The general rising market in 2019 and 2020, the sector rotation in 2021 and the sharp decline in the beginning of 2022. Investors have been on a roller coaster in recent years. In such a complex and changing investment environment, there is a fund manager whose management scale has increased from less than 500 million by the end of 2019 to more than 20 billion by the end of 2021. What did he do right behind this sharp increase?
live broadcast golden sentence
1. Growth stock investment must be far sighted, not confined to reality, but focused on the future.
2. The firm will not buy is a company whose financial fraud reflects profits that are not its real profits. Many reasons for not buying are relatively detailed. A company that does not grow should not buy. Companies that only have security but not aggression are also unlikely to buy.
3. I generally recommend investors to use fixed investment, unless it is temporarily bought and calculated on an annual basis, ignoring the fluctuation of one week or one month. It is feasible to buy one-time on an annual basis.
4. On the one hand, if we eliminate the expectation of the special explosive growth of the industry, we may find something similar to its original business a, which can only follow the growth rate of the industry. If it expands business B at the same time, its growth rate can surpass the industry, which is one of our concerns; Second, we should deal with the cost of raw materials, which are also the direction of our thinking and preparation for investment.
5. On the issue of “periodic table of elements”, one is to see the difficulty of mining elements in the future, and the other is the sustainability of future demand growth.
6. Many semiconductors in China used to rely on imports. At this time, the supply shrinks, the supply shrinks, the demand is growing, and there is a contradiction between supply and demand. At this time, semiconductors have great investment opportunities. Now, the contradiction between supply and demand of some semiconductors or the opportunity of import substitution have been fully reflected in the valuation. After that, the investment opportunities of semiconductors may be the demand for materials after China’s production capacity is put into operation. The opportunities come from the terminal links of materials.
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jointly examine and judge investment opportunities from multiple angles
host: Hello, I’m Yanbei. This is Mr. Shi Cheng, fund manager of SDIC UBS. Hello, Mr. Shi.
Shi Cheng: hello.
host: please say hello to everyone first.
Shi Cheng: dear investors, good luck in the year of the tiger.
host: before the formal interview, I’d like to briefly introduce Shi Cheng. Shi Cheng graduated from Tsinghua University majoring in electrical engineering and joined the UBS fund of SDIC in March 2017. He has successively served as a researcher and fund manager of the company. In recent years, he relied on his in-depth research in the field of emerging industries and his grasp of investment opportunities in the growth sector. At present, he has achieved brilliant medium and long-term performance in many equity products under his management, and the total scale of the fund under his management has reached 20 billion yuan. He has also become one of the cutting-edge fund managers with high attention in the industry.
Today, let’s talk to general manager Shi Cheng about his investment in growth stocks and his outlook on future markets and investment opportunities. Mr. Shi, did you enter the financial industry as soon as you graduated?
Shi Cheng: yes.
host: what kind of financial institution did you work in your first job?
Shi Cheng: my first job was also in a securities firm. Since I started working, I have been studying the contents of new energy and TMT industry.
host: you are a master of engineering from Tsinghua University. In fact, you don’t study finance related majors. Why did you choose to enter the securities industry when you graduated?
Shi Cheng: because I learned about the securities industry at that time, I think the securities industry has relatively high requirements for personal comprehensive judgment, vision, problem analysis and problem-solving ability, and can give full play to some of your own advantages. Therefore, I thought this kind of work was more suitable for me at that time. Then, when looking for a job, I deliberately looked for opportunities in this regard, and first entered the securities firm to engage in this work.
host: looking back, how do you evaluate your career choice at that time?
Shi Cheng: from my own point of view, the development of the whole career selection process is more in line with my previous expectations. After graduation, I first chose the securities industry, because I felt that if I started in the fund industry, I might have to bear greater work pressure and psychological pressure. After several years of research work in securities companies, I think it may be more suitable for the rhythm of the buyer. I went to the fund company again, from researcher to fund manager. Since March 2019, I have been working as a fund manager. Although there are twists and turns in the process, on the whole, it is still a situation that is more controllable and in line with my expectations.
Moderator: well, as you just mentioned, you have been managing fund products and working as a fund manager since March 2019. In the past three years, I have noticed that your investment has been focused on science and technology growth stocks, mainly in new energy vehicles, photovoltaic, electronics and semiconductor industries. Why do you prefer growth stocks so much?
Shi Cheng: because from our understanding of investment, we have also looked at many excellent stocks. In fact, the growth of individual stocks is the same as that of people and society. You must be under a big wave, you must be under an environment with broad space. Only this environment, long-term industry growth and long-term company growth can finally bring the return on investment in stocks. Like other types of investment styles, they prefer the way of value return to undervalued value, but we think that in the end, the value of the enterprise or the value of the company is reflected by growth. If there is no great growth, generally speaking, it is difficult for stocks to become very bull stocks.
host: does this preference for growth stocks have something to do with your entry time?
