by Charles Cheng, CFA

 

 

Investors often have a general idea of why they want to make a certain investment, such as liking the underlying business or trend, but stop short of having a fully considered investment thesis. Without one, they could miss key elements that determine whether the investment decision outperforms the market or not. These include contingencies in case their initial assumptions are incorrect and also considering the behavior of other market participants. To ensure that your investment process does add value and is repeatable over time, your thesis or thought process should answer the following questions:

投資者通常對於為什麼要進行某項投資時會有一個大致的想法，例如喜歡其底層業務或趨勢，但通常缺乏一個完整的投資理論。　沒有投資理論，投資者可能會錯過某些關鍵元素，這些元素決定了投資決策是否能夠超越市場。　這些元素包括：如果初始假設不正確時的應急措施，以及考慮其他市場參與者的行為。　為了確保您的投資過程能夠增加價值並且可以多次重複，您的投資理論或思維過程應該要能夠回答以下問題：

 

What has the market missed about this investment?

The current trading price of a stock or other investment is usually set by a huge number of market participants buying and selling the security on any given day. The facts that the underlying business is well run or that there is public news about its recent success are most likely known and factored into these trading activities.  Therefore, you must also have an insight or information that these market participants have not yet considered, but that will have a significant impact on the price sometime in the future.

市場對於這項投資錯過了什麼？

股票或其他投資的當前交易價格通常由大量市場參與者在任何給定的日子買賣該證券所設定。　底層業務運營良好或最近成功的公開新聞最有可能被市場參與者所知並被納入交易活動中。　因此，您必須擁有市場參與者尚未考慮的洞見或資訊，而這將在未來某個時候對價格產生重大影響。

 

What must happen for your investment outperformance to be realized?

For shorter holding periods, something must happen in the real world for other market participants to realize that you are correct and for you to realize a return. It’s fine to think that a stock is over or undervalued, but if there is no catalyst, then it can remain that way for a long time. Or even worse, the “mispricing” can become even worse by five or ten times, causing you to abandon the position and take a loss, or at least endure much psychological pain.

Such a catalyst could be the earnings that the company announces over the next 1-4 quarters. In such a case, you should have a financial model built that shows how your assumptions will result in a significant different number than the consensus is expecting. Alternatively, if your situation allows a time horizon in decades, like a Warren Buffett, your thesis could be that the company is so well positioned that it will make so much money at some point in the future that there is no way that the stock can possibly return below market.

This is still an earnings driven catalyst but requires no assumptions about market expectations and timing. It is important to be clear about the investment time horizon ahead of time or else behavioral biases might affect your trading activity.

需要具備哪些條件才能使您的投資超越市場？

對於較短的持有期，必須在現實世界中發生某些事情，才能使其他市場參與者意識到您是正確的，而讓您實現回報。　認為股票被高估或低估是可以的，但如果沒有催化劑，那麼它可能會長時間保持這種狀態。　或者更糟糕的是，“錯誤定價”可能會變得更糟糕 ─ 5倍或10倍的糟，導致您放棄該部位並承受損失，或者至少忍受很大的心理痛苦。

這個催化劑可能是公司在接下來的1-4個季度宣布的收益。　在這種情況下，您應該建立一個財務模型，展示您的假設如何導致一個與共識預期不同的顯著數字。　或者，如果您的投資時長可以延長至數十年的時間，如華倫·巴菲特，您的投資論點就可能是，該公司的定位如此之好，以至於在未來的某個時候它將賺很多錢，從而該股票的回報率不可能低於市場水平值以下。

這仍然是一個收益驅動的催化劑，但對市場預期和時間不需要做出假設。　提前明確投資時間範圍很重要，否則行動偏差可能會影響您的交易活動。

 

What should I be paying attention to ensure that my thesis is still valid? When do I sell, if ever?

Typically for a shorter-term trade, a time limit, target price, event trigger, stop loss, or all of the above should be set ahead of time to avoid rationalizing actions that were not part of the original thesis. In addition, there could be data points that you could track that would give indications that your thesis is on the right track or not. If your thesis is no longer valid, you should be looking to replace it with another position.

Of course, events don’t always develop as you anticipate. Perhaps you were right about a company’s performance on existing products but a new technology has been introduced that threatens its competitive advantage. This would change the narrative behind the stock and requires a reevaluation of the position. Another situation is that your stock hits your target due to a general market rally, but the surprise that you expect is still pending. These could be good reasons to revise your thesis.

我應該注意什麼以確保我的理論仍然有效？如果有的話我什麼時候賣？

通常，對於短期交易，應事先設定時間限制、目標價格、事件觸發、止損或上述所有內容，以避免將不屬於原始理論一部分的行為加以合理化。　此外，您可能還可以追蹤一些數據點，這些數據點可以表明您的理論是否處於正軌。　如果你的理論不再有效，你應該考慮另一個部位。

當然，事情並不總是按照你的預期發展。也許您對公司現有產品表現的看法是正確的，但一項新技術的引入威脅到了其競爭優勢。這將改變股票背後的敘事，並需要重新評估該部位。　另一種情況是，由於市場整體上漲，你的股票達到了你的目標，但你所期望的驚喜仍未出現。　這些都是您修改投資理論的好理由。

 

What if my thesis is wrong?

While the goal is to correct as often as possible, you should also prepare for the possibility that your thesis is completely wrong. What kind of signs would you see if that was the case?  Thinking through these things ahead of time can help you make rational decisions, especially in times of crisis.

如果我的理論是錯誤的怎麼辦？

雖然我們要做到的是盡可能多地糾正自己的投資理論，但有時也需要做好該理論是完全錯誤的心理準備。　如果是這種情況，你通常會看到什麼樣的跡象？  提前思考這些事情可以幫助您做出理性的決定，尤其是在危機時期。

 

 

This article reflects the personal views of the author and not any firm’s and should not be viewed as an investment recommendation.

 

 

 

 

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