Core Insights - The article discusses the release of the 7th edition of "Security Analysis," which retains the essence of the 2nd edition cherished by Warren Buffett while incorporating insights from 15 Wall Street investment masters [1] - The new edition emphasizes the enduring principles of value investing, highlighting that despite market changes over the past 90 years, the core investment wisdom remains applicable today [1][24] - The essence of value investing is to purchase securities at a price below their intrinsic value, often summarized as "buying for 50 cents on the dollar" [4][24] Value Investing Principles - Value investors profit through cash flows generated by the underlying business and capital gains when the market recognizes the intrinsic value [5] - A significant aspect of value investing is the margin of safety, which protects investors from errors in judgment and market fluctuations [5] - Identifying and purchasing undervalued securities is crucial, but determining the right entry and exit points requires subjective judgment [5][6] Market Behavior and Investor Psychology - Investors often react emotionally to market movements, leading to irrational buying and selling decisions [9][10] - Maintaining a contrarian viewpoint and conducting thorough fundamental analysis is essential for value investors to avoid herd mentality [7][10] Investment Strategy and Analysis - Value investors should plan to exit positions when securities return to their intrinsic value, typically selling when prices are 10%-20% below their assessed value [6] - A disciplined selling strategy allows investors to reallocate capital to more attractive opportunities [7] - The complexity of financial analysis has increased, necessitating strong analytical skills to derive accurate conclusions from available data [13][14] Technological Impact on Investing - The rapid technological advancements have transformed the investment landscape, requiring investors to adapt their analysis methods [15][16] - Companies today face unique challenges and opportunities due to technological disruption, making traditional valuation methods less applicable [15][18] Future Considerations - Value investors must focus on sustainable future cash flows while being cautious of overpaying for growth potential [19][20] - The investment landscape is evolving, and successful investors must continuously refine their strategies to account for changing market dynamics [23][24]

Core Viewpoint - The article emphasizes the importance of reading "Security Analysis" by Benjamin Graham, highlighting it as a must-read for every investor, especially those interested in value investing [2][6]. Summary by Sections Importance of "Security Analysis" - "Security Analysis" is regarded as a "bible" of value investing, essential for anyone wishing to pursue this investment strategy [6]. - The book provides a clear direction for investors, emphasizing that effort alone does not guarantee success in investing; the right approach is crucial [6][7]. Investment vs. Speculation - The first chapter of "Security Analysis" distinguishes between investment and speculation, stating that investors focus on risk and return, while speculators are influenced by market and price factors [8][9]. - Investors should concentrate on the intrinsic value of a company, rather than external factors like management actions or market liquidity [10]. Key Concepts Introduced by Graham - Graham introduced the concept of "margin of safety," which is defined as buying an asset for less than its intrinsic value, ensuring a buffer against uncertainties [10]. - The book also discusses cash flow as a critical measure for determining an asset's profitability, advocating for a cautious approach to estimating intrinsic value [10]. Updates in the New Edition - The new edition of "Security Analysis" has been expanded by approximately 150,000 words, bringing the total to 1.1 million words, and includes contributions from several prominent value investors [13][16]. - The updated version incorporates modern insights, including behavioral finance concepts like "anchoring effect," which explains why many struggle with value investing despite its apparent simplicity [14]. Broader Applicability - The book's new content demonstrates that value investing principles are applicable not only in the U.S. but may also be more effective in the Chinese market [15]. - The enduring relevance of "Security Analysis" is highlighted, as it continues to provide foundational knowledge for successful investing nearly 90 years after its original publication [16].

