"Apart from bank stocks, are there any other good companies?" Kong Shiyan was curious.

Yun Luo: “Yes.”

Yun Luo: "Real estate was very popular in the past few years, you know?"

"I know." Kong Shiyan couldn't help but sigh when she mentioned this. "I was still a student at that time and couldn't afford to buy a house. When I graduated and started working and had an income, the house prices went up rapidly and I couldn't even afford the down payment."

Yun Luo: "If you can't afford a house, you can buy stocks of real estate development companies. There was a stock that was 8 yuan four years ago, and it dropped to 6.5 yuan at its lowest. Now it's 37 yuan."

Kong Shiyan, "!!!"

A 4.6-fold increase in four years? That’s too much profit!

Yun Luo: "In the best years of the real estate market, the company's net profit soared. In about three or four years, the market value could double. For some companies that expanded quickly, it could double in one or two years."

"In addition to real estate, some other industries have benefited from this."

"After buying a house and renovating it, cement is needed, so cement sales have skyrocketed. After renovating the house, refrigerators, air conditioners and other electrical appliances are needed, so the home appliance industry has developed rapidly."

"In addition, the furniture, bedding, kitchen and bathroom appliances, interior decoration and other industries are also doing good business."

Kong Shiyan was speechless for a long time.

When she complained that "ordinary people are destined to have no chance of getting rich", there were actually opportunities everywhere in life, but she just didn't know and didn't seize them.

"Having missed out on real estate, will I ever encounter a similar opportunity in the future?" Kong Shiyan lamented.

Yun Luo: "Opportunities are always there, it just depends on whether you can find them."

Yun Luo: "In addition to buying and selling stocks, investors can also buy new stocks in the securities market. Winning one stock can earn at least 10,000 or 20,000 yuan. If you are lucky enough to win a good ticket, you can make 50,000 or 60,000 yuan at a time. For a few particularly excellent companies, it is not impossible to make more than 100,000 yuan from a new stock."

Yun Luo: "Generally speaking, if you stick to new stocks, you can get a 10% risk-free return in a year. If you're lucky, you can get a 30% return."

Kong Shiyan, "..."

There are many ways to get rich, but unfortunately, she had never heard of them before the system mentioned them.

Kong Shiyan reflects on herself.

I always complain that there are few investment channels and I have to put my money in the bank. It is safe, but the interest rate is too low and it can never keep up with inflation.

Looking back now, who can I blame?

She had heard about the stock market a long time ago, but was frightened by other people's experiences of losing money and had never learned much about it.

If she doesn't study and find ways to make money on her own, who would tell her about the opportunity to make a fortune for no reason?

Thinking of this, Kong Shiyan secretly made up her mind. She must study hard and never be poor all her life!

**

Kong Shiyan is a doctor at a pet hospital, and her salary is above average. But she has a fixed monthly rent, so saving money is extremely difficult.

Fortunately, she was enlightened early and had financial management awareness in college. So after working for three years, she finally saved 60,000 yuan.

He left 10,000 yuan for emergencies and transferred the remaining 50,000 yuan into a newly opened securities account, planning to start his road to wealth.

Yun Luo glanced at the host twice more and said, "With your salary level, it is not easy to save 60,000."

"There's nothing I can do about it." Kong Shiyan muttered, "For a child like me who grew up in an ordinary family, I can only save up my first pot of gold by living frugally."

"If you encounter an opportunity to make a fortune someday, but you don't have the funds, how miserable would that be?"

"In order to save this money, I did everything I could, such as living on a 100-yuan weekly basis, cooking for myself, and searching for money-saving tips online."

"Having said that, there are really few ways for ordinary people to rise. Every month, there are living expenses and rent expenses. Even if you save money, some expenses cannot be saved."

"As for wages, they basically remain at the same level, neither more nor less. Asking the boss for a raise is harder than asking him to die."

Kong Shiyan wanted to sigh as she spoke.

Because she felt that there was no hope in the workplace, she wanted to learn about investment and give herself a raise. But she didn't expect there would be so many scams, and it was hard to guard against them.

Yun Luo: "So I have to learn how to invest."

Kong Shiyan wanted to open the computer and look through all the stocks in the trading market. Before taking action, she paused and looked at the system, "I want to choose a few good stocks. Do you have any suggestions?"

