Chapter 130: Speculation on expectations, performance, and growth
In the trading room not far away, Li Feng was drinking tea leisurely.
Today is Monday, July 18, 2016.
In the past two months, Kweichow Moutai has slowly and steadily climbed from 250 yuan to 315 yuan, an increase of 25%. If calculated from the lowest point of 190 yuan in February, Kweichow Moutai has increased by 65% in less than half a year!
During the same period, the overall market only rose from 2,800 points to 3,000 points, a pitiful increase of 7%.
Wuliangye, the second-largest liquor stock, has also seen its share price rise from around 20 yuan in March to over 30 yuan in July, a 50% increase! Its first-quarter earnings report showed an even more astonishing increase, with profits increasing by 31.91% year-on-year!
Jiugui Liquor also climbed from its lowest point of 13 yuan in February and March to 26 yuan, an increase of 100%. The year-on-year performance growth was even more exaggerated, at 69.56%!
In the stock forum, there have been vague posts about the return of the king of liquor. Some people have sorted out the 2015 third quarter reports, 2015 annual reports, and 2016 first quarter reports of Kweichow Moutai and Wuliangye, and started to prove the arrival of the liquor cycle.
A sense of restlessness faintly came from the market.
Zhao Xinyue looked at it and felt a little uneasy.
This is a kind of fear that humans feel when facing the unknown.
Because she didn't know what to do next, specifically, she didn't know when to sell the stocks.
So, she was a little anxious.
In the stock market, those who know how to buy are apprentices, and those who know how to sell are masters.
Of the two steps in stock trading, selling is the most difficult, as it represents the final settlement of an investment. Sometimes, selling too early can lead to losses, while selling too late can leave you stranded. Other times, the opposite is true: selling too early can lead to missing out on a winning stock.
This is all due to insufficient awareness.
Only when a stock investor understands this point can he be considered a qualified stock investor.
Zhao Xinyue thought about it carefully for a long time, gave up, and asked:
"Li Feng, Kweichow Moutai has gone up so much, when should we sell? Uh, you said before that you should sell before you buy, but you didn't tell me that when you bought a few months ago."
Hearing this, Li Feng turned back from his computer and said with a smile, "Why, after just a few months, you've lost your patience? You can endure loneliness, but not prosperity? This won't do. You need to have the spirit of guarding your stocks like a widow, in order to reap big profits."
"Nonsense, still a widow? How unlucky! Tell me, how long do you have to stay a widow before you can sell it?" Zhao Xinyue frowned.
Li Feng pointed to the K-line chart of Kweichow Moutai and said, "Let's not talk about the general trend or the industry for now; they've all been talked about a lot. Today, let's talk about individual stocks. Generally speaking, there are three steps to hyping these stocks: the first step is to speculate on expectations, the second step is to speculate on performance, and the third step is to speculate on growth!"
"Every step of speculation is accompanied by an influx of funds and a rise in stock prices. Kweichow Moutai has risen quite a bit now, with a price-to-earnings ratio of 25 times. However, it is still in the stage of hyping performance and shifting to growth. It is not the time to sell yet. When its price-to-earnings ratio exceeds 30 times and the market starts to hype its growth concept, it will be time to sell."
Zhao Xinyue frowned and said, "So complicated? What about Gree Electric Appliances? Which stage of hype is it in now?"
"Gree Electric Appliances? It hasn't resumed trading yet, but we can analyze it from the perspective of its industry competitor, Midea Group." Li Feng hesitated and opened the K-line chart of Midea Group.
"Look, it started at a low of 26 yuan before the New Year, and after ex-rights, it's risen to 28 yuan. All in all, it's up 80%, even higher than liquor stocks! As for performance, the first quarter report showed 3.907 billion yuan, a year-on-year increase of 16.9%, and the current price-to-earnings ratio is only around 13."
"The real estate market, needless to say, has spread from first- and second-tier cities to our third-tier city over the past six months. For example, the house we invested in has already increased in value by 1,500 yuan per square meter."
"So Midea Group, like Gree Electric Appliances, is still in the process of speculating on expectations and then shifting to speculating on performance, which is one step behind the cycle of liquor stocks."
"Gree Electric Appliances will definitely see a rebound after resuming trading."
Li Feng is full of confidence.
"Then, what about real estate stocks?" Zhao Xinyue continued to ask.
"Real estate stocks?" Li Feng asked with a smile. "Have you been following the Baowan dispute?"
"Yes!" Zhao Xinyue's eyes lit up when talking about gossip.
If we were to say which topic has been the hottest in the A-share market over the past six months, it would have to be the "Baowan dispute". To a certain extent, it has even overshadowed "Brexit" and the "circuit breaker stock market crash".
