Learn to invest with Buffett

Chapter 93

Chapter 15 Section 5 Don't be swayed by predictions
When buying See's, one thing can be predicted, that is, it has not yet discovered its pricing power. In addition, we are very lucky in two aspects: First, the entire transaction did not happen because of our foolish insistence. Second, when selecting this company, Chuck Huggins served as the deputy general manager. Whether in private or business, our experience with Chuck is very rare. of.

--Warren Buffett
Buffett’s forecast for See’s was made before choosing to invest, but there will be some changes in the company during the investment process, which will inevitably affect the stock price. At this time, you must make appropriate decisions on your investment direction and strategy. Adjust instead of blindly believing in previous forecasts.

In stock investing, investors may be able to predict with certainty that the stock price will continue to fluctuate, but they cannot know with certainty whether the price will fluctuate up or down in the next year.Therefore, investors do not need to correctly guess the future trend of the short-term market, the key issue is to buy the right company's stock.

In today's Chinese stock market, thousands of people flock into it, but few people outperform the market and share the rich fruits brought about by the stock index surge.What is the reason?
This is because human beings have a natural desire to predict the future, which hinders investors' rational decision-making. They are always thinking about how to make profits in the stock market, and spend a lot of time every day looking for tomorrow's bull stocks and predicting market conditions. .More of them are drawing stock price charts on the computer, trying to predict the possible breakthrough points of tomorrow's stock price trend.

Moreover, in the investment market, many people believe in the forecasts of securities analysts and take these forecasts as an important basis for their investment decisions.

Many securities analysts are affiliated with securities companies, and the survival of a securities branch depends on the trading volume of stocks.Therefore, in order to increase turnover, they will artificially create some extreme fluctuations in stock prices.Fund managers are also a large user of securities analyst reports.However, investors are unwilling to believe that predicting the future of listed companies and the direction of the stock market is as inaccurate as predicting the weather.If we only predict the situation of a listed company in the next quarter, then as long as seasonal factors are eliminated, the sales and profits of the next quarter are likely to be similar to the current quarter.However, if the forecast is extended to the stock price trend of this listed company, in addition to seasonal factors, there are many other factors that affect the stock price trend, because the stock market system is a comprehensive reflection of many variables, and a change in a variable will also affect the stock price trend. Other variables interact together to affect the trend of the entire market, and then affect the trend of individual stocks.

Especially in predicting the long-term trend of the stock market, the error is even greater.Because as time continues to go backwards, the variables continue to increase, which is the root cause of what we call "most predictions are invalid".

If the market is predictable, who predicted the sharp drop in China's A-share market on February 2007, 2?Undertaking the sharp drop in China's stock market on "Black Tuesday" on February 27, the Dow Jones Index in the United States also fell 2 points, or 27%. Japan and other major stock market indexes also fell sharply.Investors who are accustomed to forecasting never imagined that the Chinese stock market has encountered a bear market for many years, and market participants are not optimistic about the Chinese stock market, but the Chinese stock market has ushered in the largest wave of bull market in history, and the Shanghai Composite Index has been soaring all the way.No wonder some people exclaimed: "When the Chinese stock market sneezes, the world's stock market catches a cold!" The original sentence "When the US economy sneezes, the world economy catches a cold" was an unprecedented subversion.

In today's big bull market in China, all the drawbacks of forecasting are covered up by the prosperity and irrationality of the stock market.As the stock price rises higher and higher, investors pay more and more attention to short-term profits.As long as the profit forecast is raised, the stock is snapped up, and the stock of the company that is not expected to meet the profit target is sold.The market eventually collapsed in an inflated bubble.

Therefore, investors must not be confused by all kinds of beautiful forecasts. Once they use the thinking mode of short-term profit to decide their investment behavior, they will definitely drift in the sea of ​​forecasts, and investment will immediately turn from rationality to speculation.If the only purpose of investment is to make profit, investors will no longer see clearly the relationship between price and value, so they will buy stocks at any price at will, and treat investment with a self-interested attitude.

Investment motto:

Although the future is unpredictable, one thing is certain, that is, the stocks of excellent companies will eventually reflect their investment value in the stock price. In this sense, the future is predictable.Therefore, what stock investors have to do is to choose the stocks of excellent companies, hold them patiently, and not be swayed by short-term forecasts, so as to share the feast of the stock market.

(End of this chapter)