Yun Luo thought for a moment and said, "Company development generally goes through three stages, namely 'growth stage', 'maturity stage', and 'decline stage'."

"For example, real estate companies in the past few years were in a rapid growth stage."

"The domestic large banks are in the mature stage, and the textile industry is in the recession stage, also known as the sunset industry."

"What does this have to do with my stock selection?" Kong Shiyan was extremely puzzled.

Yun Luo: "Didn't I say that? Buying stocks means buying companies. Only by choosing good businesses and good companies can you make money."

Kong Shiyan seemed to understand, "Just like the real estate and home appliance industries in the past few years?"

Yun Luo: “Yes.”

Kong Shiyan took out a small notebook and picked up a pen. "Go on."

Yun Luo: "There is an important indicator in stock investment, called ROE, also known as return on net assets."

"What does that mean? Simply put, if a company worth $1 million can earn $150,000 a year, its ROE is 15%."

"It is generally believed in the industry that the return from long-term holding of a stock is equivalent to the stock's ROE."

"For example, you invest 1 million yuan to open a supermarket. After deducting all costs, you make 150,000 yuan a year. Take out the money you earn every year and use it for living expenses. Then you will always operate the business with 1 million yuan of capital and always make 150,000 yuan a year."

Kong Shiyan wrote non-stop, and at the end she looked up and sighed, "This is really a business..."

Yun Luo: "In mature industries, ROE is relatively stable."

Yun Luo: "For example, in industries such as banking, highway toll collection, and hydropower generation, the ROE fluctuates between 12% and 16% each year, with little change."

Yun Luo: "These companies are stable and don't expect rapid expansion, so they will continue to distribute profits as dividends."

"What about the growth period and the decline period?" Kong Shiyan asked.

Yun Luo: "In the growth stage, this year's ROE is 100%, and the investment will be recovered in one year."

Kong Shiyan: “…”

The hand holding the pen was trembling slightly.

Yun Luo: "Companies that can maintain a stable ROE of more than 20% for many years are good companies. As a company expands in size, it is extremely difficult to maintain a high level of ROE."

"I understand." Kong Shiyan took a deep breath and moved her pen quickly, intending to write down all the key points.

Yun Luo: "Don't touch industries in recession. This year's ROE is 10%, next year's ROE is 5%, and the year after that it may even be a loss. It's better to buy bank financial products than to buy such stocks."

"I understand." Kong Shiyan wrote quickly, filling up a whole page.

After making sure that the system had nothing to instruct her, she opened the trading software and looked through each stock one by one.

**

Finally, I picked out more than ten good stocks.

The problem is that some of these are related to the home appliance and real estate industries. In the past four years, the real estate market has been very hot. In the next few years, Kong Shiyan does not think that the property market will remain as hot as it is now.

"Then eliminate it." Yun Luo said, "If you are not optimistic about an industry, you will not be able to convince yourself to hold it for a long time."

"Yes." Kong Shiyan nodded heavily, and then deleted all the stocks in the home appliance and real estate industries.

After deleting them, there are still six stocks left in my watchlist.

"The remaining stocks belong to four industries: environmental protection, technology, medicine, and breeding," said Kong Shiyan.

Yun Luo: "Good companies must be bought cheaply to get good returns. Some companies with unreasonable valuations can be deleted."

"How do you tell whether a valuation is reasonable or not?" Kong Shiyan asked humbly.

Yun Luo: "Look at the PB (price-to-book ratio, PB = share price / net asset value per share). Generally, PB does not exceed 2."

Yun Luo: "Some banks' stock prices are lower than their net assets, commonly known as 'broken net assets'. PB=0.7 means that assets worth 1 million can be bought at 700,000 according to the market price."

Yun Luo: "The share prices of some technology stocks are much higher than their net assets. PB=4 means that someone is willing to spend 4 million to buy an asset of 1 million."

"Why?" Kong Shiyan was incredulous. "Isn't this stupid?"

Yun Luo explained, "Some people are optimistic about the development prospects of technology stocks and are willing to pay a high price to buy them. If it is a really good company with unique scientific research technology and its ROE remains above 100% every year, even if you buy the shares at four times the price, you will still make a lot of money in the future."

Kong Shiyan thought about it and realized that this was the truth. "Why eliminate it?"

