Long-term investment that the industry is worth

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					Long-term investment that the industry is worth
Long-term investment that the industry is worth
Transfer from: Liang Junru's blog
?Anniversary of the Ocean
First, the "investment in the jungle," Reading Notes
?????Browse a few of the recent investment in the book, for the mind
has been hanging in the questions with some answers, I would like to
answer by Transcription in their own problems, in the end what the
industry should be long-term investment? As the "Buffett's
moat," said Dorsey, author of "Some businesses do have a
great advantage, they are born to lead. Even worse then the
pharmaceutical management companies and banks, in the long term return
on capital also make a very good rate of chemical or auto parts
company Iranian society. "In other words, there are some good
industry industry is day life. For the value of compound interest to
seek long-term investors, in this industry the probability of finding
good companies even more. We invested in those investments which
industries to give them a long-term investment success? This is
something we should seriously explore.
????Stephen A ¡¤ Gary Pavlovsky, a prominent Canadian investment in the
rich and philanthropist, he wrote his own life at age 79, only a book
"investment jungle", summing up his 50 years of investment
????He said: "My criteria is to invest in only high quality, its
growth is largely non-cyclical stocks, this stock has a high rate of
return can be expected, and hopefully provide a higher dividend growth
????"Historically, raw materials, the prices of commodities could
not keep up with inflation, while other sectors, such as the medical
sector or the financial sector is beyond inflation."
????"I can choose the world's tens of thousands of stocks, I
really need to see only a maximum of 50. I do not need to buy Bell
Canada, or GM, because I do not think these companies can generate in
the future for years has been 14% per year to 16% of the proceeds. The
same thing applies to the paper industry the company's stock because
the industry cycle dominated by serious, and very little agriculture,
forestry can provide mineral revenue 14% to 16% of the long-term
growth. I do not need to buy New stocks of small companies, they may
be as a competitor to enter and be consumed, and thus destroy the
profit margins of a night, or worse.
????I do not think that those who do not pay to purchase the company
an attractive dividend stock, I hope it is best to increase wealth as
the company increased dividends. Like most companies, like living
organisms, there is a lifetime limit. A company is to profit, and this
profit accrued to the shareholders. However, there may exist such a
company, the shareholders as a whole group in this company from birth
to death in the process did not get anything. Some investors may be
trading these stocks to reap a profit, but in the end, with the
company in decline, others will be subject to loss, and if the company
or its successor finished, the initial investment will be completely
erased. "
He specifically cited a number of industries.
????"The peanut butter, cereal, soft drinks, or razor blades are
basically non-cyclical consumer. Not only that, with the Cold War,
these products have been expanded to the world.'s Industry-leading
companies with the benefits of lower cost per unit of product, which
can accumulate greater profits, and thus provide more funding to
promote their expansion. Their market network is very strong, can be
used to promote the development of new products or products obtained
through acquisition. As a leader, more large profit margins allow them
to receive dividends, while the pursuit of growth, while the second or
third from the two companies are likely to choose one.
????Thus, like Gillette, Coca-Cola, Philip Morris, Unilever, Kellogg,
ConAgra, and so such a company is worth considering the type of
company. You should check they are in a period of, for example,
10-year earnings and dividend growth. If they are doubling every 5-7
years, then the investment plans of these companies is your candidate.
Furthermore, in 10 years if the stock rose 4-fold while at the same
price-earnings ratio does not improve, then this stock is that you
should have went in to buy the stock 10 years ago! "
????"For you to explore another very fertile area of health care,
including the industry's leading supplier of medical products in
stock. Like Abbott, Johnson & Johnson, Novartis (a Swiss company),
Hao Fu Mai - Roche (also a Swiss company), Cardinal Health Group
(Cardinal Health), Pfizer, Amgen (Amgen) and so on. These are the main
object of attention, has a solid franchise and excellent research
facilities. In my opinion, this is a wonderful area its shares within
the portfolio in my possession is always a large part.
Retail and distribution logistics industry will also have some good
stock, but this is a more delicate areas. For example, the industry's
leading pharmacy chain has a great time-tested results. But retail
stocks are often only a limited life cycle, and difficult to be
extended. Top of the food chain was shown to be more likely than
department stores or specialty stores have long-term survival.
