quantitative results can be judged logically by the ratio between R&D expenses and enterprise income.
3. Superiority of managers
The development of enterprises brings excess returns to investors. The quality of enterprise leaders and their management teams is related to the quality of enterprises, how far they can go and how big they can do. This is the meaning of "investing in people". This part should focus on the background of leaders and management team members, and obtain information such as the development direction, industry strategy, employment mechanism and incentive measures of the enterprise by tracking their words and deeds (through news, prospectus or board report).
We need to judge their personalities, patterns and values, which will subtly affect the future of an enterprise and indirectly affect the return rate of investors. Practice has proved that it is possible for first-class talents to make third-rate enterprises first-class. On the other hand, third-rate talents doing first-class business are likely to get first-class dirty. Many successful enterprises created by the first generation entrepreneurs may be destroyed by their successors, and Microsoft is a typical example. Among many conditions of enterprise's core competitiveness, the investigation of human factors is extremely important.
Fourth, the economic moat (market barriers)
The moat is a metaphor, which is usually used to describe many safeguards for enterprises to resist competitors. The core competitiveness mentioned above is an important part of the moat, but not the whole. We can also confirm the authenticity and depth of the moat through the following conditions:
1, yield
Historically, does the enterprise have a considerable rate of return? The rate of return mainly refers to gross profit, ROE (return on shareholders' equity), ROA (return on total assets) and ROIC (return on invested capital). These yield indicators are applicable to different business models. The key point is to judge from business logic, what are the high returns of enterprises? What is the decisive factor? Can it last? What measures have enterprises taken to ensure the sustainability of high rate of return? The main quantitative analysis methods are Du Bang method, Porter's Five Forces method and SWOT method.
2. Processing cost
Is the conversion cost of products or services of enterprises high? Conversion into cost refers to the difference between the cost (including time cost) generated by users giving up our products and using similar products of other enterprises and the cost generated by still using our products. Higher conversion costs constitute exclusivity, such as WeChat and email. Yixin is not much different from WeChat in essence, except that it is inconvenient for users to abandon WeChat and use Yixin, and it has a high conversion (remodeling) cost. Wechat has great vitality and commercial value because of its first-Mover advantage.
If users can't choose competitors' products, it shows that the products of enterprises are sticky and dependent on users, then enterprises have relatively high conversion costs and exclusivity. To understand the transformation cost of an enterprise, we must consider it from the perspective of consumers and users, and judge it from common sense, usage habits and business logic. The conversion cost is not permanent and must be judged comprehensively according to the actual situation.
3. Network effect
How do enterprises sell their products? Is it through human marketing, specialty store sales, franchise chain or online store sales? How much sales do various sales methods bring to enterprises respectively? How do traditional enterprises deal with e-commerce? What is the network scale effect of enterprises? Network effect usually refers to the sales or service network of enterprises. The existence of these networks provides convenience for users, and user-centered convenience can produce stickiness.
With the increase of the number of users, the value of the enterprise is gradually enlarged due to the expansion of the network and scale. For example, nationwide, ICBC's business outlets are all over the country, even in major cities abroad. Comparatively speaking, it has a larger and wider network effect than regional banks, so ICBC has more users and higher enterprise value.
4. Cost and marginal cost
What is the cost structure of an enterprise? What are the determinants of cost? Can the cost of an enterprise be the lowest in the industry? How? Can the unit cost decrease with the expansion of sales scale? It is not easy for an enterprise to maintain its cost advantage for a long time. It needs superior resource channels (raw material advantages), superior production technology (process advantages), superior geographical location (logistics advantages), stronger market scale (scale advantages) and even lower labor costs. The other side of low cost is high gross profit, which is a sign of strong competitiveness. Enterprises with high gross profit usually have pricing power.
