| In the implentment of investment servicing, due to the highly speculative atmosphere in China’s securities markets, most professional investors prefer to track the short term opportunities when they provide services to customers.But unfortunately, this inefficient work can hardly achieve the long-term preservation and appreciation of customer wealth. Moreover, it is not easy to build customers’ loyalty and stickiness when providing services to the high-net-wealth customers, though we have tried amoumts of ways. On the other hand, there are some merits and dismerits while we used some indicators to value companies. Therefore, we would like to revise this method combining with some investment advices, in order to identify stocks which have excellent performances over a long period by looking for some long-term and stable indicators, as well as the portfolio constructed on this method can achieve a good return.In addition, the real market is not perfectly in line with the efficient market theory. Most of the domestic scholars come to the conclusion that China’s security market is still in a weak-form efficient stage, which provides a theoretical basis for the paper. The investment practice of Graham, Warren Buffett and other masters abroad and excellent investors at home have improved the real possibility of obtaining excess returns through active management.Combining with real practice, this paper firstly analysis the common methods of company valuation and their pros and cons, make the theoretical foundation for the authentication and system construction of valuation indicators later, and based on which, an empirical analysis was made on China’s weak-form effective market. Secondly, the paper conducted a descriptive statistics for Graham-style investing (good price) and the Buffett-style investing (good company) in order to verify the reality and operability of long-term stable valuation indicators in China’s securitiy market, and to be reference groups of the following indicator system made in this paper. Thirdly, through a one-by-one authentication for indicators, we look out the key indicators, then by Logistic binomial regression analysis to find the core impact factors for constructing the indicators system. Finally, compared the market index, Graham-style investing approach, Warren Buffett-style investing approach to the results of the indicators system constucted in the paper, and then conduct a case study for its real effect in practice.This article totally has six parts including preface.The preface discusses the background and significance of this study, then clarifying the structure and the main idea, then briefly descripes the contribution of this paper.The second chapter discusses the common valuation practice in our industry, which are absolute valuation and relative valuation analysis method. The paper not only introduced two absolute valuation methods including the dividend discount model and discounted cash flow model, but also the relative valuation methods, including PE ratio method, and PB ratio method. In addition, this section also analyzes the pros and cons of the two type methods.Chapter three dicusses the efficient market hypothesis, the value investment theory and corporate valuation literature, makes a theoretical and empirical basis. This section describes the development, meanings, assumption of the efficient market hypothesis, and discusses the distinction and test methods between weak form, semi-strong form and strong form efficient market. And then tested the effective level of Shanghai and Shenzhen market using weekly data from1992to2011, the conclusion is China’s stock market is still in weak-form efficient stage. It is a theoretical and practical fundamental analysis for the authentication and system construction of valuation indicators. And then, the classic theory of Graham and Buffett were introduced, as well as review of the theoretical study on value investment both domestic and abroad. Finally in this section, the paper also combed domestic and foreign literature about company valuation, for building the foundation of the authentication and system construction of valuation indicators.The fourth chapter is the empirical analysis, which is the most impotent part. It firstly selected option indicators which may relate to the valuation of the company. The option indicators covered many aspects of the enterprise, including profitability, growth, asset management, solvency and market value ratios. Secondly, non-parametric test be conducted to the selected option indicators, the results show that the net profit CAGR, return on net assets, operating income CAGR, dividend yield, net profit margin of the total assets, total assets turnover, ROIC, current liabilities ratio, current assets turnover, interest earned multiple etc. have a great stability and affectivity, so that they become the next-step indicators for the construction of. Finally, the core factors were choosed through logistic binomial regression analysis. Based on the needs of the real investment practice, Two valuation system matching T and T+l were constructed for the real needs in practice. The T-year regression model selected ROE, operating income CAGR, net profit CAGR and total assets turnover as the core indicators for valuation system. In which, if the outcome P>0.49, the company is worth investing in the year, if the resulting P<=0.49, it has no investment value. The T+1-year regression model selected current liabilities ratio and dividend yield as the core indicators for valuation system, In which, if the outcome P>0.50, the company have investment value in the year, if the resulting P<=0.50, it has no investment value.In addition, this section compared the investment results between the Market Index, Graham-style investing approach, Warren Buffett-style investing method and the valuation system constructed in the paper, to verify the validity of the system. Graham-style investing approach has a poor performance in matching T years relative to the Shanghai Composite Index, nearly loose20percent ever year, however when match T+l year, it achieved an average twenty-three percent excess return rate annually, while advised Sharpe ratio also reached0.48, shows a good performance in practice. Warren Buffett-style investing method got average excess return rate of30.77%annually in matching T-year, the advised Sharpe ratio also reached0.48, and also when matching T+l year, it achieved an8.56%excess return annually, so that the strategy has a strong stability in practice. With respect to these two classic value investment approach, the valuation system strategy built in this paper achieved average excess return of15%annually when matching T year, which underperformed to Buffett-type investment strategy, but stronger than Graham-style investment strategy. It should be noted that T+1-year valueation system achieved an incredible average excess return of120.62%annually, and the advised Sharp ratio reached a staggering perfect0.93. The reason may be that, the valueation system was based on statistical regression analysis using historical data. Since it has a good fitness and strong explanatory power, it is naturally to achieve better results using the model to guide real investment. Therefore, the valuation system should be tested in the future, though up to now, it has proved a near-perfect effect in real investment.Chapter five summarized the results of the theoretical and empirical analysis, and then came up with a few useful advices to the investment consulting work. First, the consulting institution should strengthen the research on industry and company fundamentals. Second, they can focus on the study of the relationship between the value of company and fundamental indicators. Third, they can draw the valuation system in this paper or Graham-style and Warren Buffett-style investing strategy, in order to enhance the advising work.Finally, combied with the department duties, the paper do a case study on the valuation system in applying to the real practice. In real practice, if the advisor referred to the stock pool constructed by the system in this paper for customer consulting, the customer loyalty and stickiness may be easier to build up. |
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