Today, let's talk about a very interesting topic, concerning the stories in the stock market, and the accidents that come with storytelling.

Firstly, we must understand one thing: the stock market is a place for storytelling.

Many people might not take this statement seriously.

This is because some so-called value investors will always argue against the investment philosophy of storytelling, like a contrarian.

But essentially, any company, after going public, has a valuation, and this valuation is a story.

Valuations are fluid, not constant, which means the better the story is told, the higher the valuation.

Why are the price-to-earnings ratios in some industries very low? Because there are no stories to tell.

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There is no imagination space for capital to fantasize about the story, so naturally, there will be no room for speculation.

So-called value investing is still a story in itself.

Take the benchmark Moutai as an example.How did Moutai's stock price get inflated to a P/E ratio of over 70 times?

It's all about storytelling, just with a different approach.

The stories others tell are about explosive growth in future performance, but Moutai's story is mainly divided into the following points:

1. Luxury definition, high-end positioning.

Moutai is considered a luxury item among liquors, which is why it is priced high, with high gross profit margins and even higher net profit margins.

When people host guests with Moutai, it's prestigious, so sales are not a concern.

Luxury items also hold their value, so they can be collected, and when taken out in the future, not only will they not depreciate, they may even appreciate in value.

Therefore, Moutai is a high-end game, different from other liquors.

This story is very appealing, directly distinguishing Moutai from ordinary liquors and highlighting its leading position.

2. Core assets, scarcity.Moutai is unique, the only stock priced above 1000 yuan, and there is only one Moutai in China.

Moutai is a core asset that must be included in the portfolio.

Moutai is a scarce asset, and there are only so many shares of Moutai available.

A lot of long-term capital is locked in Moutai, and the circulating chips of Moutai are becoming less and less.

Funds have emphasized the scarcity of Moutai, the status of core assets, and it is named as the signboard of A-shares.

3. Stable growth, certainty.

In addition to the above two points, there is another core to Moutai's story, which is that I have performance.

Moutai has the market pricing power and a huge distribution channel.

This determines that Moutai's performance can basically achieve stable growth.

There is nothing better than the story of stable performance growth, this high certainty.Most industries are cyclical, and thus their performance will fluctuate. No company can guarantee the sustainability of performance growth.

However, at the current stage of Moutai, the growth of performance can basically be determined, because there are people who buy even when the price is raised, and the supply is still insufficient.

Taking the performance out to tell a story has attracted a large amount of following funds.

When the story ends, we find that what Moutai said is actually not wrong, but the stock price has fallen.

This shows that even if the story is true, it does not mean that the valuation is necessarily reasonable.

What if the story is not true, what should be done, and what will the outcome be?

Old shareholders must still remember the vaccine incident of Chongqing Beer.

That story, which raised the valuation of Chongqing Beer by more than 5 times on the spot.

Finally, because the vaccine was watered down, or the vaccine was not developed at all, the story was declared to be broken.

The stock price fell continuously for 9 consecutive days, from more than 80 to 20 yuan.Tell the truth, even real stories carry the risk of falling out of favor, let alone when the story is a fabrication.

Some might ask, how can one determine whether a story is real or fake?

Just listen to the story as a story.

Because even if the story is true, the funds will get tired of it, and the market will get tired of it too.

So, listening to stories also has its phases.

Phase One: New stories, new concepts.

New stories are the favorites of speculative capital.

As soon as a new term appears, speculative capital rushes in to speculate.

Speculative capital doesn't care whether the story is right, how long it can be told, or how much room for imagination there is.Because speculative capital seeks to enter the market first, rather than engaging in long-term investment.

Any new term will bring a new story, and old stories are not loved by anyone, so new stories can attract people's attention.

A group of the fastest-reacting funds first hype up the new story, and naturally there will be followers to take over.

This is the logic of speculative capital in hot topics and also the fundamental reason why stories can be hyped up.

Phase two, old stories, with expectations.

Institutions also like to listen to stories, but the institutions' understanding of stories is expectations.

Any story that is told can bring what kind of expectations, this is what institutional investors care about.

So, institutions are not not entering the market to speculate, but they are always half a beat behind.

They need a decision-making cycle, whether to enter the market to continue telling this story.

This story may have been fermenting for several weeks, or even 1-2 months, and institutions are just slowly entering the market.So, the second round of speculation in many sectors is participated by institutional funds.

They have done a certain amount of research and believe that the story has imagination, space, and expectations, so they have entered the market to layout.

Phase three, old stories, with performance.

The first cycle of the story is phase one and phase two.

The second cycle of the story is phase three, which is also the time to talk about performance.

It starts with the concept, then the logic, or the expectation, and at this time, it's time to hand in the answer sheet.

The listed companies related to the concept must have a clear performance increase in half a year at the shortest, and 1-2 years at the longest.

Otherwise, the story will directly turn into an accident.

When handing in the performance, if the answer sheet is very beautiful, even if it is an old story, there will be a lot of funds to pursue.

Because there is a part of the medium and long-term funds that need to be allocated to stocks with performance.Phase Four: The Old Story, with Bubbles.

The final phase of the story must be the distribution of shares.

This distribution will definitely not be within a reasonable valuation range, because if the valuation is reasonable, long-term capital will not leave but will continue to believe that the story can bring performance and an increase in stock prices.

However, if the stock price is pumped up very high and a bubble appears, then capital will definitely flee collectively.

When the stock price is expensive, capital naturally runs away, falling back to a reasonable valuation, and capital will still believe in the story and continue to come back.

Regardless of whether the story is true or false, as long as it enters the bubble period, it is a word: run!

No matter how realistic the story is told, do not take it as a long-term investment, because the number of stocks that can survive and run out of a super bull market is too small.

Even for long-term bull stocks, you will find that their rise is actually cyclical.

More increases are in the first three stages of this story, and the fourth phase is likely to be retracted.

Ultimately, these stocks fluctuate back and forth in the third and fourth stages, forming wave cycles one after another.In the stock market, we listen to the storyteller's tales, then we organize the logic based on the stories, distinguish the phases, and make our investments accordingly.