Yun Luo: "There are very few companies that maintain ROE above 100% every year."

Yun Luo: "If the performance drops sharply in a certain year and the ROE drops to 10%, I don't know when I can make the money back."

Yun Luo: "The market generally gives a higher valuation to the growth-stage industries, so we need to rely on high growth and high ROE to make money back."

Yun Luo: "For mature industries, if profits are much less than before or if there is a loss, it is called a thunderstorm. For growth industries, if there is a loss of growth, it is called a thunderstorm."

Too much information.

Kong Shiyan felt like she understood, but also like she didn't.

"In short," she calmed down, "tech companies with a PB of more than 5 are not suitable, they are too expensive. Pharmaceutical companies with a PB of more than 3 are also not suitable, they are too expensive."

After cutting and deleting, there is only one environmental protection stock and one pig farming stock left.

Kong Shiyan was hesitant.

Yun Luo: "Both of these stocks are good."

Yun Luo: "The concept of environmental protection will be popular in the future. In the past, we sacrificed the environment for economic development, but in the future we will have to spend a lot of money to manage the environment."

Yun Luo: "Pigs have their own cycles, which usually last three to four years."

Kong Shiyan thought about it again and again, but still couldn't make up her mind. In desperation, she had to ask the system for help, "If it were you, which stock would you choose?"

Yun Luo, "..."

Having said so much, in the end it is still her decision.

Yun Luo: "I choose breeding."

"Okay!" Kong Shiyan deleted the environmental protection stocks neatly and kept only one pig farming stock in her watchlist. "I think the current price is not expensive. Can I buy all of it?"

Yun Luo: “You can buy it if it’s undervalued.”

Yun Luo: "The current price is just right."

"Buy it as soon as it opens tomorrow!" Kong Shiyan rubbed her hands eagerly.

Yun Luo: "Let me be frank with you."

Yun Luo: "The market is irrational, so you need to be cautious when investing."

Yun Luo: "Even if the current price is underestimated, it may be lower in the future."

Kong Shiyan was slightly startled, and subconsciously said, "Then can't we wait a little longer and buy it when the price drops?"

Yun Luo: "The market is irrational and its changes are irregular."

Yun Luo: "After buying, the stock price may go up or down."

Yun Luo: "If you buy it, maybe it will fall later. If you don't buy it and wait for a lower price, maybe this is the recent low."

Kong Shiyan, "..."

"What should we do then?" she asked hesitantly.

Yun Luo: "Undervalued, buy anytime you want."

Yun Luo: "Be prepared for a long-term battle after buying."

Yun Luo: "Don't forget, real estate stocks rose from 8 yuan to 37 yuan, and before that, the lowest had fallen to 6.5 yuan."

Compared to 37 yuan, 8 yuan is definitely not expensive. But even so, it still fell by nearly 20%.

If the stock price drops, can she hold on and not sell?

Kong Shiyan asked herself, but found that she was not sure at all.

The author has something to say:

Generally speaking, the higher the return on an investment, the greater the risk.

Bank deposits have low returns, so the risk is also low.

Other investments have certain risks, so the returns are higher than banks.

So why is it that investing in new stocks is almost risk-free and has high returns? Because it is like winning the lottery, and the chance of winning is very low. It is normal not to win once a year.

**

Some people ask, why is it 7 yuan when the market value is 10 billion, and 6 yuan when the market value is 11 billion? Because the market is irrational.

The price is already very cheap and may still fall.

For example, the stock market crashed on February 3. Many banks were very cheap, but they just fell.

In the previous example of tulips, was the price of 10,000 considered high? Yes. Did it continue to rise? Yes, it rose to 11,400.

But in the long run, prices will converge to value. If it rises too much, it will fall, and if it falls too much, it will rise.

**

Highway tolls and hydropower generation

For example, Daqin Railway has an ROE of 14% in recent years, and 50% of its net profit is distributed as dividends every year.

For example, China Yangtze Power has had a ROE of 16% in recent years, and has distributed 70% of its net profit as dividends every year.

These are high-quality bonds.

**

It is rare for a company to create and maintain a high level of ROE. This is because it is extremely difficult to maintain a high level of ROE when the company expands.

-- Buffett

The long-term return on a stock investment is equivalent to the ROE of that stock.

—Charlie Munger (Buffett’s partner)