Professional stock investors, who are called successful people, are wondering what stocks they are looking at and what trading rules they are using to invest in stocks.
If you can do that, there is nothing to say if you can make a lot of money by investing in stocks by imitating the method of successful people.
In fact, there is a law of “shuhari” in the world of stock investment, and learning the investment method of a successful person is a shortcut to becoming one of the successful people .
So, this time, I would like to introduce the stock investment technique that Warren Buffett, who is one of the most successful stock investors, deals with.
The content I will introduce is something that even beginners of stock investment can practice, and just by doing it, the winning percentage of stock investment will increase by at least 20%.
Table of contents
- 1 If you want to succeed, value investing is the best
- 1.1 “What is value investing?”
- 1.2 Specific investment method
- 2 Do not key to value investing
- 2.1 Do not over-diversify
- 2.2 Don’t touch the hot issue
- 2.3 Not easy to sell
- 2.4 Don’t underestimate the dividend rate
- 3 What kind of stock would you choose for Buffett?
- 3.1 Five conditions for noteworthy stocks
- 3.2 Details of 5 conditions
- 3.3 What are the stocks that meet the five conditions?
- 4 Search for stocks with the help of a professional
Value investing is the best if you want to succeed
As you can see in this headline, the most efficient way to get results in equity investing is the value investing that Warren Buffett employs.
“What is value investing?”
In the first place, value investing by successful Buffett is a stock investment method that searches for clearly cheap stocks and holds them for a long period of time.
The reason why this value investment has a high win rate in stock investment is that obviously cheap stocks will almost certainly rise in the medium to long term .
In fact, Warren Buffett, one of the leading successful equity investors, has made huge fortunes with this value investment alone.
We will introduce the specific investment methods of value investing that led Buffett to the great success of equity investment.
Specific investment method
There are only three things that Buffett, who is a successful stock investor, often uses for value investment type stock investment .
- Invest in the best of PER and PBR
- Analyze the value of a company
- Analyze bankruptcy risk
I will briefly introduce each of the outlines of 1 to 3 taken up here.
PER and PBR are the strongest indicators
First of all, PER and PBR of 1 are indicators that lead to the diagnosis of cheap and expensive corporate stocks .
A stock with a good indicator here is one that is cheaper in stock investment.
So if you’re investing in stocks, it’s the first indicator you should look at.
Corporate value can be calculated from financial statements
And the second corporate value analysis is to diagnose the fair value of the shares issued by the company.
Although it is not well known, the appropriate value of each share of a company can be quantitatively calculated from the financial statements of the company. Using this, we analyze the appropriate price from financial statements, etc., and find out what the price is clearly higher than the current stock price .
If this fair price is clearly higher than the current stock price, it will be a winning stock in the world of equity investment. In fact, Buffett, who is a huge success in stock investment, basically invests only in this hit stock.
Analyze bankruptcy risk
Value investing is a stock investment method that assumes that the current stock price will catch up with the theoretical stock price.
As a result, we will continue to hold stocks until the gap between the two is closed. In other words, what I want to say is that the reality of value investing is a long-term equity investment that is the exact opposite of day trading.
Naturally, this long-term investment type equity investment is not perfect, and the risk is not zero. A risk that you should pay particular attention to is the bankruptcy of a company after investment.
Therefore, when investing in value , it is indispensable to analyze the bankruptcy risk of the investee company .
By the way, Buffett, who is a great success in value investing, is famous for investigating companies that have been identified as candidates for investment destinations many times to dozens of times more than ordinary stock investors.
Don’t be the key to value investing
You decide not to do the key to the success of the value investing I mentioned earlier.
In particular, you should not do absolutely as there is such a thing.
- Do not over-diversify
- Don’t touch the hot issue
- Not easy to sell
- Don’t underestimate the dividend rate
If you want to be a successful value investor listed here, I will introduce the details of “4 things you should not do” in order from the top.
Do not over-diversify
First of all, if you want to be a successful stock investor, you should definitely not do it. The first is to make excessive diversified investment.
There are two reasons why Buffett did not diversify his equity investment.
