Yang Delong： How to deal with the huge drop of more than 5 billion Buffett in a single day
Yang Delong: 都市夜网 How to deal with the huge drop of more than 5 billion Buffett in a single day
Come to Sina University of Finance and listen to Yang Delong’s “20 Macro Data That Must Be Understand” to understand the actual value of macro data. Today I will give you a case to see how the stock god Buffett is facing market fluctuations, especially how to respondThe stock market tumbled.
On February 5, 2018, the U.S. stock market, which has been in a bull market, suddenly plunged. This decline caused the world’s 500 richest people to lose $ 114 billion in assets.
Among them, the most serious loss is the stock god Buffett, who lost $ 5.1 billion in a single day.
In one of the “lost losses”, Buffett experienced five plunges in his long stocking career.
Including the plunge in U.S. stocks in August 2015, Berkshire Hathaway’s book earnings led by stocks fell to 11.2 billion U.S. dollars during the subprime crisis in 2008, Buffett’s book loss in the two months was as high as 150 billion U.S. dollars.
Faced with billions of such losses and tens of billions of dollars of stock market plunging, it is difficult for ordinary people to imagine how to face them.
So, let’s take a look at Buffett’s mentality and coping strategies when facing the plunge.
In summary, there are three words: extreme calmness in the face of the plunge, caution before the plunge, and strategic bottoming after the plunge.
Let ‘s talk about these three points separately.
First of all, facing the extreme calmness of the plunge: On October 19, 1987, after the US stock market experienced a five-year continuous bull market, the stock market crash fell from the sky. On the same day, the Dow Jones Index plummeted by 508 points, a drop of 22.
6%, becoming the first Black Monday in history.
Buffett’s wealth was lost within a day3.
At $ 4.2 billion, Berkshire’s tolerance plummeted by 25% in just one week.
So how does Buffett react in the snowstorm of the stock market?
At the moment of the plunge, it is possible that Buffett is the only person in the entire United States who does not always pay attention to the crashing stock market.
He didn’t look at the stock market at all. For a whole day, he stayed in the office as usual, phoned, read newspapers, and read the annual reports of listed companies.
Buffett didn’t panic to inquire about the news, nor did he panic in selling the stocks. In the face of the plunge, the face of his wealth shrinking sharply, and the heavy holdings of his stocks plummeting, he was very calm.
The reason why he can maintain extreme calm is because he firmly believes that the listed company he holds has long-term sustainable competitive advantages, good development prospects, and high investment value. He firmly believes that stock disasters are just as temporary as natural disasters.Eventually the stock market disaster will pass, the stock market will return to normal, and the company he holds will eventually reflect its intrinsic value.
Second, caution before the plunge: For everyone, the natural disasters they face are the same, but the losses caused by natural disasters are different.
Those who have proper precautionary measures in advance will suffer much less and will recover quickly.
So, let’s take a look again. How did Buffett prevent it before the stock market disaster?
Buffett encountered another stock disaster in about 2000, when the US science and technology bubble burst, three years of cumulative decline of more than half.
During these three stock market disasters, Buffett’s performance increased by more than 10%, and the market was greatly defeated by 60%.
Why is there such a result?
Because Buffett had already prepared for the stock market disaster before then.
From 1995 to 1999, the US stock market, driven by the Internet and high-tech stocks, gradually grew more than 2.
5 times is an unprecedented bull market.
Buffett refused to invest in high-tech stocks because he believed that it was not in his ability circle. He continued to hold stocks of traditional industry companies such as Coca-Cola, American Express and Gillette. As a result, the S & P 500 index rose 21% in 1999.But Buffett’s performance is only 0.
5%, not only lost to the market, but also lost very miserably, the difference was more than 20%.
At the 1999 shareholders’ meeting, shareholders blamed Buffett, and almost all newspapers and media said that Buffett ‘s investment strategy was outdated.
But Buffett remained unmoved at all.
It was his firm long-term value investment strategy that allowed Buffett to weather the crash of the dot-com bubble burst.
Buffett is a very cautious person. He doesn’t buy stocks easily, and only takes big positions if he is very sure.
The certainty he pursues does not come from the stock market fluctuations and constant fluctuations, but from his value investment philosophy, which is the continuous growth of the company’s intrinsic value, the margin of safety, and the clear circle of competence that we talked about earlier.
Buffett always keeps in mind two basic principles taught by his teacher Graham: first, never repeat, and second, never forget the first.
Third, finally, what is Buffett’s bottom-sweeping strategy after the plunge?