However, if you are a good early grasp the concept stocks, like
Wal-Mart or Home Depot (Home Depot), it can give you many years the
growth rate of 15%.
????In the field of banking or insurance is hard to find the steady
growth of 15%, but the existence of such growth, especially recently.
Changes in competition law blurred securities underwriting, brokerage,
insurance, and the boundaries between the banking industry, to create
new opportunities for development; The result is world-wide expansion.
In this area there are many stocks available each year about 12% to
13% of the stability of income. Of course, you should see interest
rates as high interest rates tend to dampen stock prices. The constant
search for high-yield equity of financial stocks, they also have a
growing revenue line, to show that both in the top of the (gross
income) or at the bottom (net income) have a stable growth. I want to
say again, mainly to look for industry leaders; if managed well, then
the size of the unit can provide low cost and competitive advantage,
that is the truth, led to the merger is now a strong trend. "
Reproduced above is Gary Pavlovsky investment industries that include
consumer goods, pharmaceutical, insurance and retail banking is mainly
retail chains.
????For many investors, so in several industries such investment may
be meet their appetite for it. It seems that he insight into our
hearts, in the book below, he continues:
????"You want to avoid is not satisfied with the scope of the
industry discussed above. In the high-tech industries, there are many
companies can do very well for many years, but after the collapse,
just as Apple, Wang PC ( Wang Labs), Unisys (Unisys) and Digital
(Digital), which is the case. "
????"The key to success is that you select in the
industry-leading company's stock, and then insisted for years that
hold them. If a family's income in a year or two years, did not reach
the target, whom did not need to panic, this is quite normal. as a
company, unless they are "managing their own income" (which
is a euphemism for trying to manipulate them), otherwise it will
inevitably experience good or relatively poor during the period. Most
companies, even the most good company, we must continue on their
investment. There are many companies had come out three to four years,
the products may account for 40% of total sales to 50%. and in the
pharmaceutical industry will face after the expiration of drug patents
from the so-called generic competition. So if the old and new products
and updating on the turn of the new stuff is not particularly
attractive, the company's growth will slow down or pause there; if the
company's research and development and overall management level is
still maintained at the level of industry-leading , then you do not
have to feel uneasy in this regard. I have such a slowdown in the
period of Pfizer buying its stock, the result is my money invested in
the subsequent four years has quadrupled.
This investment approach looks plain boring, as very few changes, but
this approach is effective, especially if you draw on the analysis of
experts after the study. Keep the rules and stay on the highway in the
investment, do not look around. You're not looking for emotional
satisfaction, not gambling, not investing for pleasure, but to be safe
and reliable in the long term returns. "
Gary Pavlovsky, I recently discovered a great investor, perhaps not so
well known, but in his 50-year veteran in the investment experience of
the jungle, I believe he has the choice of the industry value of
investment practices. Let us remember his choice: consumer goods,
pharmaceutical, banking and insurance, and retail chain.
2010-1-23 at Sun City
Second, "Davis Dynasty," Reading Notes
????Gary Pavlovsky, jungle battles in the investment experience of 50
years, summed up the long-term investment worth several industries,
brought him a huge return on investment, real success stories that we
have very strong indeed convincing, for which we have invested great
reference for the industry. Gary Pavlovsky, a person 50 years of
experience, and another 50 years of experience is derived from three
generations of an extended family, that is a lot of people familiar
with the Davis dynasty achievements through three generations of
investment myths.
????Rely on to accomplish great Davis dynasty it? Chief among them
insurance and banking insurance.
????I continue to plagiarism, this book is the "Davis
Dynasty", I used to read a rough back of the head did not get any
slow inspiration, the repeaters, the feelings, it shows a great need
for investors vision and perseverance, and what kind of industry
investment in gold will be bears.