Shi Cheng: actually, it shouldn’t matter much. When we were researchers and sellers, we had all kinds of thoughts. We have also recommended industries that are considered to be very undervalued. For example, some companies have a lot of cash on hand. You can use this thing to revalue it, that is, how can it be worth the money. But generally speaking, when the real market comes, the performance of this kind of stock is relatively general, so in fact, it is a process of repeated learning and exploration.
After many years of observation and reviewing the investment masters and classic investment cases, you will finally find that only by growing can it create real value.
Moderator: but from the perspective of the style change of the A-share market, sometimes it is partial to growth and sometimes it is partial to value. What are the key points to grasp in making growth stock investment in such a market environment? Can we go through this different style of market environment and continuously obtain excess returns?
Shi Cheng: as you just said, its style has changed. For example, in 2018, the whole growth style is relatively frustrated; For example, in 2021, growth style and value style are half and half from my understanding. If you don’t make some subdivision choices in the growth sector and judge the core contradictions and differences at each stage and time, I think it may be better than value from the perspective of growth and elongation. However, it is difficult to have a significant excess, so we should grasp it at this time. Growth is also different in different stages. For example, in the growth stage of the industry, it may have theme investment and some new businesses. When the income brought by it is relatively small, it has some improvement in valuation, and there may be more investment in this aspect. Then, after the industry enters the stage of rapid growth, the profit cashing and profit growth of these enterprises may be higher than the income, and the income is also growing rapidly. In such a process, in fact, its existence degree and more businesses are in the rapid growth of income and profit brought by this emerging growth industry, which is the most important. However, when the industry enters the later stage, it may develop to a certain stage, and the supply and demand structure of its industry will change. The scarce links will begin to reflect, and some links will obtain excess returns. Later, the industry may enter the stage of excess reshuffle. At this time, the leading companies in the industry or companies that can expand new business, business expansion and marginal business expansion can come out.
Therefore, each stage is different. For us, we should first invest in growth, and at the same time, we should judge the different characteristics of each stage of growth, the stage of its industry development, and what is the core contradiction of this stage. By grasping these ways, you may be able to better compare with your peers in more time It is better than other styles of products.
Moderator: just now you mentioned that compared with your peers, in fact, there are many fund managers specializing in emerging industries and scientific and technological growth stocks in the Chinese market. They are as young as you. After 85, what do you think is your biggest characteristic compared with them?
Shi Cheng: {23456} the biggest feature of I think we may no longer talk about pure detail research. In this regard, we may prefer to cut into these problems from a perspective different from the market. We are used to jumping out of the original framework. For example, we judge the changes of the industry from the factors outside the industry. From the change of the competition pattern in the industry, many people like to say that the strong is always strong. We also know that it is reasonable, but we prefer to say that if there is such a change in strength or the distribution of interests in the industrial chain, The original secondary factor becomes the main factor and the secondary contradiction becomes the core contradiction. These perspectives should be switched to explore the possible (Development) direction in the future. In fact, the history of all enterprises is also a very useful reference for the future. We prefer to explore the future development of the industry and the company from its previous development. Therefore, if we say the difference, we do not do linear deduction through the existing situation. We prefer to make prediction and advance layout.
host: is your advance layout related to your professional background?
Shi Cheng: actually, it all matters! First of all, we probably know some technologies and can make some evolution to the development of the industry from the development of product technology, which may have some advantages over other people who do not know the industrial background and technical background. At the same time, we have also seen a lot of the development history of other industries and the evolution history of other industries. In fact, many emerging industries are the same. For example, the past development of the electronic industry may have some enlightenment for the future development of the new energy industry; The previous development of the automobile industry may also have enlightenment for the development of new energy vehicles at a certain stage; For example, the upstream where we invest more, such as oil and iron ore, has an enlightening significance for the future trend of new energy. Therefore, we can jointly examine and judge from various perspectives, including technology, products, company management, industrial law and various perspectives.
growth stock investment does not stick to reality focus on the future
Moderator: you have worked as a fund manager for nearly three years. You have realized the transformation from research to investment in SDIC UBS fund. In this process, I believe President Shi also has a lot of feelings. Share some of your experiences on investment, especially growth stocks?
Shi Cheng: understand. Let me first talk about the changes from research to investment, and then talk about growth stocks. In fact, as a researcher, whether it is the buyer or the seller, he may pay more attention to the company itself. He may judge the stock price in detail. As fund managers, over the years, our perspective has become more and more macro. Of course, macro and micro are combined. In other words, it is a combination of macro perspective, economic perspective, terminal industry perspective and subdivided company management perspective. These are some feelings in the process of transformation from research to investment, which are different.
