What are the six investment mentalities of Warren Garden?

Total profit-look at the absolute number first

It can directly reflect the "earning power" of an enterprise, which is as important as the "earnings per share" of an enterprise. I require that the total annual profits of the enterprises I buy should reach at least 10 billion yuan. If the listed company 1 year only earns millions, it is not worth my investment, and it is not as good as self-employed. For example, WISCO and Baosteel can earn billions every year, and China Merchants Bank can also earn billions every year. Such enterprises are not at the same level as those that do not make money. They are really good companies.

Through this indicator, all the heavyweight stocks I choose are selected from companies with absolutely large total profits.

Net assets per share-don't care

I think the net assets that can make money are effective net assets, otherwise it can be said to be invalid assets. For example, some people revalue the net assets of some Shanghai commercial stocks on the grounds of soaring land prices in Shanghai, and their net assets should be greatly appreciated after revaluation. The problem is that this appreciation can not bring practical benefits, and it can be said that it is meaningless, and it is only "paper wealth" at most.

Net assets per share is not an important financial indicator for me to judge the company's "good or bad", and I don't care about it.

ROE-10% is impossible.

The high rate of return on net assets indicates that the enterprise has strong profitability. For example, when I bought Kweichow Moutai in 2003, if I removed the cash assets from Kweichow Moutai's account, its return on net assets should be above 80%, which is actually an investment of 100 yuan, and I can earn 80 yuan every year. My research on China Merchants Bank Beijing Branch also found that its return on equity also reached 53%.

This indicator can directly reflect the benefits of enterprises. The company I choose generally requires a return on equity of more than 20%. I won't choose a company with a return on equity below 10%.

Gross profit margin of products-high, stable and rising.

This index can reflect the pricing power of enterprise products. The gross profit margin of the products of the company I choose should be high, stable and rising. If the gross profit margin of products declines, we should be careful-it may be that the competition in the industry has intensified, leading to the decline of product prices, such as the color TV industry, which has been declining year by year in recent 10 years; However, the gross profit margin of liquor products has been relatively stable.

My standard is to choose an enterprise with a gross profit margin of 20%, and the gross profit margin should be stable, so that I can "settle accounts" for the future income of the enterprise and increase the "certainty" of investment.

Accounts receivable-avoidance

There are two kinds of accounts receivable. One is recoverable accounts receivable, such as G cast pipes. Accounts receivable are deferred payment by water supply companies all over the country, which have been collected smoothly for so many years; For example, Yuntianhua's accounts receivable are also cash on delivery with users, which are all recoverable. Another situation is that the products are not sold well, so be careful to borrow them before returning them.

I will try to avoid enterprises with large accounts receivable.

Advance payment-the more, the better

A large number of accounts received in advance indicate that the product is in short supply, the product is a "fragrant cake" or its sales policy is to pay for the goods in advance. The more advance payments, the better. For example, Kweichow Moutai has received more than one billion yuan in advance for a long time, which can reflect the "toughness" of enterprise products.