????What kind of company in the choice of the above, there is a word I
feel the need to keep in mind:
????"The sale of products or services never become
????Very short sentence, in fact, deep messages. In human society, and
what it will never become obsolete? That is as long as human
existence, human beings need, sickness and death of the most basic
health life is entertaining, plays a level is to meet the needs of
humans in the production of these substances or activities to obtain
funds or services. Specifically talk about is food, medicine, and of
course with the progress of mankind, the ancients did not have some
modern necessities, such as financial, family and personal products
and the like, has become the basic needs of life. Because these things
are always with the phase of human existence, then, one of the best
companies will be able to provide a steady income, change in the magic
of compound interest to accumulate into a huge profit figures.
????In the 50 years of trial, error and improvement, Davis chose the
family as their primary insurance and investment banking industry,
especially the insurance industry to the first 1,700 times Davis's
earnings. Davis to 15 million seed money, through 50 years of
accumulation, in the 12 stocks accumulated wealth of 261 million.
These 12 companies, there are 11 insurance companies, and the
remaining one of Fannie Mae, also with the insurance similar.
????In the years in large-scale buying of bonds, "Davis does not
care about the bond market turmoil, he is too busy for insurance
stocks, especially those small, the strong momentum of the species. In
1954, he finished 7 years of self-employment, entered the ranks of the
rich. the market is money to be made in every area, people hanging
Christmas, but aimed at the most sweet, Davis happens no one pay
attention to that part. no exaggeration to say , life insurance
companies like revenue growth rate of the computer industry in the
future, digital processing industry, pharmaceutical industry, and
well-known retailers like McDonald's and Wal-Mart. "
????Davis believes that "insurance companies, compared with the
manufacturer, has many unique advantages. Underwriter always introduce
new products, the customer's money to invest for a profit, without
costly factories and laboratories, not pollution, but also to ward off
recession. the economic downturn comes, consumers delay large
purchases (homes, cars, household appliances, etc.), but they can not
postpone the payment of housing, cars and life insurance costs. "
????Relative to the insurance industry, Davis, aluminum, rubber, soil
or concrete car companies were not interested. Because
"manufacturers such as these require high cost plant, repair and
innovation will make their cash running low. They will lose money in a
recession, so stock returns are not reliable. They want to introduce
new processes or new inventions , they would face bankruptcy.
Throughout the history of the production industry, few companies can
live long, only those companies that can transform innovation not be
eliminated. "
????Insurance is not the case, it has timeless features. "Some
insurance companies have spent their 200-year-old birthday, while
sales of the products are basically not changed, or when those
Founding Fathers alive. They put the customer's money for investment,
benefit from it; the producers never get this opportunities. "
????But the insurance industry itself is not a compensation package
does not make the industry, due to strict control by the government,
the insurance industry is a low margin industry, and because there was
no difference between the insurance product itself, and fierce
competition, buyers of brand value is not much attention as other
industries, because when they buy insurance, mainly from the local
dealer to buy, what to buy what they recommend, for any one insurer,
the same suspicion and hatred. This is Dorsey in "Buffett's
moat," a book that insurance does not owes something to the moat.
However, think carefully about Buffett's investment experience in the
insurance industry, I found, perhaps not in the insurance industry,
the insurance industry itself but the moat in the insurance industry,
the investment that is, who are more advantages, who can make float
stable and sustained revenue? This is the way, after the talk.
????So why Davis from such a low profit, highly competitive industry
in a massive return it? The book summarizes several reasons:
????1, the insurers cover up the true profitability, the profit is not
high ... ... .. it may be, at least in part, insurance actuarial
????2, Davis, starting at a low price point, in his initial portfolio,
many insurers are small operators; when these small companies by large
mergers and acquisitions, Davis, can reap the profits.
????3, after World War II, he seized houses, cars and life insurance
in the peak.
????4, he did not realize their potential has not been able to select
those companies, such as Aetna, where the loyalty of the shareholders
are often not return. He was looking for those adventurous and
low-cost operations compound machine, such as Japan's insurance
companies, Berkshire Hathaway and AIG, they can make a few decades to
shareholders satisfaction and trust.
????5, a technology company operating properly is often clever knock
down opponents or cutting-edge invention; but a the same insurance
company are the good guys can win in the competition to take account
of, and never have to worry about obsolescence.
????Davis, Newcastle will be the second-generation dynasty chose
banking as their main battlefield. He believes that banks and
insurance companies tend to operate outside of a way of sounding the
headquarters, but is a giant grave. Banking will never become
obsolete, because the money never out of date.
