The Applied Research Of The Value Investment Of Stock Market In China

Over the past four decades after reform and opening,Besides saving their income,people also seek for diversified investments.As a risky but rewarding asset,stock is very popular with the investors.As a classic investment strategy,value investment has been followed by more and more investors.In 2017,an upsurge of value investment was created in the Chinese stock market.The “Leading White Horse” market became the annual buzzword for the 2017 investment strategy of the Chinese stock market.In the meanwhile,the “long bull run” pattern of the Chinese stock market gradually formed.These targets,which are basically well-behaved and undervalued by the market,ushered in a rally in 2017,indicating that the Chinese stock market is being guided to a mature value investment ecology.To judge whether a company has the potential to make value investment,it is necessary to analyze the fundamentals of the company first,including the analysis of the macro environment,the industry in which the company is located and the company's own operations and financial status.Good fundamental is a prerequisite for value investment.The second step is to evaluate the company's intrinsic value with either relative valuation or absolute valuation.The correct judgment of intrinsic value is the key to value investment.Thirdly,we can compare the intrinsic value with the stock price,judging the size of safety margin.Having sufficient safety margin is the core of value investing.Finally,we buy the stocks and sell them until value reversion to obtain satisfying investment income,which is the ultimate goal of value investing.In order to research further the application of the value investment in Chinese stock market,can this paper use SANY to research the value investment as case study.Through the case study,the construction machinery industry which the SANY belongs to will recovery in the end of 2016 and through the whole 2017 after the five-year further adjustment.The reason of the recovery is mainly because of the demanding increase which includes the fundamental construction investment,real estate investment,the incremental demand of “One Band One Road” export and the update demand of outdate machines,etc.In addition,the concentration of the construction machinery industry further increases.SANY heavy industry is the leading enterprise in the construction machinery industry which will be benefit firstly in this recovery.Through the analysis of the operations and financial statements of the company,we will know the company has a bright fundamental.This article uses the four methods of free cash flow discount,P/E,P/B,and P/S to estimate the intrinsic value of SANY.Then,according to the characteristics of each valuation method,the estimated results of are given different weights,respectively.The intrinsic value of the weighted average of the intrinsic value of the 11.44 yuan.The current closing price of SANY Heavy Industry(March 23,2018)is 8.15 yuan,and the intrinsic value is 1.4times that of the stock price.If the return value is achieved,there is still 40% upside and there is a relatively large margin of safety.Think SANY Heavy Industry is a high-quality target for value investment.Through the analysis of the case of value investment of SANY Heavy Industry,it can be found that the fundamentals of SANY Heavy Industry remain solid.The estimated intrinsic stock value is also higher than the fair price,where there is a large safety margin.According to the strategy of value investing,it is profitable to buy the stock of SANY Heavy Industries and hold it until value reversion.