Second, in terms of investing in growth stocks, we think a very important point is that it is different from the return of investment value. Many value returns belong to calculation. I have also seen some investors, such as real estate, or traditional industries, even including industries such as coal. They may be more important for the calculation of certainty. I firmly believe that this asset can have much value. I firmly believe that this thing is underestimated in reality. For example, how much money the asset of aviation will have if it is discovered by him at some time in the future. However, for growth stock investment, the key is not the current value. For all growth stock companies, you say that the average valuation of 20 ~ 30 times is certainly not high among growth stocks. Many of the 30 ~ 40 times and 40 ~ 50 times are PE valuations that often occur. In this case, the actual profit is not the core thing, Rather, it means that you can look forward to the earnings and growth brought by its future changes, which are hidden behind the high valuation. Therefore, growth stock investment must see far, not stick to reality, but focus on the future.
Moderator: fund managers are quite different from researchers, but some fund managers say that researchers may only provide seasoning, but how fund managers make this meal may depend on fund managers. In previous interviews, some fund managers mentioned that the companies they found from the perspective of researchers and from the perspective of deep fundamentals may not rise in the secondary market. There is a certain deviation between their understanding of the market and stocks and the consensus of the market. Have you ever encountered such a problem?
Shi Cheng: we often encounter and want to solve this problem.
First, I don’t think we should fight the market most of the time. Because most of the time, the market reflects an overall cognition. There are many people’s information and all kinds of things in its information, which are ahead of you. Therefore, your better way is to wait for your cognition to resonate with the market, whether it is revaluation or the beginning of the market. This is a more comfortable way of investment. But sometimes, this resonance does not necessarily happen all the time. There are often many situations where you have differences with the market. Sometimes you may have to fight the market. At this time, you need to have high requirements for your own research, judgment, mastery of fundamentals, understanding of the market and tolerance of stock price, for example, the market’s departure from the mentality for a period of time. But this situation also happens frequently. All investors can’t be completely downwind. Therefore, both of these situations will happen. When your discovery resonates with the market, you can make a faster investment, or you can make a more smooth investment; There will also be different market cognition or periodic response from you. You must face both situations. The first one is to grasp the upper position. You may be more comfortable at that time; In the latter, you may have more confidence in yourself, your judgment and your understanding of the future of the market.
host: so, is your investment philosophy similar to Soros, the investment master, that is, we can’t recognize the 100% truth, and sometimes we have to rely on the feedback of the market mechanism.
Shi Cheng: in fact, what Soros said is not to recognize all the truth. He thinks it is an illusion, and then you quit before the market recognizes its illusion, so what he said is a bit like different academic schools or martial arts schools. They are based on different underlying things, based on their own theoretical basis, For example, there are Taoists, Confucians and other Mozi and Guanzi in China. Their underlying philosophy is different, but they all have their own reasons and will launch different things according to these things. For us, we have also read a lot of books about investors or their investment history. In fact, each method has many advantages. Finally, we should keep the methods of these people suitable for you. Some methods may also be relatively good, which may not be suitable for you.
host: general manager Shi is also a master.
Shi Cheng: we are not called integrators. We always think that our level needs to be continuously improved, so we need to keep learning, learn more people as much as possible, and then summarize and become our own investment method as much as possible.
host: what investment figures or investment ideas have the deepest impact on you?
Shi Cheng: at the beginning of investment, you may look like Fisher and Peter Lynch. This is a classic or from now on, it may be an entry-level investment method that is easier to understand and use in starting investment. Then, later, for example, the investment methods of Soros and his reflexivity, you will feel that it is really reasonable. Some of them rise to the category of philosophy or art. Then, there are many investors in China. I think they have a great impact on me. For example, Feng Liu of Gao Yi, who has written some investment notes, has a deep understanding of consumer goods and stock games. After I read it, it also has a great impact on me.
three investment frameworks pursue long-term return
host: OK, general manager Gang Shi introduced his background in detail, shared the reasons why he insisted on the growth stock track, and your understanding and perception of investment, especially growth stock investment. So, what is your overall investment framework in terms of investment practice? Can you give me a brief introduction?
Shi Cheng: to say the whole investment methodology, we are now relatively mixed or inclusive. We have also summarized a variety of stock selection and investment methods. The previous rebound also said that some of our early stock selection and investment used the second growth curve, which is both safe and offensive. Then, in the later part of the time, we used the transformation process of partial orderly growth from PE valuation to DCF valuation method. This kind of stock is more cashed in the long term. Cashing it in the long term in the short term over a period of time is also an investment method.
