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

Chapter 7 How to Pick Growth Stocks

Xiao Quan, an individual investor, published on July 2013, 7

(1) Backward, eliminated, and overcapacity industries are not selected.Such as coal, steel, glass, electrolytic aluminum, shipbuilding, etc.

(2) Industries that are at the lower end of the industry chain, lack independent pricing power, and are greatly affected by upstream OEMs are not selected.Such as auto parts, garment processing, beverage can processing.But there is one exception, which is a short-lived investment opportunity like touch screens that is affected by the explosive growth of upstream supply and demand.

(3) Potentially high-risk industries are not selected.Such as real estate, financial institutions.

(4) Challenged by emerging industries, industries with declining competitiveness are not selected.Such as traditional department stores and home appliance manufacturing.

(5) Industries relying on national policy monopoly protection are not selected.Such as "two barrels of oil", operators, banks.

(6) Cyclical economic industries are generally not selected, but it also depends on the situation, because such stocks are extremely explosive when they encounter the futures market.Such as non-ferrous metals.

(7) Don't choose industries that you don't understand.Such as Kaishan shares.

(8) Select industries that are supported by national policies, conform to the mainstream consumption concept in the future, have high potential consumption power, and have innovative business models.

(9) Enterprises whose top leaders lack strategic planning, low execution ability, wrong strategic planning (Nokia), and damage shareholders' rights and interests are not selected.

(10) Great companies need soil (industry) to nourish, and the probability of selecting growing companies in the blue ocean market is much higher than that in the red ocean.The fundamental factor that determines the company's ability to stand out is the company's management system: far-sighted strategic planning + strong execution.The enterprise management system can only be understood, cannot be conveyed in words, and cannot be imitated.For example, the strong executive power of Evergrande Real Estate; the culture of Gome Wolf in the era of Huang Guangyu; the innovative spirit of Apple in the era of Jobs.The corporate culture and corporate management system are determined by the boss, so if you want to invest in a growing company, you must first study the boss.

(11) Growing companies need industries, teams, and products.

(12) The world's top enterprises are determined by innovative business models.Such as Amazon, Alibaba, Google, Apple, Sony in the walkman era, Nintendo in the arcade era, etc.Business model, occupying the top of wealth.

Wonderful comments:

Xueqiu user Fengyun Tianxia invests:

The old tune is repeated, and it will last forever.Review Fisher's 15 points on picking growth stocks:
(1) Does the company's products or services have sufficient market potential, and can the turnover grow substantially in at least a few years?

(2) In order to further improve the overall sales level and discover new product growth points, is the management determined to continue to develop new products or new processes?

(3) Compared with the size of the company, how successful is the company's R&D efforts?
(4) Does the company have a superior sales organization?
(5) Is the company's profit margin high?

(6) What is the company doing to maintain or improve profit margins?

(7) Is the labor-management and personnel relations of this company very good?

(8) Is the relationship between the senior executives of this company good?

(9) Is the company's management depth enough?

(10) How well does the company's cost analysis and accounting records do?
(11) Is this company unique in its field?Could it provide investors with important clues as to "How does this company stand out relative to its competitors?"

(12) Does the company have a short-term or long-term earnings outlook?

(13) In the foreseeable future, will the company issue a large number of shares and obtain enough cash to facilitate the development of the company, and will the interests of existing holders be greatly damaged due to the expected growth?
(14) Does the management only report good news to investors but not bad news?Frothy when things are going well, but "keep quiet" when problems or disappointments occur?
(15) Is the honesty and integrity of the company's management beyond doubt?

Fengyun Tianxia’s investment point of view: Fisher’s 15 key points on selecting growth stocks, although they cannot be fully applied in the A-share market with flawed systems, their coverage is very comprehensive, covering several important points of value investment and growth stock investment. Areas - market space, sales capability, profit margins, innovation capabilities, coordination of the top management team, cost control and accounting records, corporate integrity.If investors have grasped these aspects and are not mistaken because of their own level, (although most of them are blind and not aware of it), they have met the standard in terms of stock selection.

Stick to the value without wavering:

（1）非标产品的不选；（2）坐商的不选；（3）毛利率不高的不选；（4）毛利率不稳定的不选；（5）收入不能持续增长的不选；（6）净资产收益率不高的不选；（7）对公司产品不熟悉的不选；（8）负债高的不选；（9）固定资产投资高的不选；（10）回款差的不选；（11）上市不满3年的不选。

(End of this chapter)