5. Brand effect
Does the product or service have a brand effect? In fact, for most users, their sensitivity to brand is far less than that to price, and price is the first factor to guide their buying behavior. The significance of a brand is that it can reflect the difference, quality, taste and reputation of a product or service. The value of a brand lies in its ability to change consumers' buying behavior, thus bringing above-average added value to enterprises. Therefore, products or services with brand effect should have the following characteristics: strong recognition. It is trust, dependence and satisfaction. Above the average selling price. It is the culture and values of the enterprise. It is the first choice of consumers.
6. What measures have enterprises taken to keep these advantages (moats) from being eroded?
Verb (abbreviation for verb) grows.
Growth focuses on future growth, not the past, and we should look at the future from the perspective of ceiling theory. Growth needs qualitative analysis, but it cannot be accurately analyzed quantitatively. For emerging industries, the reference of historical data is of little significance. For mature industries, long-term historical data (preferably covering a complete economic cycle) can provide some clues, which is still necessary as a reference.
Income is the leading indicator of profit: income growth, changes in main business, sales analysis of major customers and comparison of major competitors.
The level of gross profit margin reflects the competitiveness of enterprises: gross profit margin level and cost composition.
Moisture of net profit: operating profit (excluding investment income, fair value change income and non-operating income) and actual net profit (operating profit-income tax).
The gold content of income and profit: cash yield (cash/income received from selling goods or providing services), operating cash rate (net cash flow/income generated from operating activities), free cash free cash flow (free cash = operating cash flow-capital expenditure) and free cash/enterprise value (FCF/EV, enterprise value = market value+interest-bearing debt).
Sixth, the level of return.
1, ROE (return on shareholders' equity or return on net assets) 2, ROA (return on total assets) 3, ROIC (return on invested capital) 4, dubang method 5, porter's five forces method 6, SWOT method.
Seven. Security: The key is cash flow and cash reserve.
Asset structure: 1, cash assets, the ratio of cash and cash equivalents in assets, representing the cash reserves of the enterprise. 2 convertible cash assets, including financial assets, trading assets and investment assets. 3. Operating assets
Debt structure: 1, interest-bearing liabilities 2, interest-free liabilities.
Liquidity and capital flow: 1, accounts receivable and main debtors 2, inventory composition 3, capital flow, that is, the difference between the current change of liquidity and the previous change.
Liquidity change = (accounts receivable in advance+accounts payable)-(accounts receivable+accounts payable+inventory)
1, making money with other people's money. Specifically, the change of working capital of an enterprise is positive, that is, (prepayment+payables) > (accounts receivable+prepayment+inventory), and the payables of upstream customers and the prepayments of downstream customers are equivalent to an interest-free loan, which meets the working capital needed for the normal operation of the enterprise. This is a special business model, such as Suning Appliance and Gome. This business model shows the strong position of enterprises in the market.
2. Credit. Credit here refers to bill credit. Bill is a kind of credit financing. The notes receivable of an enterprise are the credit to downstream customers, while the notes payable reflect the credit of upstream customers to the enterprise. Bill credit reflects the relationship and status between enterprises and upstream and downstream partners, and is also a business model.
Cash flow is a key index to evaluate the competitiveness of enterprises, because profits can be whitewashed, resulting in more water. Enterprises with continuous positive cash flow have R&D and investment strength. It can be roughly divided into several situations:
3. Both cash added value and operating cash flow are positive-the enterprise is safe. The cash added value is positive or offset, and the operating cash flow is negative. It shows that the cash inflow generated by financing, issuing bonds or bank borrowing offsets the operating cash expenditure. The enterprise is still sound. It is necessary to evaluate the possible financial risks of enterprises in combination with the interest rate level.
4. Both cash added value and operating cash flow are negative, indicating that the company has financial problems. Of course, the judgment of a company depends on its development trend, core competitiveness and market barriers. Like Facebook. If it is a traditional enterprise, it is better to avoid it.
5. The cash added value is negative, but the operating cash flow is positive. Explain that the enterprise has investment, research and development or debt repayment expenses. This situation needs specific analysis. It is important to judge which part (investment or financing) is the main reason for consuming cash. The most unsatisfactory situation is that cash is only used to pay off debts, and the investment value is not great.