Snowball Special Issue No. 015: Looking for Ten-fold Stocks

Chapter 11 Investing in Growth Stocks and When to Sell
Listening to the wind-Chunhua Qiushi, individual investor, published on October 2013, 10

Those who can buy are apprentices, and those who can sell are masters.For investment, "selling" is always a problem. It is almost commonplace to sell early and late.For every old stock investor, there has been an experience of selling bull stocks too early. Many people recall that it was a heartbreaking experience.

For myself, the problem of selling has always existed and has always troubled me.So far, I think that my stock selection ability is passable; my patience in holding stocks is not bad; the problem of selling is very serious, especially since I have not realized the seriousness of the problem of selling in my system. is the biggest shortcoming.

Since I have not been in the stock market for a long time, from the beginning of 2007 to the present, it has only been about 6 and a half years, resulting in a serious lack of experience in selling and being too bookish.

For example, KDX, Tomson By-Health, etc., which were dug up early in the morning and held at a low price, have always followed the "overvaluation and selling" method taught in books. In time, all shot.In the eyes of outsiders, this income should be quite good, but in my own opinion, this is a serious mistake: good companies are extremely rare, and selling almost means giving up, which is basically equivalent to failure.

For this reason, I have spent several months thinking about how to sell.In fact, Peter Lynch has a pretty good summary of how to sell growth stocks.It's just that this summary is very difficult in the implementation process, because there is no specific standard to rely on.For example, Lynch believes that if the company's stock price-earnings ratio is as high as 30 times, but the most optimistic profit growth rate is expected to be only 15% to 20% in the next two years, it must be sold.But in the process of market operations, this standard is not reliable, especially in China, a rapidly developing economy, where the growth rate of many companies far exceeds everyone's imagination, and even the ability of many companies to milk profits like milking cows is far beyond yours and mine. imagine.

In fact, compared with ordinary stocks, the stock prices of real fast-growing stocks will be higher and higher, which is unbelievably high, illogically high, and high beyond your imagination.So when to sell is really hard.

This also determines the selling of growth stocks, and it must not be handled according to simple valuation.In the stock market, except for the pitiful dividends, we mainly rely on the company's profit growth and valuation improvement to make money.High growth and high returns are the essential characteristics of fast-growing stocks.Earning money from performance growth is the core content of growth stocks' profits; earning money from rising valuations, that is, making money from market bubbles, requires not only the courage to overcome stock price rises, but more importantly, experience. Textbooks can't teach us.

Through this period of exploration, I found that there is only one real selling point of growth stocks, and there will always be only one, that is-in the growth process of fast growth stocks, it is actually wrong to sell at any time.Therefore, in the holding process, in addition to simply tracking the company, all methods are not as simple as: close your eyes and don't sell!

So, are growth stocks never to sell?slow!I'm not that stupid yet.Good growth stocks can be invested across bull and bear markets, but once the performance of growth stocks falls short of expectations for a long time, the double kill brought by growth stocks is more terrifying than double-clicking, and it can even make you lose everything and return to before liberation overnight. Totally homemade.

When should it be sold? (Choosing the wrong stock is out of the scope of this discussion)

(1) Late bull market, early bear market
If you sell at this time, if the growth of the subsequent enterprises is still there, you will definitely have the opportunity to buy them back at a lower price, and at the bottom of a big bear market, there will definitely be many better investment targets.This is for sure!Of course, there are some masters in the market who can cross bulls and bears with their entire position.I have nothing but admiration, but for an ordinary investor like me, if he wants to go through bulls and bears with his whole position, I'm afraid that the rose of time is already moldy.We must pay attention to preventing systemic risks in the broader market. This work must be done and preparations must be made.Besides, the era of comprehensive short-selling will definitely come in the future, and the bear market can easily be played to death by short-sellers.

How to distinguish between bull and bear markets?The small bull-bear market is not considered in this scope, and the big bull-bear trend is mainly considered.Of course, this also requires some experience and auxiliary means.Simply put, some knowledge of trends and the overall valuation of the market are enough, and as long as a veteran with a little experience should know it, I won’t say much here.

(2) Meet better growth stocks

If a new fast-growing stock has been discovered, and the valuation is also in the position building area, and the growth stock in hand has indeed risen very high, and the stock price space in the future is obviously limited, it should be no problem to sell at this time. .If you are really reluctant, sell half or two-thirds to complete the swap.Growth stocks are also suitable for the method of building positions in batches, so we will not discuss them one by one here.

But there is one thing, that is, don't easily exchange second-tier growth stocks for first-tier growth stocks. The probability of success is often relatively low.Generally speaking, the compensatory growth ability of second-tier growth stocks will eventually be difficult to outperform first-tier growth stocks.I have made a mistake in this regard, and I propose it here for your reference.

(3) The growth rate of fast-growing stocks has declined rapidly, and the foundation for rapid growth is no longer
Since fast-growing stocks generally have high growth and high valuations in the market, the most feared thing about investing in growth stocks is double killing.Once the fundamentals of rapid growth change, the losses caused by the double killing will be huge, even unbearable.For example, Suning, Vanke, etc. have faced this kind of problem.

Don't fall in love with stocks.Stocks have no emotions, they are just an investment tool, so don't fall in love with the stocks you invest in.

A tree can never grow to the sky.No matter what kind of fast-growing stocks, whether it is 3-year, 5-year or 10-year continuous rapid growth, there must be a growth cycle.Identifying the growth cycle of fast-growing stocks is the most important thing in the process of investing in growth stocks.Once the growth rate of fast-growing stocks declines rapidly and the basis for rapid growth changes, as an investor, you must have a full sense of crisis, otherwise it may be nothing but joy.

It is the first time to systematically think about how to sell fast-growing stocks. It may not be comprehensive enough, and it will continue to improve in the future.

(End of this chapter)