The core idea is one: replace overvalued with undervalued, replace uncertain with certain Let's briefly talk about the valuation tool - price to earnings ratio. The formula is: price to earnings ratio=price to earnings ratio ÷ return on equity (PR=PE ÷ ROE ÷ 100) Buffett buys at 40% off and 50% off, and I also follow this rhythm. For value stocks with stable ROE, use TTM PE and TTM ROE to calculate If encountering cyclical stocks with unstable ROE or distressed reversal stocks, the second formula can be used: PR=PB ÷ ROE ÷ ROE ÷ 100, combined with the average ROE over many years to blur the valuation. For companies that make fake money and receive low dividends, a correction factor N should be added (based on a 50% dividend payout ratio as the benchmark, the coefficient below 25% should be directly adjusted to 2.0) The long-term holding of A-shares has a dividend tax rate of 0%, so 1.0PR is considered overvalued; H-share dividend tax of 20% or 28%, 0.8PR or 0.72PR is considered overvalued. This system is more suitable for industry leaders because the incremental funds of AH shares are limited, and the valuation of leaders is more informative Next, let's take a look at the situation in several industries: Baijiu: After the Wuliangye incident, it was worried that other manufacturers would follow suit, and it was difficult to judge the bottom of the financial report data. The profit rate of Kweichow Moutai has dropped to more than 50%, and I have changed from cautious optimism to slightly optimistic about the prospects of the industry Air conditioning: As a must-have consumer, the domestic basic market is still good, and there are many policy games in the European market, but the prospects are improving. Midea Group's AH shares have a revised market profit margin of around 70%, and we can only observe from now on Pork: This is my first time making a pork cycle. In the past decade, I have made a lot of profits in cyclical stocks such as oil and coal. Currently, the industry leaders have adjusted their market profit margin to around 50% Hang Seng Technology: According to Mr. Market's definition, it has now completely become an old listed stock. According to non international financial standards, Tencent Holdings has fallen below 60%, as buybacks replace dividends and there is no need to adjust the market profit margin Lithium ore: It has experienced consecutive sharp declines in the second half of the year, but most cyclical stocks have maintained a boom cycle of at least two years. It is not reasonable to enter a recession now. Using PB combined with dynamic ROE, the valuation of the leading company is about 50% off, but the balance sheet has not been repaired yet, so there is no need to demand strict correction Oil: High oil prices have become a short-term phenomenon, and using TTM PE combined with TTM ROE is the most realistic approach. China National Offshore Oil Corporation has revised its market profit margin to about 0.5PR, but its dividend tax rate is as high as 28%, with an overvaluation threshold of 0.72PR Insurance: Just got out of trouble and turned around. Ping An AH shares in China have a revised market yield of approximately 70%. Insurance stocks have a bull market amplifier effect, and investing in them is also betting on old stocks and a second wave When buying a faucet, you must buy a faucet