In today's discussion, let’s delve into the consumption sector to explore how to acquire relevant and authentic data, as well as to comprehend the crucial indicators and dynamic factors shaping this industryThis is incredibly valuable information, especially for many investors who often fall into common pitfalls when analyzing the market.
The true driving forces of the stock market often emerge from dynamic changes in the industry.
Since 2016, leading liquor companies have entered a phase of remarkable earnings growth, with many of them maintaining profit growth rates exceeding 20-30% well into 2023. However, it is crucial to understand that this late-stage growth has largely been fueled by distributors hoarding stock due to prior demand surgesConsequently, the essence of the situation will be starkly evident in 2024: weak sales figures and a cautious approach to maintaining prices will be apparent, as growth rates continue to dwindle into single digits

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Still, some investors cling to outdated research based on previous years' rapid sales growth, mistakenly calculating what they perceive to be 'undervalued' stocks, leading to potentially skewed interpretations.

Many enthusiasts praise high-end liquor stocks for their dividend yields, which often exceed those of ten-year treasury bonds by more than 1. However, this situation is not without its uncertaintiesOn one hand, if the industry remains robust, it may genuinely be undervalued, leading to a rebound that normalizes dividend yields; on the other hand, if the industry is in decline, the real landscape will emerge, revealing continuous decreases in net profit attributable to shareholdersThis, in turn, would lead to reduced dividends and a return to lower yield levels. — Clearly, investors should recognize that industry research factors are dynamic; they encompass much more than mere numbers—they are trends reflected by market expectations influencing stock prices.

At the root of all indicators lies the overarching economic cycle.
Numerous technical analysts tirelessly observe an array of metrics, from trading volumes and moving averages to indicators like MACD, Bollinger Bands, and RSI, often utilizing these as the foundation for their trades.Yet, these indicators only scratch the surface; the true core lies in the fluctuations of the broader economic cycle, which instigates changes within the industry

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This is the underlying cause, with stock prices and technical indicator fluctuations merely reflecting these internal shiftsAs a result, during specific periods of earnings responsiveness and policy adjustments, technical indicators can become irrelevant or even counterproductive.

For instance, post-Chinese New Year in 2021, the stock market faced a peak with the so-called "Beautiful Fifty" phenomenon, coinciding with a solid performance by the liquor industry coupled with strong technical indicatorsHowever, the clear signals of a collective market peak were undeniableDuring such moments, the signs of an impending change in the economic cycle became significantly more apparent, rendering individual stock performances and even industry factors less crucial. Consequently, over a span of three years, we witnessed Moutai's stock value cut in half, while stocks like Wuliangye and Luzhou Laojiao saw their market prices plummet to one-third of their 2021 peak levels, and companies like Shede Liquor and Jiu Gui Liquor plummeted even further to just a tenth of their previous highs.

During this time, numerous investors engaged in earnings and technical analysis, often catching the market at weak points—sometimes halfway up the rebound, only to later lament the ineffectiveness of various indicators.In reality, the industry's trends are tightly intertwined with the larger economic context

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From 2022 onwards, a consistent decline in property sales became evident, with risks associated with companies such as Evergrande starting to crystalizeThe consumer stockpiling that had bolstered the market during the pandemic in 2020 began to wane by 2021, and by 2022, the suppression was increasingly apparentBusiness demand represents a critical channel for high-end liquor sales; without this layer of support, companies initially might cope by controlling inventories to sustain their performanceHowever, when the speed at which distributors could deplete their stocks slowed, rendering them unable to accept fresh peer offerings, the discrepancies in company performance metrics became glaringly obvious.

In many ways, this scenario is merely a delayed reaction to the broader economic environment rather than a sudden development.However, many investors perceive these shifts as unexpected, largely due to relying exclusively on previous data or technical indicators, which can lead to making far-fetched analogies

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