The formation of his measures have gone through a long exercise. He was good at investing in growth stocks in mutual fund that year. The strategy he put forward at that time was to pursue the acceleration of enterprise performance growth, and he did not care too much about whether the valuation was too high. For example, the year-on-year growth rate of a company's net profit was 20% last year, 30% this year, and is expected to be 50% next year. It was a good target, regardless of the valuation at that time.

However, he realized that the clients’ requirements were lower performance volatility and higher margin of safety after establishing hedge fund. Therefore, an investment system of "value growth" is established to look for individual stocks with reasonable price and growth. LIU Qingshan said, "In fact, the research methods have not changed much, but the importance of value has been raised in the balance between value and growth, while the requirements for growth have been lowered.".

LIU Qingshan said, "In fact, I am more suitable for this method. What we want to do is simple investment, business transparency, no need to guess the prospects, no need to bet on policy, and be a lazy person." LIU Qingshan said that he also reached a consensus with friends in the investment circle around him for many years, that is, to earn income in the secondary market, you should invest in blue-chip stocks; If you want to get high profits from enterprise growth, you should do PE or VC; If you want to do overseas markets, you can buy overseas indexes. In LIU Qingshan’s view, if we are against the market consensus, it’s easy to make mistakes. Therefore, we must be humble. Investment must follow the Law of Large Numbers, so that it is easier to gain.

For simple investment, LIU Qingshan set a living example. "I read an article two days ago saying that a successful marriage only needs to do two things - find a good person and be a good person yourself. If you cannot do them  well, the two things will become four things. If it is not done well again, it will become more." He thinks it's similar in investing, which simply means buying a good stock at a reasonable price and analyzing it.

A good price is to set a margin of safety for the investment result. An important link in value investment is to judge whether the price is reasonable, and the standard for consideration is valuation. LIU Qingshan believes that the valuation methods used to judge each industry are different, and he takes several promising industries as examples.

For example, the valuation of the insurance industry depends on the embedded value (P/EV), because there is a lag in the release of insurance profits; Banks should pay special attention to the quality of credit assets. Once the risk of some potential non-performing assets breaks out, it is easy to drag down the performance; The real estate industry depends on the net asset value (NAV), because the land stored can release profits in the future.

The valuation method of the consumer sector is different from that of the market. At present, Buffett's Discounted Cash Flow (DCF) method is widely used for valuing consumer goods, but in his opinion, this method has a basic condition that enterprises can survive forever. If an enterprise goes bankrupt 20 years later, the DCF method is meaningless.

"So Buffett invests in enterprises that are basically sustainable, such as Coca Cola, Procter&Gamble, Nestle, American Express and so on. As long as there are people, there is demand for the products of these enterprises", LIU Qingshan said in an interview, "The reason why A-share consumer enterprises can't adopt the discounted cash flow method is that few of them exist permanently. In the formula of the discounted cash flow method, the sum formula is used to calculate from 1 to n years. In the formula, n is taken as" approaching to infinity ". If an enterprise does not exist after 20 years, the current cash flow calculated by this method is not objective.".

Since the discounted cash flow method cannot be used to judge the valuation of the consumer industry, how can we judge the valuation level of consumer enterprises? Mr. LIU said that it can be seen from the current inventory and accounts receivable of the enterprise, and to what extent the advance receipts will decline in the next few years.

In LIU’s system, to measure enterprise value, we should not only focus on valuation, but also pay attention to the return on invested capital (ROIC). The reason for this is that the valuation of enterprises is mainly from the growth of earnings per share, net profit growth, revenue and other aspects. However, in fact, the growth of profits is closely related to the investment of enterprise shareholders. A successful investment should be that the return on investment is greater than the return required by the cost of capital. The reporter of Weekly on Stocks saw a group of data. In 2007, Kweichow Moutai, Vanke and Conch had profits of 4.5 billion, 7.7 billion and 3.2 billion respectively, which were almost the same. However, their ROICs are 39.48%, 11.75% and 11.35% respectively. This shows that Kweichow Moutai has a stronger earning effect and a stronger stock price trend.

In addition, he will compare the size of ROIC and WACC. At present, the capital cost is about 7%, that is, 6% of the loan cost plus 1% of all expenses. If the rate of return on invested capital is lower than 7%, it means that the company is not getting a higher return on its expanded reproduction than it would get if it put the money in the bank, which is equivalent to destroying value.

The second: What is a good enterprise?