By last year, we were very concerned about the contradiction between supply and demand. For example, the new energy industry did evolve to such a stage last year. Therefore, many of our investments actually have a certain cyclical attribute. In this year, through our investment in this field, we summarized the experience and lessons of investment in many things with price attribute, or the temsector available in the future. In the future, we may continue to explore other investment methods. We also hope to do better in the new investment methods and the combination of theory and practice in the future.
host: you mentioned that you pay great attention to the second growth curve in the process of stock selection. Can you talk about it? Then, when it comes to investment, through the grasp of the company’s second growth curve, have you explored big bull stocks? Do you have any cases to share?
Shi Cheng: well, individual stocks still don’t share.
host: you can talk about the industry.
Shi Cheng: we have a lot of investment. You can take a look at our investment from 2019 to 2020. This method is used more. In addition to our subjective will, this method also has an objective background. After that time, we invested more in new energy. At that time, the new energy industry was actually in the stage where the companies mainly involved in the industry were less profitable. At this time, the applicability and power of the second growth curve were relatively large. Why? Generally speaking, this kind of temsector means that the company has a relatively strong main business. For example, this main business can grow by 30% compound; At the same time, its business like new energy actually dragged down the profits of its main business. For example, it lost 50 million in the first year, more than 100 million in the second year and 300 million in the third year. Finally, the overall profit of the company is lower than that when it only has its main business, and the growth rate of the performance of the whole company, both in absolute value and growth rate, has been depressed. Therefore, when the profits of its new business begin to reverse, reduce losses or even reverse losses, the apparent performance growth brought by it will exceed the growth rate of its original main business. At this time, the acceleration of performance growth is very exaggerated. At the same time, it will also improve the valuation system. That’s a method we used more at that time.
host: just heard from you, your position actually includes three directions. The first is a company with a second growth curve; Second, companies selected according to this orderly growth and DCF model; Third, it may be the contradiction between supply and demand growth last year. How did these three positions form? Is it because the focus is different at different development stages of the industry?
Shi Cheng: yes, yes.
As we have just said, the second growth curve is suitable for companies with strong main businesses to turn around losses or reduce losses when an emerging industry is just emerging, and the performance flexibility will be particularly large. However, when this emerging industry enters rapid growth, the original company with the main industry actually has a discount in its growth rate because the growth of the main industry is not as good as that of the emerging industry. At this time, companies that are pure in this emerging industry and can linearly extrapolate growth for many years have greater performance flexibility and valuation flexibility. Then, after the development of each industry, there will be some contradictions between supply and demand in the end, and some contradictions between supply and demand will last for a long time. These links, on the one hand, may be the cause of the contradiction between supply and demand, which will bring a certain premium due to the shortage. At the same time, if it becomes the short board of supply and demand of the whole industry, its profit explosion or its ceiling will be particularly high. At this time, the profit is a very exaggerated state.
You can see that the situation of iron ore between 2006, 2007 or 2011 is the development of China’s heavy industry. Or in the 1970s, when automobiles began to be popularized on a large scale, oil should rise from more than $1 to $150, and it is not a state of war. Oil may become a long-term short board for the development of the automobile industry, and iron ore may become a long-term short board in the process of China’s heavy industrialization. Well, its profits are long-term and sustainable, which is our understanding of the contradiction between supply and demand just mentioned.
host: well, what about the DCF part in the middle?
implementation: DCF, which is actually relatively simple. When the company in the second growth curve is not flexible enough, it needs to fully focus on the business of this industry. Its main businesses are all emerging industries, and these companies may facilitate DCF at some stage. Why? At the beginning, the industry may be relatively small, and we don’t believe it. Later, we found that it was profitable. At the same time, why don’t companies in other industries use DCF? Because it doesn’t have enough room to grow. Generally speaking, at the beginning, we were particularly optimistic. I predicted according to this year’s performance. But later, I am more and more optimistic about this industry. I look at one year, two years after one year, three years after two years, and even the most optimistic time, such as 10 years and 15 years. Many of these partial growth industries have experienced this process, directly reflecting the growth of 7-8 years, 5-6 years or 5-10 years in a year. Therefore, DCF does not mean that this valuation method is correct, but that the company uses a single period perspective at the beginning, and finally uses a 5-year or 10-year perspective to discount to this year, but when it ends, the process may also end.
So, it’s not that this method can be used all the time. The best way is to look at the single period at the beginning, and then switch to the long-term. You think you’re very sure in the long term. Generally speaking, it’s over. Why is it over? Because the long term is usually uncertain. So this is actually what Soros said. Maybe you will find it is also a scam in the end, but you can participate in it and make money before withdrawing. As you can see, companies valued with DCF over the years have finally found that many things are not DCF, and everything is a cycle.
