Stock Mid-term Speculation Guide -- General Outline for Cryptocurrency Exchange Platforms

First, let’s discuss stocks only,

not involving any other asset classes,

although there are some things I personally believe can be applied.

Second,

emphasize the medium term,

covering a time frame from 3 months to 3 years.

From a quarterly financial report time dimension to an industry cycle dimension.

Third,

talking about speculation,

here the definition is引用的格雷厄姆。

Investment refers to operations based on detailed analysis,

with guaranteed principal safety and satisfactory returns.

So what about speculation?

It involves less detailed research,

using probability and odds calculations,

to balance between principal safety and satisfactory returns.

As for those operations with little research,

purely based on intuition,

they can only be called gambling.

Main content:

Part One,

Company quality.

The quality of a company is the most important,

and also very difficult to quantify.

In the stock market,

whether investing or speculating,

both rely on the company’s operations.

Of course,

except for ultra-short-term fast entry and exit modes.

Investing depends on the company returning profits to shareholders through dividends or buybacks.

Therefore,

long-term holding is an inevitable choice,

and it requires higher standards for company quality,

and a good understanding of the company’s long-term operational status.

Medium-term speculation,

more relies on improvements in the company’s operational state,

and the increase in operating profits to push up the stock price,

thus earning from the stock price difference.

Therefore,

the requirements for company quality, although not as high as for investing,

are still quite high.

Because the company must earn enough profit during an upward cycle,

to possibly achieve Davis double play.

The quantitative indicator I choose for company quality is ROIC.

By comparing the company’s normal ROIC values to determine quality.

This step may exclude over 80% of companies.

Part Two,

Valuation.

Valuation is second only to company quality in importance.

If a company is bought incorrectly, it will go to zero,

if bought expensively, holding long enough might still make money.

However, valuation itself is also a difficult world.

Therefore,

I do not intend to perform precise valuation on a company,

but to estimate using some quantitative methods.

Judging that the company is in an undervalued zone is sufficient.

And also providing a reasonable range,

which gives a rough estimate of future stock price potential.

This step will also exclude many companies that passed the first step.

Of course, during bear markets, more companies qualify,

and during bull markets, the number sharply decreases.

Part Three,

Marginal changes.

Can companies that meet parts one and two be bought? The answer is no.

Because the above parts are based on your own assessment.

If after your evaluation you think the company is undervalued,

and you buy in expecting it to rise,

this is a common mistake made by most people in the market,

including myself before.

But medium-term speculation is not long-term investing.

If it’s a company you truly understand,

and you can ensure principal safety and satisfactory returns,

then naturally, buy more as prices fall,

gradually increasing positions,

and the final return depends on your purchase cost.

But the requirements for company quality and valuation,

and your understanding of the company,

are very high.

Good investment opportunities are hard to find,

most people are incapable of value investing.

So,

when should you buy in medium-term speculation? It’s when the marginal changes for the better appear,

when profit-taking is cleared,

and when the buying force surpasses the selling force.

Similarly,

the selling point is when a bad marginal change occurs in a reasonably above valuation zone,

signs of loosening chips appear,

and the selling force surpasses the buying force.