LIU Qingshan believes that besides reasonable prices, growth is also an essential factor. To find out whether an enterprise is growing, he listed several criteria for judging a good enterprise:

1. The characteristics of the times: The birth of a good enterprise is often accompanied by the rise of the industry under the background of the change of the times or the rebound from the bottom of the demand. Companies that can achieve sustainable growth must be based on profound changes in the industry.

2. Company characteristics: The business of a good company is more competitive than that of its peers. Due to high barriers, their competitiveness can be maintained for a long time. Good companies often enjoy profit margins that exceed the industry average and faster growth. Therefore, leading in profitability and growth rate is often a direct manifestation of a company’s strong competitiveness.

3. Management team: industrial elites who are down-to-earth. LIU Qingshan believes that an excellent management should have at least three characteristics: down-to-earth and dedicated, industrial elite and steady work.

LIU Qingshan made some detailed explanations for the above standards. He pays more attention to the penetration rate and concentration of the enterprise. The former indicator represents how many new users will be added in the future, and the latter indicator represents how many shares can be occupied by competitors. Together, these two indicators reveal the size of the pie at hand.

Respectively, LIU Qingshan elaborated the method of calculating the penetration rate of consumer goods enterprises. Take the air conditioning industry as an example. Normally, a family's residential area is about 100 square meters, with two rooms and one living room. In case of saturation, 2.5 air conditioners are required. At present, the number of air conditioners in China is 1.2 in urban areas and 0.6 in villages and towns, so there is more than twice the market share and more than 50% of the sales volume. This is an industry with increasing penetration.

In the process of growth, an industry will be accompanied by the formation of oligarchic enterprises, which is the natural result of market competition. Like penetration, concentration also reflects whether the company has money to earn. For example, Apple has limited room to improve its concentration.

In the consumer goods industry, the key to whether a company can gain higher concentration depends on it can beat its competitors or not. In LIU Qingshan's investment, this is directly related to the brand power, product power and channel power of the products.

Take the home furnishing industry as an example. First of all, the brand power. Some enterprises invest as much as 300 million to 500 million yuan in advertising every year, while most only tens of millions or even less. This will give the former brand more opportunities to be recognized by consumers. However, whether the brand can gain the trust of consumers to build a good reputation depends on the quality, cost performance and consumer service of the product. The combination of brand awareness and reputation is to strengthen brand power. The stronger the brand power, the greater the pull of products on channels, sales and prices, and the easier it is to achieve success.

Next is product power. In the furniture industry, it depends on materials, quality stability, design leadership and sales services. Strong product power can provide brand reputation and expand the effectiveness of brand promotion. On the contrary, if the product power is poor and the marketing is ahead of the product, consumers' evaluation of the brand will be reduced and the promotion effect will be greatly reduced.

The last is the channel power. The terminal sales of furniture enterprises are mostly completed by dealers. The ability of dealers is one of the most important factors determining the sales volume of the company's products. The indicators commonly used to measure the channel strength of enterprises include the number of stores, the number of dealers, the profitability of stores, etc.

If the research object is a technology-based company, LIU Qingshan is more concerned about the R&D drive on the competitiveness of the company. A typical case is that Hikvision's main security equipment, such as cameras, benefited from the "safe city" strategy in the early years, and the company's profits grew rapidly. Especially from 2008 to 2009, the government invested 4 trillion yuan to drive economic growth, and the industry growth reached 40% - 50%. But later, with the start of the anti-corruption campaign, various government departments have tightened their spending, and their investment in the security field has also been tightened accordingly. Market share of the first Hikvission and the second Dahua shares began to fight price war, which led to the very low valuation of the company in 2014. It dropped from a high of 40 times to more than 20 times. Dahua Shares also took advantage of the anti-corruption trend to narrow down the distance with Hikvision.

"Hikvision was a stock that I paid attention to when I worked in mutual fund, but we didn't discuss this stock for a long time during the anti-corruption period. The turnaround began to occur until Hikvision and Nvidia cooperated to release the 'Super Eye' (Shenmou in pinyin) series of professional smart cameras. This new camera can intelligently identify the characteristics of people. For example, after theft, the suspect rode a motorcycle, wore a hat, held a red bag, and then each camera can identify the suspect and draw his whereabouts. It used to take a few weeks for the police to see all the video materials, but now it only takes 15 seconds. Therefore, the advantages of Hikvision are becoming more and more obvious, so that enterprises can seize market share from competitors, and concentration will continue to improve, " he said.