Yesterday, I started the advanced course of long-term investment in stocks and began to analyze industries and companies. To find a good company, we must first look at whether the business we are engaged in is good or not. And the two criteria for judging a good business are-living long and earning much.

There are many industries that make a lot of money. There are inherent differences between industries and businesses, and good industries are more likely to get high returns. For example, the return on investment in the health care industry can reach 25 times, the software and liquor industry can reach 16 times, and medicine, household appliances and household items can also reach 10 times.

Then how can we judge whether an industry and a company can live long?

First, the market potential should be large, and second, the market competition should be small.

To judge the market potential, we can calculate it according to the market size and market capacity, so as to get the total demand for a certain product or service in a certain period of time.

For example, to calculate the market potential of the air conditioning market. We can assume that there are 430 million households in China, each with an air conditioner, and each air conditioner has a service life of one year, so there will be 430 million air conditioners in the market every year. The market potential in the future 1 year can be judged by subtracting the existing air conditioning output from the market demand. Of course, the service life of air conditioners is much longer than 1 year, so we can adjust the market demand according to the average service life and estimate the more accurate market capacity.

In addition, we can also calculate the market capacity through the data given by the research report, such as "Huibo Intelligent Strategy Terminal" and "Radish Investment Research", which are very powerful investment research tools. Of course, it should be noted that research reports are reports issued by various brokerage companies. In order to encourage investors to make investment decisions, analysts will give recommendations or optimistic suggestions to get service fees from them. Just refer to this suggestion. Don't make blind investment decisions. Be sure to combine the analyst plate and the comprehensive ranking of analysts to compare.

Market competitiveness can be found in the investment research report. Generally speaking, if a company has little competition, it means that it is profitable and easy to survive for a long time. On the contrary, if the competition is fierce, it is more difficult to survive.

There are four common competition patterns in an industry: perfect competition, monopoly competition, oligopoly competition and complete monopoly, and the intensity of competition in these four situations is gradually weakening.

When we judge the competitive pattern of an industry, we can make a comprehensive judgment through the number of enterprises and market concentration. The smaller the number of enterprises, the higher the concentration, the weaker the competition, the easier it is to obtain excess profits and the greater the possibility of long-term survival. The more enterprises there are, the fiercer the competition will be. At this time, the profit may be lower, and the possibility of enterprise survival is also low.

There are three stages of general market competition. In the first stage, many enterprises in the industry share the market and enter one after another, so it is difficult to judge the survival probability of enterprises. In the second stage, the number of companies is gradually increasing, and the market is completely competitive, so it is still difficult to judge the retention rate; In the third stage, leading enterprises occupy most of the market share, and the remaining enterprises are more likely to survive.

To sum up, when we judge an industry and a company, we should first look at the industry and judge the proportion of the main business in the market and whether there is growth potential; Secondly, we should look at the market competition and the market share of other companies in the same industry, and then eliminate those companies that lose money with short life through their own independent thinking, leaving a real white horse.

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