???"Bank does not manufacture any product, so no expensive
factories, precision machinery, warehouses, laboratory or Dr. Gao Xin.
Banks will not cause pollution, so do not spend money on pollution
control equipment. It did not sell small equipment or clothing,
therefore not employ sales staff. it does not have the goods shipped,
so there is no transportation costs. Bank of the only product is
money, borrowing from depositors and then lend to borrowers in the
hands. Monetary many forms (coins, banknotes and securities), but
never out of date, competition between banks, but the banking industry
itself is always fashionable. "
???"Because banks do not become obsolete, so it can not lead the
trend, investors will not be willing to make great efforts to buy bank
shares. This way, you can always buy bank stocks at lower prices,
without having to spend a lot of money to development investment for
the bank. "
Davis family to focus investment "money timeless" theme,
whether it is insurance and investment, in fact, the kernel is
spending money with money, as long as prudent allocation of funds, not
to greed, the long run must be fruitful. Return on equity from the
composition point of view, insurance and banks have high leverage, the
leverage that is to use someone else's money to make money.
????Whether the insurance industry or the banking industry, which is
characterized by timeless, but to get huge profits, they must be
ignored by the public when investors, Davis investment insurance
stocks, very few people are concerned about the industry, he can buy
at low prices, until 1965, everyone realized that the charm of
insurance, this time, the performance of the insurance increased four
fold, and investors spend 3 times the price on the shares to buy ,
profit growth and earnings increases created a double play when
David's profits.
????It makes me think of Jerry Siegel in "The Future for
Investors" in reference to the basic principle of investor
Long-term stock gains do not depend on the actual profit growth, but
on the actual profit growth and investors expect profit growth
differences between.
????Investors pushed up the price too high expectations, stock prices
can not be obtained in high excess returns. For rational investors, to
obtain stable and sustainable high-yield and find timeless industry is
important, but equally important is that in this industry in a market
expected to be underestimated or ignored when the public can buy the
ultimate success.
????Based on the above experience, take a look at today's A shares on
the right bank stocks and insurance stocks, especially banks, are not
worth our study and take the time to think?
Third, "The Future for Investors," Reading Notes
Is it worth the long-term investment in an industry to see an
individual or a family life in their long-term investment performance
of selected industries, the natural is a reference value, but such
cases will not be just a special case, it does not have universal
significance. If you really want to prove worthy of long-term
investment in some industries, we need a longer data history is more
extensive industry research. Fortunately, the field is a very mature
investment world, a lot of talented people rush to give us a variety
of excellent research results. Study the long-term data for the stock
market has made great achievements and get a well-recognized to
calculate the Wharton JEREMY J. SIEGEL (Jeremy J. Siegel), Professor,
he wrote, "the stock long-term investment," a sensation, I
want to read here is based on the book he wrote on the "The
Future for Investors," as part of this book specializes in
long-term history, which made the industry far beyond the average
revenue performance.
????Siegel's research established the S & P 500 Index based on 46
years of data (March 1, 1957 to December 31, 2003), the original
company to track the S & P 500, up to almost half a century of
performance. S & P 500 index and the performance of the overall
income gap between the best the company's revenue significantly.
????Siegel writes:
"If you're 28 February 1957 S & P 500 index fund to invest $
1,000, then after repeated investment dividends, to December 31, 2003
This $ 1,000 can be accumulated to nearly $ 125,000; but if the 1000
U.S. dollars are put to the best that the original company to an
index, then under the same conditions you can almost have $ 4,600,000.
????S & P 500 Index Fund 10.85% annual compound rate of return.
????The best performing companies in a compound rate of return is
????And this company is so lucky to be? That in 2003 changed its name
to Altria Group's Philip. Morris (Philip Morris) company. Initially,
this is a tobacco company, smoking regulations in the government was
under pressure to earn profits by buying tobacco in a large number of
well-known consumer products companies such as General Foods, Kraft
Foods and Nabisco Holdings (Nabisco Holding). Currently Philip. Morris
has more than 40% of the revenue and 30% of profits from food sales.