- I didn’t have a lot of money
- Because I was convinced that the price of the investee would rise
First of all, it is true that the former did not have the funds. Even though Buffett is now a huge stock investor, he wasn’t a successful stock investor from the beginning.
Of course, there was a time when I worked on stock investment without having abundant funds. In such a case, if diversified investment that cannot concentrate investment destinations is adopted for stock investment, almost no profit can be expected .
Buffett, who is committed to value investing, originally invested after thoroughly investigating the investment destination and confirming the bargain.
Because of this, I knew that the price would actually increase, so it was advantageous to concentrate the funds on the targeted investment destinations rather than diversifying the investment destinations.
Diversification is the royal road to stock investment, but if you dare to go the other way, successful stock investment will do well, so I think it’s worth knowing.
Don’t touch the hot issue
The second thing Buffett, who is a huge success in stock investment, does not do is basically to keep the stocks that are attracting public attention.
This is also a continuation of the “Successful people go the other way” introduced earlier, but in reality, the stocks of interest tend to be overpriced because everyone is paying attention to them.
In other words, it is no exaggeration to say that there are no stocks that meet the condition of “searching for stocks whose prices will increase in the future”, which is the basic principle of value investment.
Especially if you want to be a successful stock investor, you definitely want to avoid bubble stocks and IPO stocks .
In fact, the warning for bubble stocks and IPO stocks is also issued by Mr. Jeremi Siegel, who is known in the United States as one of the successful stock investors like Buffett.
In his book, “The Future of Equity Investment,” it says, “The majority of IPO stocks will eventually plummet, and now popular stocks are sold, not bought.” .. This “when it becomes popular, when it sells ” is one of the common senses in the world of stock investment, so it’s worth remembering.
Not easy to sell
The third thing you should quit to be successful in value investing is to sell the stock you bought right away.
In fact, the vast majority of stock investors who cannot be successful stock investors tend to sell as soon as the stocks they buy go down. This attitude is not bad for protecting your assets, but you cannot be a successful equity investor.
This is because selling lower-priced stocks in the world of equity investment protects assets and throws away opportunities .
In fact, Buffett, who has become a huge success in value investing, will continue to hold the stock even if the stock he bought goes down.
Moreover, it is not uncommon to buy more shares than just own them.
The reason for doing this is because we know that stocks that we have noticed are clearly cheap, so even if the price drops in the short term, it will reverse in the medium to long term .
This is also the theory that “successful people go the other way”, but if you want to be a successful stock investor by using value investing, it is important to keep holding the stocks you bought.
Don’t underestimate the dividend rate
Many unsuccessful equity investors tend to focus on stock price increases and downplay dividend rates when investing in stocks.
This is not a problem for stock investment in units of days or hours such as day trading, but in value investment it is necessary to pay attention to the dividend rate as well.
The reason is that in value investing, we may hold stocks for 5 or 10 years, so even a 2% difference in dividend rate will make a big difference.
In fact Jeremy Siegel, who has been recognized as one of the successful people of the equity investment as well as Buffett, in his book called “equity investment of the future” in the long term is more important dividends than capital gains says I will.
Of course, there may be a point that “dividends are more important than stock price increases in stock investment”.
However, knowing that the dividend rate is as important as the price increase in value investing, there is no loss, so I definitely want to keep it down.
What kind of stock would Buffett choose?
So far, I have introduced the value investing methods that Buffett, who is a great success in stock investment, and what to avoid if you aim to be a successful stock investment.
Next, as an application of the contents so far, let us consider the characteristics of stocks that Buffett , who is a great success in stock investment, is paying attention to, and the names of the stocks that correspond to them.
Five conditions of noteworthy stock
First of all, as you can see in this headline, there are five conditions that are often found in the stocks selected by Buffett , who is a big success in stock investment . These are the five conditions that Buffett pays attention to.
- Treasury is sound and cheap
- Enclosing customers
- Not so much attention in the market
- There is bad material while satisfying 1-3
- Higher dividend rate
Let’s look at each of the conditions mentioned here one by one.
