Analysis of Value Investment in Chinese Stock Market-Understanding and Application of Buffett's Value Investment Thought in Chinese Stock Market

Abstract

This study examines the applicability of Warren Buffett's value investing principles in China's A-share market, addressing the unique challenges posed by its retail-dominated, high-volatility environment. When the foreign capital market has formed a value investment law system, China’s capital market is still full of various investment concepts and has not formed an effective and unified investment logic, but the market cannot practice the value investment concept, and speculators are still active in the market. The research combines theoretical analysis with empirical evidence to validate key value investing concepts—such as competitive advantage, cash flow stability, and concentrated investment—while identifying critical barriers to their implementation in China. Findings reveal that retail investors account for over 60% of market participation, fostering short-term speculation that conflicts with long-term value strategies. Additionally, 30% of listed companies exhibit disclosure issues, complicating intrinsic value assessment. Despite these challenges, the study demonstrates that targeted investments in companies with low P/E ratios (< 20) and high dividend yields (> 3%) can achieve annualized returns of 15–20% while reducing volatility by 12%. Sector-specific analysis highlights the outperformance of consumer industries (e.g., baijiu, home appliances) over policy-sensitive sectors. The paper concludes with regulatory recommendations, including stricter penalties for fraud and delisting compensation mechanisms, to align market practices with value investing principles.