????Pick out the 500 companies insist on holding a company for almost
50 years, this seems not an ordinary person is capable of, so lucky
when it seems difficult to favor any one of 1957 people. Listing of a
company just 50 years to determine its long road, seems to be an
impossible task.
????However, Philip. Morris may be slightly different, it is listed on
the 1925, "when people just started to collect statistics and
stock returns, the stock market it has become the best investment
option." That , was born in 1957, the S & P 500, select
Philip. Morris is traceable. If you start investing from 1925 to the
end of 2003, the annual compound rate of return is 17%, but from the
people who started investing in 1957, the annual compound rate of
return is 19.75%, revenue higher. This means that investors in
understanding the back of its performance history, if we can make the
right judgments, the selection of this is possible, in particular, the
company has been in existence in the case of 32 years (1957-1925).
????The key is the depth of our understanding of human nature, human
demand for addictive products, from the species to the spirit of the
stimulus intensity has been expanded into this process has been 500
years. Continuing to meet human needs that the tobacco companies, how
could it not made a fortune?
Of course, investment in half a century, Philip. Morris to gain
maximum benefit, there are other reasons, that of the government
restrictions that led to the "lower expectations, higher growth
rates and dividend yield, the three high The formation rate of return
to create the perfect conditions. "
From the 500 companies singled out Philip. Morris is very difficult,
which may make you feel depressed. Fortunately, the best performing S
& P 500 index as many as 20 survivors.
????Of the 20 companies, two industry dominating firmly: high-profile
consumer brand companies and well-known large pharmaceutical
companies. "These companies have gained wide recognition and
trust of consumers. They experienced in the past half century, the
economic environment and political climate of great change and,
ultimately, to survive. In addition, these companies are actively
expanding the international market."
The 20 companies ranked as follows:
????Philip. Morris
????Bristol-Myers Squibb Company
????Little toe ring Industrial Company
????Coca-Cola Company
????Colgate Palmolive Company
????Crane Company
????Fu Chun Company
????Procter & Gamble
????Hershey Foods
????Royal Dutch Petroleum
????General Mills
????Of which 11 are consumer products companies.
????Philip. Morris and Fu Jun is the tobacco companies.
????Little toe ring than 100 years the company has been producing
lollipops, the price did not change in 107 years. Have children who
have first-hand experience, the children they see lollipops, anything
else would be put aside and ran to it, as long as the survival of
mankind, to raise their children will not disappear lollipop business,
the key that you have a strong brand or channel can be seen everywhere
laying capacity. Hershey is also the candy maker, Wrigley as it is
with the products and the same 100 years. Heinz ketchup is synonymous
with most of the family dinner table without it. Coca-Cola and
Pepsi-Cola is carbonated beverage, but its power of sustained
profitability, we all have the same feelings. We can see in these
foods to the company without diet meals, while more than a snack food,
seasoning, its powerful brand into a profit machine.
????Colgate-Palmolive and Procter & Gamble are the production of
home health products company, the two companies in the Chinese
consumer awareness and consumption of personal hygiene products, we
have personal experience.
????Siegel that the continued success of these companies,
"originated in the United States and around the world build a
strong brand image. Well respected and trusted brands allow companies
to raise prices above the competitive price, as investors more profit.
????Of which six pharmaceutical companies: Abbott, Bristol-Myers
Squibb, Pfizer, Merck, Schering-Plough, Wyeth.
????Why pharmaceutical companies have such a brilliant performance?
Dorsey in the "real rules of the stock market," said,
"The health care industry is very few and are closely related to
the economic sphere of human existence." "Many areas have
been a few big companies do not need to price competition in the
monopoly," "immediate economic downturn, people will get
sick, you need doctors and hospitals. "demand is stable, high
profit margins, which naturally achievements of the health care
????It can be seen above, to meet human needs of food and medical
treatment is never out of date, but the premise is "a well-known
brand", where the brand is very important, is how not be
For Chinese investors, from the brand perspective of existing listed
companies in China will be a bit disappointed, at least in the field
of consumer goods is that, in the pharmaceutical area, because of the
legacy of our ancestors, may be a little amount to anything.
?2010-1-29 Sun City in Tianjin