Details of 5 conditions
First of all, the fact that the financial content is sound and cheap is the first item to check if you aim to be a successful stock investor through value investing.
You can get an answer to this by deriving an appropriate price from the figures of the bargain index and financial statements introduced earlier and comparing them.
Enclosing a second customer means that the company’s brand is recognized because it’s good in a niche market. One example is Coca-Cola.
Sold all over the world, the company has a large number of customers and has a tremendous amount of influence and brand.
Also, the fact that the third market hasn’t received much attention means that stock prices aren’t exploding like the bubble. In other words, it is not attracting the attention of many investors.
The fourth “bad news” means that there is a lot of negative news, such as “it doesn’t suit an aging society” or “it’s a sunshine industry.”
Stock prices with such negative information are unlikely to rise, so they are ideal for value investing.
To put it even more luxuriously, the dividend rate is high while satisfying 1-4 .
If you hold these kinds of stocks for a long period of time, the price will gradually increase and you will make a considerable amount of profit from dividends every year.
This double punch of trading profit and dividend is very large, so if you want to be a successful stock investor, I would like to find a stock with a high dividend rate after satisfying 1 to 4 and work on stock stocks.
What are the stocks that meet the five conditions?
Of course, there aren’t many stocks that meet the five conditions I introduced earlier.
However, there are about 3,000 investment destinations in the world of stock investment, so you can find them here and there. For example, there is a company called “INTELLEX” listed on the First Section of the Tokyo Stock Exchange .
This company is a company that deals with housing renovation, and the administrator of this site also invested about 300,000 yen.
This INTELLEX stock met the five conditions introduced earlier , which Buffett , a successful value investor, pays attention to when selecting stocks .
- Treasury is sound and cheap
- Enclosing customers
- Not so much attention in the market
- There is bad material while satisfying 1-3
- Higher dividend rate
First of all, regarding the financial soundness of 1, both PBR and PER were above the market average.
Regarding the retention of 2 customers, we are the number one in Japan in the field of “renovation of housing”, so we are retaining a large number of customers in the niche field .
It also satisfies 3 “not so much attention in the market”.
This is because Intellix itself is a listed company on the First Section of the Tokyo Stock Exchange, but with sales of less than 100 billion yen, it is not a major company that the majority of equity investors who cannot be successful are looking at.
Moreover, the renovation field, and by extension, the housing industry, is a field with negative requirements such as a declining birthrate and an aging population and a decrease in the average income of Japanese people. In short, there are plenty of negative factors that unsuccessful equity investors hate.
And regarding the fifth annual dividend rate, the time when the manager invested was 3.2% per year. Considering that the dividend rate of ordinary Japanese stocks is 1.5%, this value is quite high because it is twice the level of ordinary companies.
In other words, Buffett is a corporate stock that meets the five points of interest of successful stock investors.
Aside from the story of INTELLEX invested by the manager, it is an interesting part of stock investment that you can find out if you search for such stocks .
Finding a brand with the help of a professional
It is not impossible to become one of the successful stock investors if you work on stock investment with the above contents in mind.
By the way , in order to succeed in value investing by successful stock investors, the key is to select one or two stocks . However, there are actually some difficulties for beginners in stock investment when it comes to selecting this stock.
This is because in order to find a proper stock, it is essential to have sufficient accounting knowledge to read financial statements and to correctly understand how to diagnose the fair price of corporate stocks.
In the first place, it takes a lot of time to search for stocks, so it is essential to have enough time to sit down and work on stock investment.
Considering the difficulty of acquiring this knowledge and the trouble of searching for stocks, it is difficult for ordinary stock investors to practice the stock investment technique of successful people.
Then, what to do is to leave the selection of stocks to a stock investment adviser called an investment adviser .
This investment adviser is a stock investment supporter who searches for stocks that are expected to increase in price. If you work on stock investment with their help, stock names that are perfect for value investing will be introduced each time.
In fact, Buffett , who is a successful stock investor, also employs multiple collaborators for information gathering .
It’s not a bad idea to aim for a successful stock investment by yourself, but with the help of a professional, the chances of becoming a successful stock investor increase.