Private equity bosses Qiu Guo Lu: 10 big traps that avoided growth stock investing
investment is to buy the future, almost everyone agreed on. It is not difficult to explain why people are more willing to bet on growth stocks in energy. After all, in a market, growth stocks is always a concern of "beloved".
However, the same person, baiyexiaohe, recall, those falling fast "bear share" there are lumpy in growth stocks. High growth, do not want to buy can buy growth investments, often not as simple as we think, not everyone lucky enough to be the draught of a pig.
first of all you need to be able to find the "outlet", can predict new trends, predict success of enterprise business vision and the vision to see industry landscape. Without many years of industry experience and expertise, retail investors are easy to get into all sorts of misunderstandings and traps.
high growth investment most common trap
1, high valuation of the most common trap is overvalued – overvalued growth is behind the high expectations. High expectations for the future is human nature, but expect the higher, the greater the disappointment. Statistics show that high-valuation stocks does not reach the expected performance is much higher than the undervalued stocks. Once expected to be achieved, double valuations and earnings tend to be very deadly.
2, Miss the route of technology growth stocks in general are in emerging industries, these industries (such as solar batteries, car batteries) often have different technical path of dispute. Even if sometimes it is difficult to predict what kind of industry experts in the industry standard will win. And this technology battle often cut-throat, winner, once lost, may put before the whole boondoggle. This is the most brutal growth trap.
3, no profit growth the current wave of Internet start-ups, many start-up companies are crazy money-burning mode to drive traffic, attract customers. Burn mode is not "one size fits all", applicable to all companies. Such as some users cost and high viscosity, money gathered in the early users, this is clever tactics. But for a lot of industries (such as B2C e-commerce) clients on different platforms without conversion cost, viscous differential, this non profit growth model is not sustainable.
4, blind diversity to achieve market expectations of higher growth targets, some growth companies tend to be fast-spreading, what money do, casually into an unfamiliar area, into a blind diversity. So be sure to watch out that industry is not clear, away from long-term to short-term performance goals of the company. Of course complementary diversification (such as Cheung Kong and Hutchison) and the related diversification (horizontal product line and vertical industry chain) company is another matter.
5, new risks of growth stocks to grow, we must constantly, but new product cost is huge, income is uncertain. Even powerful Coca-Cola on the new kind of too large over the robustness of consumer stocks like this, tech and pharmaceutical stocks, having suffered in the new are too numerous. Most sad is the struggle to develop new products is not recognized by the market.
6, and parasitic type growth some growth type enterprise fast growth full by "near Biggie", for example plenty of for Apple indirect provides parts, plenty of for Mobile provides service, this class parasitic type of growth not has can continued sex, because its lifeline master in "Biggie" hands, enterprise itself no core competitiveness and pricing right, once downstream lost cooperation wishes, on may into embarrassing of dilemma. Of course, those who achieve monopoly status in their own field, with core competitiveness and bargaining power is another matter.
7 bankruptcy even profitable businesses, growth, rapid expansion in fixed assets, personnel, inventory, advertising, and other aspects also need a lot of cash, cash flow is negative. Faster growth, cash flow hole larger, extreme or even a capital chain rupture, triggering growing broke. For example take too many developers and rapid expansion of outlets (especially those that are not listed).
8, spent many so-called growth enterprises has been the golden age of growth, but still enjoy the overvalued, because people often make undue extrapolation error, mistaking the high growth of the past may be extended in the future. Investments, the grasp of the industry room to grow properly, permeability and saturation track not tight, it is easy to grow into the trap paid overvalued.
9, bolts to a clear distinction between the two, one is the threshold, has first-mover advantage, the success of such companies will lead to more success; the other is no threshold, the waves always killed before the waves on the beach, success was not more successful, and more competition. In the latter business, successful business encounter failure often is too successful, companies have brought too much competition. Rush of new entrants into the innovator had just started enjoying success and had to face a lot of copycat and fake. For example, buy, because of the low threshold, one or two slightly successful, within a year China has 3,000 group-buying sites, who would also make money.
accounting 10, value stocks have this trap, but growth stocks this problem is more common. 50%, expected growth, is a growth stock, another is looking forward to 10% the value of shares in the market, the more difficult? When you can not do, in order to avoid double play Davis, 50 times forward earnings growth stocks and 10 times price-earnings ratio of value stocks, that have the power to "use all means" met the expectations of the market?