Uncle Pan and Han Lie really enjoyed their drink together.
Han Lie wasn’t a real youth, mature and sensible enough to play the role of a supporting character and a good companion well.
Gradually, Uncle Pan stopped caring about his daughter who let information slip and began to express his frustrations as a stock investor.
"Little Han, you tell me, my ability to make money isn’t poor, so why do I always lose in the stock market?"
"Shall I analyze it for you?"
"Yes, yes, yes! Analyze it for me!"
"Let’s take it step by step. What’s the core logic behind your favoring of a certain stock?"
"Performance, of course!"
As soon as those two words came out, Han Lie’s head began to hurt.
This was a pure and tender leek through and through.
And Uncle Pan continued, with spittle flying, "Take Fuxing Pharmaceutical for instance, how good is their performance? I was friends with Old Guo in the early days. My cousin is currently an executive assistant in Fuxing Group, so I’m pretty familiar with the listed companies of the Fuxing system. Their financial statements are absolutely clean! But no matter what, the stock just won’t rise. If you count it out, it’s had me trapped for nearly three years! Is that reasonable? And then there are the bank stocks, look at how far they’ve fallen! Last year, I watched as the stock price was about to fall below the net value per share. In the long run, isn’t that like earning the moment you buy? And yet, I got trapped again for two more years!"
After hearing this, Han Lie began to feel pain in his... "eggs."
Seriously, ’in the long run’? You probably don’t know how many bank stocks later fell below the price-to-book ratio, even dropping below 0.5...
The price-to-book ratio is quite an interesting indicator. The market price of a stock, its net assets per share—the ratio of these two figures is the price-to-book ratio.
In theory, if a listed company’s price-to-book ratio falls below one, then, if you have the capability to purchase all of its circulating shares at the current price, you would make a killing. For example, a company with a net asset value of 100 billion, with a price-to-book ratio of 0.32; you could take over the whole business by borrowing only 32 billion. Then delist to go private, completely control the company, flip it with a stock pledge loan, effortlessly borrowing 40 billion to pay back the loan and the interest. Profit from nothing, a pure earnings of 60 billion.
Of course, a full acquisition isn’t very realistic. A smarter move would be this: Acquire a 5% stake, then make a public declaration, announcing to the market, ’I’m going to take it over!’ Everyone sees that and thinks, wow, what a great company and how cheap! Quick, hurry onto the train! Then, the stock price soars, returning at least to its normal value, potentially even higher. Hold off, wait six months. When it’s time, sell off that 5% of the stock, selling it for 10 billion with ease. Profit from nothing, a clean gain of 5 billion isn’t bad either.
Alright, the above is purely BS. Because the only stocks that go below net value in the stock market are bank stocks, and as everyone knows, banks are "impossible" to take over. So bank stocks can fall without limit, because aside from the national team and a few stubborn investors, no one really gives them a second thought.
Are bank stocks worthless? No. It’s because anyone with a brain won’t play with them.
Pan Shengwu built such a big empire; he can’t be without brains, but in the stock market, he’s just another leek. It’s like that casino chip cleaner’s father—who was sharp as a tack—ended up losing a bundle in an insider trading deal...
That’s what you call specialization in your field. Tʜe source of this ᴄontent ɪs novel★fire.net
As an expert, Han Lie decided to give his future father-in-law a proper rundown to show off his skills.
"Uncle Pan, your thought process isn’t wrong, but you have a misunderstanding about performance."
"Ah?" Uncle Pan was startled. "What do you mean?"
"First, a performance that can’t exceed expectations isn’t really performance. What is the market speculating on? It’s the future potential. Normal growth, that’s just mediocre. You need to exceed expectations to get investors flocking to you. Fuxing Pharmaceutical is a classic example of mediocrity, and the banks have completely stabilized, without any room for imagination left. With such large capitalizations, who would bother with them?
"Second, to evaluate performance, you can’t just look at financial statements; you have to consider the industry outlook and the company’s potential. A company losing money now might not be bad in the future. A company making money now might already be losing its momentum.
"Third, what do ordinary investors pay the most attention to in terms of performance? Interim and annual reports. But those are too lagging. The really valuable potential performance isn’t something common investors can grasp, but what you can fully understand... think about it, what is that?"
With some clever talk, Han Lie played the role of Zhuge Liang outwitting Sun Wukong.
Uncle Pan wasn’t dumb; he just hadn’t thought of it from that angle, and with Han Lie’s prompt, he suddenly slapped his thigh in realization.
"It’s the macroeconomic policy!"
"Right!" Han Lie gave a thumbs up. "Uncle Pan, your advantage lies in your vision and information. You shouldn’t follow the pace of ordinary investors; you need to have the courage and confidence to be one step ahead."
The flattery was not in vain.
Uncle Pan pulled his chair closer, wrapping an arm around Han Lie’s shoulder, looking very affectionate. "Teacher Han, you’re right! And so straightforward, unlike those experts who beat around the bush all the time!"
"No, don’t call me teacher. This is all just armchair strategy..." Han Lie waved his hand quickly, indicating he couldn’t bear such a title.
"How can that be?" Uncle Pan waved his hand generously. "I’m not blind to your achievements; out of 800,000 people, you stand out with your high return rate, in a class of your own. Even Zhao Kuo isn’t fit to carry your shoes!"
Han Lie continued to be modest. "It’s only been a week; luck played a role."
Immediately, Uncle Pan slapped his hand down firmly. "Modesty despite victory, good!"
The voice was so loud that Pan Ge and Xi Luting looked over in unison, curious what the two men were up to.