Moderator: in 2020, is DCF valuation model very applicable to the new energy sector.
Shi Cheng: for other industries, some are the same. Because at this time, many industries, including new energy, have entered a period of rapid development, and in the short term, you can’t prove or falsify this thing, so it can DCF. However, many things are reversed when things reach their extremes, or prosperity and decline, or monthly profit and loss, which is a very normal phenomenon. Therefore, everything that has been DCF is usually at its high point, or expected high point. Then why is it that in 2020, everyone uses DCF? Take new energy as an example. The development of new energy in that year has just gone from disbelief to belief, and it has not developed to a time when there is great resistance. In fact, you haven’t found many things when they are supported by resistance. The best time for DCF is when it is still developing at a high speed and no obstacles have been found.
host: we often say that there are three kinds of investment: good company, low value and high prosperity. What do you think? What is the position of the three in your research and investment system?
Shi Cheng: in fact, I think these are more dialectical. Good companies. In fact, you think many companies you invest in are good. For example, some segments of the consumer industry and some high-end consumer goods are located in the southwest border of China. The cultural level is different from that of the management in Beijing, Shanghai, Guangzhou and Shenzhen, as well as matrix management. I think there must be some gaps. Many are state-owned mechanisms, and how awesome or how encouraging they are, but they are all good companies. Because, in essence, it is a good business.
Second, underestimate the value. Undervaluation is also a paradox, that is, when you really find that it is undervalued, generally speaking, unless the market’s profit forecast and other things are wrong or not found, if everyone knows that it is profitable, the valuation is undervalued, and it is generally problematic. Many of the stocks I bought lost a lot of money are undervalued, because its undervalued value is sometimes false. For example, when you buy vegetables in the vegetable market, you buy a particularly cheap fish. Maybe take it back and find it broken.
High prosperity, it is also a challenging thing. The so-called high boom does not refer to its real high boom, but the continuation of its high boom. It is likely to be accompanied by the fact that the valuation of this thing has been DCF. If it is something that has been DCF, it may not be suitable to invest with its so-called real high boom. Therefore, we feel that specific analysis of specific problems requires investigation and realistic judgment. Just like the battlefield, the situation of everything is different, and some laws behind it are relatively similar.
Moderator: so can it be understood that you value the texture of the company more than the valuation of the company.
Shi Cheng: can’t say that either. When the industry boom is going up, in fact, second tier companies often perform better than the first tier, which is equal to boom overflow. This is different. If you are a person who holds stocks for a long time and is not ready to change, for example, if you buy a certain consumer goods company, the leader who bought it at that time has been holding it still. In the end, it is actually better than buying a second-line company, but if it is refined to each year, this law is completely inapplicable. Second tier companies, many or defective companies will fall after rising. They may not rise so much when it’s their turn to rise, but they don’t adjust much when they fall. Therefore, it can not be completely said that a good company is a good stock.
host: well, in an environment where the bear market in the A-share market is different from the bull market, will you focus on different companies?
Shi Cheng: if you enter a bear market, you should configure leading companies to avoid risks. If entering the bull market, the leading companies will generally perform well in the first stage, but in the later stage, unless its ability is really strong, there will generally be other more flexible opportunities, so it is not necessarily.
Many of the so-called leading companies are also due to the achievements of the background of the times. For example, some real estate companies were leading companies in those years, but when the industry was large β After being removed, personal power is relatively small and slim.
Moderator: talked about some criteria for your company selection. What kind of company are you determined not to buy?
Shi Cheng: well, resolutely won’t buy a company whose financial fraud reflects profits that are not its real profits. Many reasons for not buying are relatively detailed. A company that does not grow should not buy. Companies that only have security but not aggression are also unlikely to buy.
host: do you pay much attention to the management? I talked to you before. You said that during the bear market, you might pay more attention to the management of the company.
Shi Cheng: yes, yes. In the bear market, we pay more attention to the quality of management. However, this problem is also relatively simple. If the industry has existed for a long time, whether its management is strong or not, we can basically draw a judgment conclusion from the reputation of competitors, the evaluation of upstream and downstream, and the achievement degree in history. In the past, we used to analyze the management in a very detailed way. Now I think the management is understood as a black box. It reflects a number. The overall level of the management is about 5 points and 4 points. Just have this concept. The style characteristics of the management are what you should pay attention to. For example, the two management levels are 4 points, but when the industry is good, you should buy the more radical one of the 4 points. If the industry is going down, you should buy the more conservative one of the 4 points.
host: I see. From the perspective of industry configuration, you mainly invest in this new industrial field. There are many industries in Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) field. It changes rapidly and the frequency of updating and iterating new products and technologies is also high. In this process, how can you quickly capture investment opportunities? You just mentioned that you will do some advance deduction. How do you do it?
