Since this year, affected by the covid-19 epidemic and the war between Russia and Ukraine, A-Shares have continued to be capped by dark clouds. The gem index fell by as much as 30% at the end of the year, and the Shanghai Composite Index fell by more than 10% this year. Recently, it has hovered below 3100 points.
Coerced in the current market, the hearts of investors are inevitably full of anxiety, but from the past ten years of A-share history and the 100 year investment history of U.S. stocks, the crisis will eventually pass, and bull stocks continue to hit new highs at the end of the crisis.
A-share bull short bear long, if investors do not have a stable mind and long-term investment belief, it is easy to sell at a low point in shock waves again and again. Over the past decade, A-Shares have faced some vigorous “major events” almost every two years, such as the “money shortage” in 2013, the clean-up of off-site capital allocation in 2015, the Sino US trade friction in 2018, and the spread of covid-19 epidemic in early 2020
However, these “major events” that once caused a panic did not affect the bull run of good companies. According to the statistics of the reporter of securities firm China “investment little red book”, in the past 10 years (20122021), nearly 40% of the stocks with comparable data have more than doubled, which means that the annualized yield of these stocks exceeds 7%, outperforming bonds and financial products in the same period. Among them, 14% of excellent companies increased by more than three times, and 3% of excellent companies increased by more than 10 times.
US stocks are the same. There have been six panic attacks in the 19th century. As Buffett said, sometimes the market will plummet, which may be more than 50%, but for those who have long-term funds, control their emotions and have a stable investment framework, stocks are a better long-term choice
From the perspective of historical changes, those investors who can draw wisdom from history and combine knowledge with practice will eventually have a good return in the long run.
A-Shares have experienced 6 shock waves in the past 10 years
Some people say that a financial history is actually a history of crisis.
After the subprime mortgage crisis in the United States in 2008, Buffett said in an interview with China Central Television that the United States has a history of about 200 years, but it may have experienced 15 financial crises. There were six recessions in the 19th century. At that time, it was called recession. Now we call it panic. This recession does not mean a bottomless pit, but it does not mean a bottomless pit. Every century has some bad years, but if the good years are more than the bad years, the country will not stop moving forward, as is the case in China and the United States.
Back to a shares, there have been six influential shock waves in the 10 years from 2012 to 2021. Every time the impact comes, investors who are not mentally prepared feel that the mountain is pressing down, but if they are placed in the coordinates of history, the mark left by the panic event that once triggered a moment on the stock market is like the ripple in the sea, which is not enough to fear.
In November 2012, the plasticizer crisis of hit the Baijiu sector, hitting the Shanghai Composite Index to 1949 points, commonly known as the “liberation bottom”. In November 19, 2012 Baijiu Baijiu was published by the media. The liquor exceed the standard. The stock of liquor sector was sold by investors collectively. After 3 months, the weight of Kweichow Moutai Co.Ltd(600519) and Wuliangye Yibin Co.Ltd(000858) dropped more than 30%. On December 4, 2012, the Shanghai Composite Index also fell to 1949 points.
2013 the “money shortage” once caused the overnight lending rate to soar to 25%, and the stock index fell to 1849 points. In June 2013, the market exposed the rumors of capital default due to tight liquidity, and the interbank interest rate rose rapidly, especially the overnight lending rate. On June 20, the overnight lending rate once soared to 25% and the pledged repo rate soared to 30%. The previous may, the overnight lending rate was only about 4%. The panic in the money market also spread to the whole financial market, and the Shanghai and Shenzhen stock markets fell sharply. On June 25, the Shanghai Composite Index fell to a five-year low of 1849.
in summer of 2015, A-share “huge earthquake” and “limit drop of thousands of shares” occurred continuously, and the share prices of thousands of individual shares were quickly “halved”. In the summer of 2015, the news of substantial reduction of industrial capital and clearing of off-site capital allocation triggered a change in market confidence. At that time, there was a huge amount of leveraged funds in a share, and the forced closing of positions and the decline of share price kept a negative cycle. In just 17 trading days from June 10 to July 8, the stock index fell as much as 32%, and 1167 stocks fell more than 50% during this period.
at the beginning of 2016 under the “circuit breaker Market”, the stock index fell as much as 22% in January. On January 1, 2016, A-Shares officially began to implement the circuit breaker mechanism. However, the circuit breaker mechanism was suspended on January 8 due to the suspension of all day trading due to the two falling trigger thresholds on January 4 and January 7, which exacerbated the market panic. Affected by the “circuit breaker Market”, the Shanghai index fell as much as 22% in January of that year.
2018 under the Sino US trade friction, the Shanghai index fell by nearly 25% in the whole year. At the beginning of 2018, the cloud of China US trade war shrouded over a shares. By mid June, China and the United States officially promised to start levying tariffs in the following period, and A-Shares plunged rapidly. The Shanghai stock index fell sharply by 25% throughout the year, none of the 28 industries rose throughout the year, and more than 90% of the stocks fell to close below the whole year.
