Chapter 36: Hidden Rules of the Stock Market: Sector Attack and Defense

Early the next morning, Zhao Xinyue went to work.

Li Feng munched on some bread, turned on his computer, and started watching the market.

The life of a professional stock investor is so boring and stressful.

Even if you are not trading, you should always pay attention to the market, feel the fluctuations in the stock market, and look for potential opportunities.

Today's Shanghai Composite Index opened at a low of 2411 points, with billions of dollars traded in an instant. Various sectors in the market went back and forth between red and green, with constant ups and downs.

But in Li Feng's eyes, it looked lifeless.

In the weighted sectors of the Shanghai Stock Exchange, bank stocks and even insurance stocks are already at the end of their strength and are in danger.

Real estate, nonferrous metals, steel, and coal have also suffered from serious overcapacity in recent years.

The economy has been difficult this year.

The stock market is also a barometer of the economy. If the economy is not good, the stock market is unlikely to be good.

While I was thinking, there was a soft knock on the door.

"who?"

Li Feng opened the door, but it was Lin Menghan standing outside with two bottles of Wuliangye.

Today, she was wearing a black mink coat and a pair of thick black tights on her legs. She stood quietly outside the door, looking particularly mature and charming.

"You, why are you here?" Li Feng was a little surprised.

"You woke my dad up yesterday, and he asked me to bring you two bottles of wine." Lin Menghan walked into the room and gently placed the two bottles of wine on the table. She then asked, "Is Xinyue not home?"

"No, I went to work. I've been working overtime lately." Li Feng closed the door and answered.

"oh."

Lin Menghan took off her coat and hung it on the hanger, revealing a moon-white base shirt. She gently stroked her hair, her eyes moved, and she saw Li Feng's computer.

"Still watching the market? Aren't you waiting to buy Kweichow Moutai?" She frowned slightly, a little puzzled.

"I want to choose another stock to form a portfolio," Li Feng explained.

“Which stocks to choose?”

Lin Menghan became a little curious. She went home last night and studied the stock selection criteria that Li Feng mentioned for several hours, but she was still confused and didn't gain anything.

"Could it be? You want to pick strong cyclical stocks?"

Lin Menghan suddenly saw the steel index that Li Feng had adjusted on his computer.

Strong cyclical stocks in the stock market refer to stocks in the steel, nonferrous metals, coal, oil, and shipbuilding industries with long cycles and large fluctuations.

These stocks may not start, but once they start, the price will increase by several times or even dozens of times.

During the super bull market of 6124 points from 2005 to 2007, China Shipbuilding created a legendary 50-fold increase in 3 years, and its stock price soared to 300 yuan per share!

At that time, there were many bull stocks in the oil, coal, nonferrous metals and other sectors.

It’s embarrassing to talk about a three-fold increase, and it’s not even worth mentioning if it’s increased five-fold. But there are a lot of stocks that have increased ten-fold or twenty-fold!

That was truly a great era for making wealth.

Lin Menghan did not experience the bull market of that year, but every time she saw the booming stock market from newspapers, news, or the Internet, she couldn't help but feel excited.

A person only needs to seize a bull market like this once in his life to change his destiny.

Could it be that the spring of strong cyclical stocks has arrived?

Lin Menghan's eyes flashed with a bright light. She quickly grabbed the computer, tapped her ten fingers rapidly, and began to analyze the current situation of these industries.

After more than half an hour, she sighed in disappointment and said to herself, "No, these industries have been experiencing serious overcapacity in recent years. Many large companies in the industry are on the verge of bankruptcy."

"Furthermore, the cycles of these industries are very long... It's impossible to reverse them in a short period of time... You can't buy the bottom of these stocks..."

After saying that, Lin Menghan looked up at Li Feng, wondering what he was doing with his analysis of these strong cyclical stocks.

Li Feng nodded and said, "That's right, these industries cannot be touched now."

“But have you ever thought that precisely because these industries are in trouble, new opportunities have emerged?”

"Chance? What chance?"

Lin Menghan could no longer keep up with Li Feng's train of thought.

Li Feng pulled a chair over and sat next to Lin Menghan, continuing to explain: "In our country's stock market, there has always been a tradition of speculating on cycles in bull markets, avoiding consumption in weak markets, and speculating on concepts in bear markets."

"This is because, during a bull market, strong cycles are always accompanied by super bull markets within the industry, and funds naturally flock in. During periods of weakness and adjustment, consumer stocks, with their advantages of weak cycles, high gross profit margins, and strong cash flow, have become a refuge for countless funds. However, in a bear market, everyone's performance is poor. Rather than hyping those large, underperforming strong and weak cyclical stocks, it is better to hype theme stocks and concept stocks, which are more eye-catching."

"Now, strong cyclical stocks are all caught in industry difficulties, and weak cyclical consumer stocks, such as the liquor industry, have also entered an industry downturn. If market makers want to make a living, the only way left is to hype concept stocks."

"this……"

Lin Menghan's eyes widened, but she didn't expect that Li Feng would explain the entire A-share market from another perspective, which opened her eyes.

Everyone has their own unique face.

Every stock investor has his or her own unique understanding of the stock market and makes decisions based on his or her own understanding, which has led to the birth of various schools and concepts in the stock market.

However, there are still traces of market operation. After decades of continuous metabolism and adjustment, the A-share market has formed this unwritten rule.

In a strong market, go to the offensive sectors; in a weak market, avoid the defensive sectors.

Li Feng glanced at her and continued:

"As the saying goes, leeks need to be harvested in batches. Last year, the market makers harvested the leeks that were hyped up by restructuring stocks, and this year it's time to harvest a new batch of leeks."

"Generally speaking, theme stocks and concept stocks include internet stocks and technology stocks in addition to the ever-popular restructuring stocks."

Lin Menghan found it hard to believe and said, "You mean, those junk stocks will be hyped this year? Tech stocks?"

"That's right. If a banker wants to make a living in a bear market, he will definitely choose small-cap tech stocks with fresh concepts to lure in the "leeks," Li Feng analyzed.

“I just don’t know which one it is.”

"You want to speculate in junk stocks too?" Lin Menghan asked with some difficulty.

In her impression, Li Feng is a value investor, which can be seen from his choice to buy a large position in China Minsheng Bank and his intention to buy the bottom of the leading liquor stock Kweichow Moutai.

Colleagues look down upon each other.

Generally speaking, value investors despise investors who speculate in junk stocks the most.

But now, I heard from Li Feng that he wanted to speculate in junk stocks.

Can one person have two operating styles at the same time?

This couldn't help but surprise her.

Li Feng saw her expression and said with a wry smile, "Menghan, what's so strange about this? We come to the market to invest and make money, not to argue with others about which stocks are noble and which are cheap."

"In the stock market, there is only one criterion for judging good and bad, and that is money. As long as it can make money, it is a good stock; as long as it loses money, it is a bad stock."

"It's a bear market now. In a bear market, there are ways to survive and play in a bear market. You have to play by the rules in a bear market, otherwise you won't make any money."

"In a bear market, value investors play by buying low, using 40 cents to buy a dollar-worth of assets, then slowly selling them when the stock's value is rediscovered. Technical traders play by keeping a close eye on the market, and when market makers intervene in a stock, they choose to play along with them, leveraging their momentum to realize asset profits."

After hearing this, Lin Menghan looked towards Li Feng, blinking her long eyelashes and muttering:

"Your...personality is so split..."

"This is called hedging." Li Feng stood up, brought over a plate of melon seeds and started eating them.