Shi Cheng: is generally based on what we already know and combined with the regular laws of the industry. In the development process of each industry, we will encounter contradictions, and we have to solve them. The key link where people can get the most benefits is where they can solve these contradictions. For example, at a certain stage of the development of this emerging industry, its core contradiction may be production capacity. At this time, whoever can expand production capacity fastest belongs to the best thing at this stage; For another example, at a certain stage, the core factor becomes the cost, so it is necessary to analyze what will have a greater impact on the cost. After the cost and production capacity of these things are not a problem, the whole industry will encounter some obstacles in increasing the growth rate, so analyze the obstacles. If there are no factors, it depends on whether the profits of the industrial chain will be transferred. In fact, it’s a bit from top to bottom. First, there’s a general idea of what kind of problems the industry will have this year. Refine to some links, and then do the detailed work.
Moderator: taking the new energy sector as an example, you were also one of the earlier fund managers involved in new energy investment. How did you feel that new energy had the opportunity at that time?
Shi Cheng: at that time, it was also relatively simple. New energy began in 2018 and fell into a two-year bear market. Let’s take the car as an example. The reason why it fell into a bear market is that China’s subsidy policy has been reduced. For example, you have two cars, a new energy vehicle and a fuel vehicle. Assuming that their performance is 100, but when there is a subsidy, the cost of the new energy vehicle is 200000, and the actual price is only 180000. The fuel vehicle is still 200000. At this time, it will be replaced quickly. However, after the subsidy is cancelled, the new energy vehicle becomes 200000, and the fuel vehicle is 200000. It has no such advantage, so its replacement speed will slow down. However, when its costs continue to decline and its products continue to improve, these speeds will accelerate after a certain critical point. Therefore, from 2017 to 2019, China’s subsidies will decline rapidly. However, after the decline of subsidies was relatively fast, the sales volume basically began to stabilize. And new products are gradually coming out, including Tesla and the new forces of car making in China. You will probably feel that the time point for the transformation of this industry may be approaching, and it is difficult to accurately say which time point it is. After you have this feeling, you have to follow up the events and data. If it really happens, this opportunity is generally relatively large, because after the critical point, this trend will not be reversed unless there is another large marginal adjustment change. If not, the gap between a fast-growing industry and a slow-growing industry will become larger and larger once it passes the inflection point of cost performance.
host: did you see Tesla built in Shanghai in 2019?
Shi Cheng: China’s capital market responds very quickly to things that have been paid attention to by the market, but for things that the market has not noticed, even if there is a lot of information in front of it, it will be relatively slow. Therefore, at that time, there were a lot of information telling you that the industry was showing signs of growth, but the market did not pay much attention.
Moderator: in the science and technology industry, is your investment main line or growth space?
Shi Cheng: yes! It’s also right to say that it’s all growth space. Change also brings growth space. Some of the opportunities brought by change are replacement opportunities. The replacement opportunity is that new things replace old things. The original market of old things is its growth space. Simply from the total space, the growth space is also the ceiling of theoretical growth.
host: how big is this space? Are there any specific indicators?
Shi Cheng: we think 3 ~ 5 times is a more appropriate space, because when it starts to grow and realize its performance, we don’t have to worry about the downward movement of valuation for the time being. For example, if it is doubled or this kind of space, it is generally accompanied by a continuous decline in the valuation level after it starts to grow. Finally, the upward speed of the stock price is less than that of the profit.
Moderator: from the perspective of your position style, your position is relatively high and the shareholding concentration is also high, so the offensive characteristics of the whole portfolio are relatively strong. How did this style come into being?
Shi Cheng: we didn’t deliberately form this style. For us, the first one I pursue is the long-term rate of return. Based on this goal, our positions are not very concentrated. Generally, the more concentrated we are, the more confident we are about this direction and judgment. Therefore, at this time, you will feel that the portfolio ratio is more concentrated and aggressive, but you just say that you are confident at this time. If we think our confidence is weakened, or when we can’t see clearly, we will spread some positions. In a word, with high concentration, we will be more convinced.
On the one hand, it is the problem of industry attribute; On the other hand, at a certain stage, we have a high degree of confidence in what we judge, and we are willing to undertake some withdrawal in exchange for better returns.
host: how do you control the pullback when the market fluctuates downward? What measures will be taken?
Shi Cheng: generally, we are not very good at position selection, because from the history of position selection, whether to do or not has little impact on the net value. For example, if we sell and reduce our positions during the decline, it is difficult for us to buy back at the lowest point. Therefore, we didn’t make position selection frequently. We also hope to study the positive direction, take the initiative to seize the opportunity and make use of it α Ability to reduce downward β， We are now more offensive way to do defense.