Core Viewpoint - Value investing is about purchasing securities or assets at prices below their actual value, often summarized as "buying for 50 cents what is worth a dollar" [1][25][26] - Investors must balance multiple objectives, including generating returns, long-term capital growth, and risk management, while maintaining liquidity to respond to future needs [5][6] - The future cash flow of a business is the most critical factor in investment decisions [1][15] Group 1: Value Investing Principles - Value investors must become excellent business analysts, especially in the digital age where information is readily available [1][52][55] - The principles of value investing remain applicable despite market changes over the past 90 years, emphasizing the importance of fundamental analysis [7][8] - Market inefficiencies create opportunities for value investors to buy undervalued securities when prices deviate from intrinsic value [16][20][29] Group 2: Market Behavior and Investor Psychology - Stock price fluctuations can be both a challenge and an opportunity, as they often reflect market sentiment rather than the underlying business performance [16][18][20] - Investors must resist the tendency to overreact to price increases while selling off during price declines, which can lead to missed opportunities [33][34][35] - Behavioral biases can significantly impact investment decisions, leading to inefficiencies in the market [29][30][37] Group 3: Valuation Techniques - Valuation is both an art and a science, requiring a combination of analytical skills and subjective judgment [41][51] - Investors should use multiple methods to assess a company's value, including discounted cash flow analysis and market multiples [42][44] - The quality of future cash flows is paramount, and investors must consider the sustainability and sources of growth when evaluating potential investments [46][60][63] Group 4: Management and Corporate Governance - The skills and motivations of a company's management team are crucial for determining shareholder returns, and past actions are often the best predictor of future behavior [50][51] - Investors must be cautious when investing in companies where management may prioritize their interests over those of shareholders [51] - Engaging with underperforming companies can present opportunities for activist investors to unlock value through management changes [51]

Core Viewpoints - The article emphasizes three universal principles from "Security Analysis" that transcend time: equity thinking, contrarian thinking, and risk thinking [1][19][20] Group 1: Equity Thinking - Investment is a game based on value, requiring a perspective from the owner's viewpoint, which is termed equity thinking [9][10] - Equity thinking serves as the foundation for long-termism, as only owners are willing to grow with the company [12][19] Group 2: Contrarian Thinking - The article discusses the human tendency of herd behavior, particularly in the stock market, which distorts investment actions [13][14] - Recognizing the cyclical nature of market emotions allows rational investors to question popular consensus and act contrary to the crowd [14][19] Group 3: Risk Thinking - The financial world is filled with "black swan" events that can have devastating impacts, highlighting the asymmetrical nature of financial risks [15][18] - Investment strategies must possess "traversability," meaning they should avoid irreversible actions that could lead to total loss [16][19]

Core Viewpoint - Value investing is suitable for China, as it combines investment methodology with philosophy and principles, helping investors connect theory with practice [1][8]. Group 1: Investment Philosophy - Graham's main investment ideas include safety margin, Mr. Market, and investing with a business perspective [1][7]. - Safety margin arises from two aspects: fundamental undervaluation and solid fundamentals [7]. - Mr. Market is described as an extreme character, fluctuating between optimism and pessimism, which is often observed in the A-share market [7]. Group 2: Financial Analysis - The book "Security Analysis" uses accounting language and focuses on financial statements, providing a method for fundamental analysis [2]. - Analyzing a company's financial statements over time can help assess its intrinsic capabilities and value [2][3]. - The essence of a company is reflected in its financial data, which can fluctuate, but the core remains more stable [3]. Group 3: Investment Elements - The three basic elements of investment are valuation, quality, and timing [4]. - Valuation analysis in "Security Analysis" offers various accounting and quantitative perspectives to evaluate a company's fundamentals [4]. - Understanding a company's quality requires deep industry knowledge and experience to uncover deeper capabilities beyond financial statements [4]. Group 4: Market Dynamics - The stock price reflects a two-layer mapping: the first layer is the price reflecting fundamental data, and the second layer is fundamental data reflecting intrinsic value [7]. - The volatility of stock prices provides opportunities for investors when intrinsic value is significantly underestimated [7]. Group 5: Practical Application - Value investing in China has shown high long-term returns for many successful investors, but it requires strong discipline and independent judgment [8]. - Mastering the knowledge and techniques in "Security Analysis" can help investors develop discipline and independent judgment [8].