Bao is Baoneng Group, which owns many companies, has hundreds of billions of revenue and is very powerful.
Wan refers to Vanke Group, the leading real estate stock in the A-share market, with sales of hundreds of billions of yuan. It was listed in 1991. If calculated based on the opening price of 14.15 yuan that year, the stock price has increased more than 200 times in the past 25 years!
Last year, after the stock market crash, in order to stabilize the market, the China Insurance Regulatory Commission introduced a series of policies to support insurance funds in increasing their holdings of listed companies' equity, which opened up channels for various insurance funds to buy up stocks.
On July 11, 2015, Qianhai Life Insurance Co., Ltd., a subsidiary of Baoneng Group, bought 5% of Vanke's total share capital in the secondary market in just one day!
According to regulations, when other companies increase their holdings of listed companies' equity in the secondary market to 5%, they must make an announcement, which means raising their stakes.
At that time, the stock market crash had not yet subsided and the market was extremely panicked. No one, including Vanke Chairman Wang Shi, had thought that this would be the fuse of the "Bai Wan dispute".
On July 24, 2015, Baoneng Group raised its stake in Vanke Group for the second time, and its subsidiaries bought another 5% of Vanke's shares. After the two bids, Baoneng Group's Ju Shenghua and Qianhai Life Insurance together held 10% of Vanke's shares, which is only one step away from Vanke's largest shareholder, China Resources Group, which holds 14.89% of the shares.
A battle for equity is about to break out.
Who is Vanke's largest shareholder will soon be revealed.
On August 26, 2015, just over a month later, Baoneng Group raised its stake in Vanke Group for the third time. After this increase, Baoneng Group's total stake in Vanke reached 15.04%, surpassing China Resources Group in one fell swoop and becoming Vanke's largest shareholder!
China Resources Group is unwilling to lose its position as the largest shareholder.
On September 4, in the Hong Kong stock market, it also increased its holdings in Vanke, increasing its equity to 15.29%, surpassing Baoneng Group!
On December 4, 2015, Baoneng Group started its buying spree again, increasing its stake in Vanke to 20.008% in one fell swoop!
Subsequently, Baoneng Group further increased its stake in Vanke to 24.26%, significantly surpassing the second-largest shareholder, China Resources Group.
At this time, Anbang Insurance suddenly appeared out of nowhere.
On December 17, 2015, Anbang Insurance also took action and increased its stake in Vanke to 7%!
What does it mean?
What is the intention?
You should know that Vanke’s management holds 4.14% of the shares. If Anbang Insurance turns to the China Resources Vanke Alliance, its shareholding will exceed that of Baoneng Group.
Many people have started paying attention to Anbang Group again.
On December 18, 2015, Vanke began to suspend trading.
Vanke's stock price also soared from more than 8 yuan before the suspension to 17.12 yuan, more than doubling!
At this moment, facing the fat piece of Vanke, Baoneng Group came in aggressively, spending tens of billions to grab the biggest piece of the pie; China Resources Group stood by and watched, firmly sitting on the second-largest shareholder's seat; Anbang Insurance held its chips, waiting for a price to rise; and the fourth-largest shareholder, Vanke's management, held on to its shares, waiting for help.
Vanke Chairman Wang Shi tried many times but was helpless. He angrily denounced Baoneng Group as barbarians, and management members BJH and ZJH also spoke out.
There has always been a tradition of speculating on restructuring in the A-share market, but most of them are small-scale, and many are capital operations, transferring money from one hand to the other, like Baoneng Group's aggressive acquisition of the leading real estate company.
Unprecedented.
Therefore, the "Baowan dispute" attracted countless investors to watch the show. Some participated in it to make money, some commented and guessed the results, and some jumped around to express their opinions. In short, it added a lot of vitality to the already quiet and boring bear market.
But the melon was not yet finished. Not long after, Evergrande entered the market again, spending a huge amount of money, mobilizing more than 30 billion yuan to directly buy 14.07% of Vanke's shares!
Now, the shareholders were completely dumbfounded. They thought it was a four-person game of mahjong to fight for Vanke's equity, but unexpectedly, a dark horse, Evergrande, emerged halfway.
"What do you think?" Zhao Xinyue also wanted to hear what Li Feng had to say.
Li Feng said, "I have no comment on this matter. I am only interested in the logic behind it."
"Look, real estate stocks are so cheap that industrial capital is buying them, but recently real estate stocks have been performing mediocrely, which is due to the settlement cycle."
"So, even though the housing market is hot right now, real estate stocks are still in the stage of speculation and expectations, and are lagging behind Gree Electric Appliances and Midea Group."
"I see—" Zhao Xinyue listened and had an idea. "What do you think? We can take advantage of this launch order and hype it up. Wouldn't that increase the overall financial returns?"
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