Moderator: your performance was relatively good last year, and now the scale of the fund is also large. Investors of some of your old products feel that the net value fluctuates greatly. Sometimes they worry about buying at the high point. How to solve this problem?
Shi Cheng: I generally recommend investors to use fixed investment. Unless it is temporarily bought, it is feasible to buy one-time on an annual basis, ignoring the fluctuation of one week or one month. If it is a fixed investment, it is not so sensitive to short-term fluctuations. You can choose to make a fixed investment at ordinary times and add positions when there are large fluctuations. This may be a better way.
Moderator: it’s the first quarter of 2022. Looking back on 2021, you still grasped the opportunity of the growth sector. The overall investment performance is very good, and the ranking of the two funds under management is very high. Looking back on the operation of the past year, where do you think your excess return mainly comes from? Or what investment opportunities have you grasped?
Shi Cheng: excess return comes from our choice of industry. Most of our excess returns last year came from our grasp of last year’s core contradictions. We think it is a contradiction between supply and demand, and it is a relatively large-scale contradiction between supply and demand. There are some subdivided products in the middle. The expansion of its market price rate leads to the expansion of the contradiction between supply and demand of products. These judgments are in it. Last year’s withdrawal actually came from here. There are some contradictions between supply and demand, which are short in time and will be replaced by other contradictions. Last year, the income came from our judgment, and so did some pullbacks.
host: looking back on 2021, what is worth reflecting on?
Shi Cheng: can not be said to be reflection, but it is also a learning process for us. Without these experiences, the experience may not grow. Many things are actually operated. After making such profits and losses, we can better summarize its laws and enrich our experience. We now hope that in the future, our investment methods can be further summarized and improved, and there are more investment means to choose good stocks.
industrial upgrading 2022 new investment opportunities in emerging industries
host: last year’s revenue mainly came from the new energy sector, regardless of the industry β， Or stock selection α。 However, since the beginning of 2022, the new energy sector has experienced significant adjustments, including a certain withdrawal of many heavily held new energy funds. Many investors are now less confident in the new energy sector. What do you think is the main reason for the adjustment of the new energy sector since 2022?
Shi Cheng: I think there are various reasons. One is the change of fundamental factors of the industry itself, and the other is the influence of market style. It is difficult for us to predict what style it will be this year. For example, in 2018, the value style is obviously better than the growth style; From 2019 to 2020, the growth style is obviously better than the value style, which is basically the world of growth stocks; In 2021, growth and value are in equilibrium. For example, the performance of pharmaceutical consumption is not satisfactory, new energy is relatively good, and traditional ones that prefer value, such as non-ferrous metals, perform well.
In 2022, it is difficult to say which style prevails. In terms of fundamentals, like the development of new energy today, the production capacity of some of its sub industries may be relatively large, and some of its supply and demand relations have passed a good time. Therefore, the good links in this industry will gradually decrease, and the investment may gradually focus. Reasonably speaking, this year should not be particularly big for new energy β But there will still be many investment opportunities, which need to be carefully selected.
host: in 2021, the main logic of your investment in new energy is the contradiction between supply and demand growth. Has this logic changed this year?
Shi Cheng: in fact, it has changed. In 2021, the contradiction between supply and demand occurs in many links. When the industry just gets up, the production capacity is generally gradually transformed from surplus to balance. After that, many production capacity will gradually become tense and enter a new round of production expansion cycle. On the one hand, the new production capacity will gradually meet the demand. From the beginning of oversupply to oversupply, its profitability will rise much. At this time, there is generally a tide of production expansion. After the scale of production expansion is relatively large, the production capacity will increase. On the other hand, the very long expansion cycle of a small number of short links is longer than that of other links in front. There are only a few links left when these supply-demand contradictions develop to the final actual contradictions. In other words, everything is surplus at the beginning, and then everything is tense. Later, because of the shortage degree of some things, the difficulty of expanding production and the long time, the tense time of these things will last for a long time, and will block the demand of other links.
For example, in 2022, there may be demand for 7 million cars in China, but some links can only supply more than 500, and the total amount may be up to this point. At this time, there will be excess supply in other links, and because there is a lot of capacity expansion on the way, the future process will become more and more serious. This is an objective law. The difference between this year and last year is that the first shortage link will become less, but it will become more shortage, which is the law of 2022. Second, in this case, how to solve the problem of shortage may become the origin of investment opportunities. For example, the shortage of products and the upward movement of costs may lead to the upward rise of the cost of the whole product. If there is a new technology that can reduce the cost of the whole product, it may have investment opportunities. Some things may become substitutes for others, and then they may be recycled. Therefore, this year is different from last year. Last year was an all-round tension, and this year is a tension in a few links. How can we solve the problems caused by this tension.
host: this year, the balance between supply and demand of the whole new energy industry may be reversed. Including some enterprises that transformed into new energy last year, they ushered in the performance cashing period, so this sector is more differentiated. At present, what segments are you optimistic about in the 2022 new energy competition?