Core Viewpoint - The investment philosophy of Yu Long emphasizes a "hold to maturity" approach akin to bond investing, focusing on patience and value realization over time, contrasting with the prevalent trend of chasing market fads and short-term gains [1][3][4]. Investment Strategy - Yu Long's strategy is characterized by simplicity and a contrarian nature, relying on a long-term internal rate of return as the sole investment decision metric [3][4]. - The sources of investment returns are categorized into three areas: value distribution (dividends and buybacks), value creation through reinvestment, and value discovery from market mispricing [3][4]. - The target internal return rate for the investment portfolio is aimed to be above 15%, allowing for price fluctuations without concern as long as the quality companies are purchased at low prices [3][4]. Stock Selection Criteria - The selection criteria prioritize both "cheap" and "high-quality" companies, with a preference for leading and state-owned enterprises due to their stable dividend capabilities and capital returns [3][4][6]. - Yu Long typically maintains a concentrated portfolio of around 10 stocks, believing that fewer holdings can effectively control risk and enhance returns [6][7]. - The focus is on companies with strong competitive advantages, growth potential, safety margins, risk pricing, sound governance, and transparency [7][9]. Market Approach - The investment approach is fundamentally bottom-up, avoiding reliance on macroeconomic trends or industry rotations, and instead focusing on individual stock valuation [6][7]. - Yu Long seeks opportunities in underappreciated sectors, where companies may be undervalued despite having solid fundamentals [7][9]. - The strategy involves buying when market sentiment is low, capitalizing on the fear and panic of others to acquire undervalued assets [9][10]. Long-Term Holding Philosophy - The holding period for investments is generally long, with a low turnover rate, reflecting a willingness to wait for value to materialize over time [7][10]. - The philosophy underscores that true investment success comes from maintaining a rational approach and resisting the urge for immediate gratification [4][10].

Core Viewpoint - The investment philosophy of Yu Long emphasizes a "hold until maturity" approach, akin to bond investing, focusing on patience and value realization over time [2][4]. Investment Strategy - Yu Long's strategy is simple yet contrarian, relying on a long-term internal rate of return as the sole investment decision metric, which requires patience and discipline to ignore market noise [4][5]. - Investment returns are categorized into three sources: value distribution (dividends and buybacks), value creation from reinvestment, and value discovery from market mispricing [4][5]. - The focus is on acquiring high-quality companies at low prices, aiming for an internal return rate of over 15%, regardless of short-term price fluctuations [4][5]. Stock Selection Criteria - The selection criteria prioritize both "cheap" and "high-quality" companies, favoring leading and state-owned enterprises for their stable dividend capabilities and capital returns [4][5]. - Yu Long typically maintains a concentrated portfolio of around 10 to 15 stocks, believing that fewer holdings reduce risk and enhance returns [7][8]. Research Focus - During company research, six key aspects are emphasized: competitive advantage (moat), growth potential, margin of safety, risk pricing, corporate governance, and transparency [8][10]. - The investment horizon is long, with a low turnover rate, as Yu Long is willing to wait for value to materialize, even if it takes years [8][10]. Market Approach - Yu Long adopts a bottom-up approach, avoiding macroeconomic predictions and focusing on individual stock selection, particularly in underappreciated sectors [7][10]. - The strategy involves buying undervalued stocks during market downturns, emphasizing the importance of understanding the intrinsic value of companies [10][11]. Risk Management - The concept of margin of safety is crucial, with investments made based on worst-case scenario valuations, ensuring that even in adverse conditions, the investment remains sound [11]. - The philosophy is to leverage common sense over emotional reactions, maintaining a disciplined approach to investing [11].

