A fan friend asked: "Please, Mr. Meng, explain the differences and connections between half-position rolling high-sell-low-buy and long-term investment. Thank you!"

What is long-term investment? The essence of long-term investment is to invest in the real economy, to be the boss of a listed company, and to obtain the dividends of industry development is the goal of long-term investment. Therefore, its focus is on the fundamentals. Long-term value investment is based on changes in fundamentals as the core of buying and selling.

For example, more than 10 years ago, Buffett bought BYD's stock at a price of 8 yuan, and a few years later, BYD's stock price rose more than nine times, and Buffett did not sell. Later, the stock price fell sharply, close to Buffett's cost. A few years later, there were opportunities to earn 7 times, 5 times, but Buffett did not sell, and in the end, the stock price fell sharply again.

Advertisement

In these more than ten years, Buffett has at least taken three or four roller coasters of the market, and only last year did he start to reduce his position in BYD's stock by about half with a profit of more than 30 times.

Buffett had many opportunities to make a profit of 9 times, 7 times, and 5 times, why didn't he sell? Because he thought about the company's fundamentals as the core. At that time, in his eyes, BYD's fundamentals were still in a high-speed growth period, just like a child in his teens, still with a lot of development space. So he chose to continue to hold.

In the past two years, Buffett believes that BYD's fundamentals have entered the youth period, and the performance growth rate will slow down later. So, Buffett sold half. Keep half of the position to continue to observe the changes in BYD's fundamentals, and then make plans.

The core of Buffett's BYD buying and selling decisions is the company's future fundamentals, not the market trend. It is not related to whether it is a bull market or a bear market at the time. He mainly buys and sells according to the stage of BYD's fundamental development. It is equivalent to buying when the pig is young and starting to sell when the pig is adult.

If this BYD stock is operated with a half-position rolling operation, it should be sold when BYD rises by 9 times, 7 times, and 5 times, and then pick it up again at a low position in the market, and will not take the market roller coaster at all. The core of the half-position rolling operation is not the fundamentals, but the market trend. Although BYD's fundamentals did not change much when the stock price rose by 9 times, 7 times, and 5 times, the half-position rolling operation has already operated several times.

It is very clear that the essence of the half-position rolling operation is speculation, focusing on market fluctuations and market games. The buying and selling operations are directly related to whether it is a bull market or a bear market, and whether the profit is doubled at the time.The Connection Between Long-term Value Investing and Half-Position Rolling Operation:

1. Both generally require transactions through the secondary market.

In the example above, Buffett's purchase was made directly from the primary market, not from the secondary market of the Hong Kong stock market. However, his sales were made through the secondary market. The secondary market for stocks provides long-term value investors with more convenient channels for buying and selling.

2. Sometimes, the buying and selling points of the two may coincide.

If the rolling operation is large enough, to the extent that it takes advantage of people's fear to buy during a bear market and utilizes people's frenzy to sell during a bull market. At this time, it may overlap with some of the operations of long-term value investing. In a bear market, there is a high possibility of undervalued opportunities, which may trigger long-term value investors to buy. In a bull market, the valuation of listed companies may be too high or the industry may be overheated, leading long-term value investors to reduce their positions.

In summary, long-term value investors are more concerned with the operation of the entity. They are like the owners of a chicken farm, with most of their energy and decision-making focused on the operation and development of the chicken farm. They will also pay attention to the market for live chickens and chicken meat, but this is not their focus.

Half-position rolling operators are more concerned with the stock market trends. They are more like live chicken and chicken meat dealers, with most of their energy and market focus on the market prices of chicken and live chickens. They will also pay attention to the breeding and feeding of live chickens, but this is not their main direction.

One is raising chickens, and the other is selling chickens. This is their difference and connection.