2020 covid-19 epidemic spread. In March 2020, the covid-19 epidemic spread to the world, and U.S. stocks fused four times in March. Even Buffett felt “long live”. Some well-known researchers claimed that the impact of the covid-19 epidemic would be comparable to the great depression, and the Shanghai stock index also fell 4.51% in March.
not afraid of repeated shock waves, 14% of individual stocks triple in 10 years
For investors in the shock wave of the stock market, pessimism seems endless, and hope is always late. It is inevitable to panic and worry when they see that their principal or profits seem to be losing all. If you can’t control your mood well at this time, investors tend to sell at a low point and panic to sell stocks at all costs at the most depressed moment.
In the long history, despite six shock waves, 761 stocks more than doubled in the 10 years from 2012 to 2021, accounting for 40% of the 1910 listed companies with comparable data in the same period. Time will eventually be on the side of investors.
according to the statistics of brokerage Chinese reporters, of the 1910 listed companies listed before 2012 without backdoor restructuring or delisting, 761 individual stocks have more than doubled in the past 10 years (20122021), accounting for 40%
Excellent companies have increased surprisingly. 50 stocks have increased more than ten times in the past 10 years, and 275 stocks have increased more than three times.
Statistics also show that 1526 stocks have increased positively in the past 10 years, accounting for 80% of companies with comparable data. However, 50 stocks have fallen by more than 50% in the past 10 years, and many stocks have been delisted, which has caused heavy losses to investors.
performance is the main factor driving the rise of share price
Despite the ups and downs of the market, what investors need to do is to choose the right stock. What determines the fate of investors is not the market, but the income of listed companies.
The leap in performance is the main reason for the rise of individual stocks Luxshare Precision Industry Co.Ltd(002475) ‘s share price has risen 30 times in the past 10 years, and the company’s net profit attributable to its parent has also increased 26 times in the past 10 years. In 2011, the company’s net profit attributable to the parent company was only 258 million yuan, and in 2021 Luxshare Precision Industry Co.Ltd(002475) the net profit attributable to the parent company was 7.07 billion yuan.
The share price of Shenzhen Inovance Technology Co.Ltd(300124) has increased by 14 times in the past 10 years, and the net profit attributable to the parent company has increased by 9.4 times in the past 10 years. The net profit attributable to the parent company was only 340 million yuan in 2011 and 3.53 billion yuan in 2021.
Hangzhou Hikvision Digital Technology Co.Ltd(002415) ‘s share price has increased 11 times in the past 10 years, and the company’s net profit attributable to parent has increased 10 times in the past 10 years. The net profit attributable to parent was 1.48 billion yuan in 2011 and 16.8 billion yuan in 2021.
Wanhua Chemical Group Co.Ltd(600309) ‘s share price has increased by 11.6 times in the past 10 years, and the company’s net profit attributable to parent has increased by 12.3 times in the past 10 years. The net profit attributable to parent in 2011 was 1.85 billion yuan and that in 2021 was 24.65 billion yuan.
panic sellers who are not forced to sell
“If you encounter a stock market crash and will panic to sell your holdings, I suggest you’d better not invest in stocks. It’s usually not a wise decision to sell your stocks when you hear bad news.” Buffett said in a letter to shareholders.
Panic market provides a good opportunity to enter the market. It is such a moment that there will be the highest potential return. If there is no capital to increase positions at this time, we should also keep calm and ignore the pessimistic market trend. In the panic, investors should keep in mind that they should be buyers at this time to avoid becoming miserable sellers due to psychological endurance or financial arrangements.
Howard max of oak capital said in his book the most important thing of investment that in the crisis, our key is to stay away from the force of forced selling and position ourselves as a buyer. In order to meet this standard, investors need to do the following: firmly believe in value, use less or no leverage, have long-term capital and tenacious willpower; Supported by the mentality of reverse investment and a strong balance sheet, you can only wait patiently to reap amazing benefits in the disaster
Just because the capital market seems to have some adverse events every two years, Peter Lynch also said that this is a very important principle that you must keep in mind. Never use your college tuition, marriage expenses or other funds you will spend next year to buy stocks or funds, so you don’t have to be forced to sell stocks in a plummeting market in exchange for cash to pay the necessary expenses you have to pay, If you are a long-term investor, time will eventually be on your side.
Zhong Zhaomin, chairman of Oriental marathon, said that although a certain price reflects value in the capital market for a long time, she is like a princess dominated by fierce temper, sometimes crazy and sometimes panic. Most of the time, the stock market is a problem of economics. We can earn reasonable profits and returns through qualitative research and quantitative estimation; But in extreme cases, it is philosophical speculation that dares to think and invest in reverse. All the situations that are hard to meet in a hundred years and a thousand years have happened. If there are more difficult situations and the probability of making things worse is very low, we should learn to think in reverse: the sky can’t fall! It’s no use taking cash if it really collapses. If we want to use our Chinese philosophy to think, we will not be able to come to Thailand.
Zhong Zhaomin believes that profit growth is the biggest factor driving the rise of stock prices. “The long-term investment income comes from three parts: the national average alpha, the industry alpha and the alpha of outstanding enterprises. Among them, the largest part comes from the alpha of outstanding enterprises. In the long run, the market is the weighing instrument and profit is the biggest factor driving the growth of stock price.” Zhong Zhaomin said that investing with the mentality of being a shareholder is to abide by its duty and return to nature. It is the smartest and wisest investment method.