Core Viewpoint - The core competency of value investors often lies in patience, particularly the patience to refrain from making impulsive decisions [18][19]. Group 1: Performance and Strategy - The performance of the managed products has been relatively stable, with several funds outperforming the market despite a lackluster overall performance in 2023 [2][3]. - The top holdings remain consistent, primarily in traditional sectors such as banking, chemicals, construction, and real estate, with a significant portion of the portfolio allocated to these industries [2][3]. - The long-term annualized return of the flagship product managed since December 2018 exceeds 16% [4]. Group 2: Investment Philosophy - The source of excess returns is attributed to a combination of establishing a forward-looking advantage in information, deeper analysis, and different perspectives [8]. - The investment approach emphasizes acquiring high-quality assets at low prices, which is more feasible when the majority do not share the same valuation standards [5][6]. - The belief that good stocks and returns are achieved through endurance and patience is a recurring theme [20]. Group 3: Market Insights - The current market environment has seen prolonged low performance in cyclical industries, which has exceeded most investors' expectations [10]. - The concept of "this time is different" is highlighted as a cautionary note, indicating that prolonged low performance can delay cash returns and diminish value over time [11]. - The outlook for the real estate sector suggests that risks may not be fully cleared, with a preference for a cautious approach until 2025 [13]. Group 4: Sector Analysis - In the banking sector, while the long-term contraction of interest margins is not yet over, the current pricing remains acceptable based on long-term perspectives [14][15]. - The construction industry has shown signs of cash flow improvement, aligning with expectations, which reduces concerns [15]. - The chemical sector faces challenges with many companies operating at a loss, yet some are still managing to generate profits through cost-cutting measures [15]. Group 5: Emerging Trends - The development of AI is viewed as an irreversible trend, although its immediate impact may be overestimated [16]. - The investment strategy involves a cautious approach to emerging sectors, emphasizing the need for thorough research and understanding of price dynamics [22].

Core Viewpoint - The discussion emphasizes the balance between idealism and realism in investment management, highlighting that achieving ideal outcomes requires addressing real-world challenges [4][5][6]. Group 1: Investment Philosophy - The investment philosophy is rooted in value investing, aiming to help more people achieve financial success through this approach [7]. - The gap between ideal and reality is acknowledged, with the understanding that while ideals may be distant, practical solutions must be found to bridge this gap [5][6]. - The focus is on making ideals a reality rather than allowing them to remain unattainable [6]. Group 2: Performance Evaluation - Performance evaluation is not solely based on quantitative metrics like net asset value growth but also includes client experience and satisfaction [7][10]. - The goal is to increase the proportion of clients who earn money, with ongoing exploration of what constitutes "doing well" in investment management [7][10]. - The anxiety regarding future performance and client trust is acknowledged, emphasizing the need for consistent results to build and maintain trust [9][10]. Group 3: Market Perspective - The discussion includes insights on the banking sector, particularly regarding interest margins, which have been narrowing but may experience short-term recovery due to recent changes in deposit interest rates [31][32]. - The investment strategy for banking stocks is based on a long-term perspective rather than short-term trends, with a focus on acceptable pricing despite ongoing challenges [32][33]. Group 4: Decision-Making Process - The decision-making process for investments is described as an intersection of price and understanding, where both elements must align for a purchase to be justified [26][28]. - The importance of thorough research and understanding of market conditions is emphasized, particularly in relation to emerging sectors like new consumption and innovative pharmaceuticals [26][28]. Group 5: Strategy and Individuality - Investment strategies are not ranked as better or worse; rather, their effectiveness depends on the individual investor's characteristics and goals [17][18]. - The alignment between a fund manager's strategy and their personal attributes is crucial for achieving successful outcomes [19][20].

Investment Core Principles - Invest in companies with high returns on new capital, as past performance does not guarantee future growth potential [3] - Volatility is not synonymous with risk; true risk arises from a lack of understanding of the investment and the company's characteristics [3] Valuation and Investment Guidelines - Intrinsic value is determined by the total future cash flows a company can generate, discounted at an appropriate rate [4] - Maintain a margin of safety by understanding the company, its competitive advantages, and ensuring reasonable valuation [4] - Avoid over-diversification; focus on quality investments rather than spreading capital too thinly [4] Timing and Strategy - Do not wait for market crashes to invest; act decisively when identifying companies with sustainable competitive advantages and reasonable pricing [5] - Small investors should consider investing in smaller companies, as they often have greater price discrepancies and potential for significant growth [5] - Stock buybacks should only occur when the stock is undervalued and there are no better uses for capital [5] - Long-term holding of excellent companies is advisable unless there are significant changes in valuation or company fundamentals [5] Conclusion - Understanding and applying Buffett's investment principles can guide investors in their wealth accumulation journey [6]