When the stock disaster happened, they suffered a plunge, and many people were anxious to make a dips and wanted to make a stock disaster disaster.
But when you are anxious to make a bottom, it is very likely that you are getting a falling knife, and what you get is often the blade, but rarely the handle. Looking back on Buffett’s performance in previous stock disasters, we will find that Buffett has a set of his own strategies.
I briefly summarized it as a “four-heart” strategy, that is, be patient with the bottom copy, don’t be discouraged if you don’t make a copy, you should be careful with the bottom copy, and you must stick to your original heart.
First, patience must be made. In September 1969, Buffett withdrew from the stock market, and kept on cash, waiting for the overestimated stock market to plummet.
But even he himself did not expect that although the S & P 500 fell from a minimum of 100 points to 68 points in May 1970, it rebounded rapidly, growing for more than two years in a row, and reached a maximum of 121 points in January 1973.It fell until October 1974, when the S & P 500 index was at a minimum of 60 points.
Buffett waits for the plunge, and the first wait is 5 years.
When the market was extremely pessimistic, and when the stock market fell to everyone’s fear, he returned to the market and started buying greedily at a low price.
Buffett has never been in a hurry to grab a rebound. What he wants is not small gains in short-term speculation, but large gains in long-term value investment. This is also a kind of delayed satisfaction.
Therefore, he will wait patiently for the stock market to fall again and again: “Only when the capital market is extremely depressed and the entire corporate sector is generally pessimistic, investment opportunities that yield very rich returns will appear.”
Second, don’t be discouraged if you don’t copy it. From August 1987 to October 1987, US stocks plunged 36%.
This time the stock market fell faster and rebounded faster, but Buffett didn’t copy it to the end.
Facing the rushing investment opportunities coming and going, Buffett is still very calm, because he believes that the next opportunity will come. As long as you wait patiently, the opportunity will always be there.
In a 1987 letter to shareholders, Buffett stated that for Berkshire, there have been no investment opportunities in the stock market over the past few years.
But you can rest assured that Mr. Market will definitely provide investment opportunities in the future, and once the opportunity comes, we are very willing and able to seize the opportunity.
“Without a successful bottom-up, Buffett believes that you should not blame yourself or even get out of control of your investment by trying to seize every opportunity.
Sure enough, in the second year after the slump, the opportunity for a dips came, and Buffett started buying a lot of Coca-Cola.
By the end of 1997, the market value of the holder’s Coca-Cola stock had risen to $ 13.3 billion, and it had made 10 times in 10 years.
Third, the bottom-sweep should be carefully intentioned, that is, after the plunge, not all stocks can be bottom-selled, and it must be carefully selected.
From March 2000 to October 2002, US stocks plunged again.
Buffett has long predicted that the bubble will inevitably burst after this wave of stock market surges driven by technology and internet stocks.
But still the stock market has fallen by half in 3 years, Buffett is not suddenly eager to dip the bottom, because many of the stocks he wants to buy are not cheap enough, and those Internet stocks that have fallen by more than half seem to be very attractive, but Buffett does not want to go at allBottom.
Because, he did not think that the intrinsic value of these stocks after the plunge was undervalued by the market.
Only a few stocks have fallen sharply, making Buffett interested.
By 2003, Buffett finally found good stocks that were cheap enough, and began to buy a large number of people from PetroChina, and it took only four years to make a huge profit of 27.7 billion US dollars.
Fourth, we must adhere to the original intention, which is the firm belief in value investment.
In 2008, the financial crisis struck.
At the height of market fear, Buffett published an article in the New York Times in October that year, publicly announcing that he was buying US stocks.
In a letter to shareholders in 2009, he said that he had to be greedy to use a vat during a plunge. “Such a huge opportunity is very rare.
When going up and down that day, you should pick 四川耍耍网 it up with a big bucket instead of a small ring.
“In September of that year, Buffett announced the purchase of Goldman Sachs’ $ 5 billion permanent preferred stock, and its common stock convertible price was $ 115. At that time, Goldman Sachs may still be above $ 125.
But then it fell to US $ 55, plunging nearly 55%, at that time, the voice of “the stock god” will be flooded by major media.
But Buffett disagreed.
By March 2013, the investment had netted Buffett $ 3.1 billion.
Stock duvets are the last thing investors want to see.
But Buffett did the opposite. For the stocks he was optimistic about, he would even “actively buy a package”, which also reflected his firm belief in value investment.
Therefore, he was able to invest in such a calm and large-scale in the plunge of the financial crisis.