Shi Cheng: generally speaking, our top ten positions have been disclosed in the four seasons report.
Moderator: I read your four seasons report. There are many additional positions in the upstream links of battery management.
Shi Cheng: yes. If you look at our financial report, you will probably know our point of view.
From 2022, the shortage link will basically shift to the upstream. These shortages will last for more than 2023 and 2024 at the same time. Our configuration is basically these links. The shortage of the whole car, its cost and price elasticity are not simply considered from the perspective of lithium battery. Finally, it corresponds to the car. Maybe the final price rise of these things, or the elastic space of prices, will be much higher than everyone estimated. After these problems are reflected, on the one hand, our expectations for the special explosive growth of the industry are eliminated. We may find something similar to its original business a, which can only follow the growth rate of the industry. If it expands business B at the same time, its growth rate can surpass the industry, which is one of our concerns; Second, we should deal with the cost of raw materials, which are also the direction of our thinking and preparation for investment.
Moderator: speaking of upstream resource products, throughout 2021, many investors said that buying stocks according to the periodic table of elements, especially carbon group metals and some transition elements, did perform better. Does this investment method still work this year?
Shi Cheng: on the one hand, looking at the growth rate, the whole bulk market in 2021 is affected by the epidemic and the relatively slow global economic growth in previous years. The capacity expansion of many resource products is slow, including coal. But its revenue side is actually not producing fast, which will be solved at some time. If you invest in metal or other, its income side grows very fast, and the cycle is not solved in a very short time. We recently looked at the pig cycle. In fact, many opportunities for supply side contraction in 2021 come from supply side contraction, which brings temporary or β Only the long-term sustained growth on the demand side will bring about a real large cycle.
on the “periodic table of elements”, one is to see the difficulty of future mining of elements, and the other is the sustainability of future demand growth.
host : are you still optimistic about lithium?
Shi Cheng: in fact, there are other elements, but lithium is the core element for the development of new energy vehicles and energy storage, and the comprehensive value of lithium reserves and mining difficulty is relatively large, so it is better than other elements. There may also be rare earths in our heavy position. Rare earths are lithium with higher certainty but weaker strength. Rare earth also benefits from the great development of the whole new energy, but the elasticity of rare earth demand is weaker than that of the whole new energy. The supply link of rare earth is controlled by the state, so the certainty of the supply link is relatively high.
Many things have some investment value, and there are other metals that the seller or buyer is more optimistic about. Finally, there are two fundamental factors: supply and demand. The speed of supply and the intensity of demand. When the intensity of demand is large enough, supply cannot be met.
Now, 70% of lithium metal should be used in lithium batteries, and the proportion is very high. We should not only see its growth rate, but also its proportion. Only when it accounts for a large proportion of downstream industries, its growth, certainty and benefit will be the highest.
Moderator: you can see in the four seasons that you are firmly optimistic about emerging industries. In addition to the links of various industrial chains in the new energy sector mentioned above, there are also semiconductors and electronics that you usually pay attention to. What do you think of investment opportunities in this regard?
Shi Cheng: mobile consumer electronics has been difficult to become a growth sector, because its ceiling is very clear, and mobile phones are growing slowly. If it is electronic, it depends on new applications. However, after TWS, we haven’t seen very good applications on mobile phones for the time being, so we need to keep tracking.
From the perspective of semiconductor, it is not entirely a story of demand expansion, not a global growth sector. It can be divided into two aspects. On the one hand, its growth refers to China’s growth, because the global semiconductor growth is not fast. The majority of semiconductors used to be used in mobile phones and cars, but the pull is not obvious. However, the import substitution of China’s semiconductors and the development of China’s semiconductor industry are a growth sector. On the other hand, the core logic of our investment in semiconductors in recent years is not growth, it is supply contraction. Why supply contraction? Its background is that under the background of trade war and science and technology war, China’s import of semiconductors has been greatly hindered. many semiconductors in China used to rely on imports. At this time, the supply shrinks, the supply shrinks, the demand is growing, and there is a contradiction between supply and demand. At this time, semiconductors have great investment opportunities. Now, the contradiction between supply and demand of some semiconductors or the opportunity of import substitution have been fully reflected in the valuation. After that, the investment opportunities of semiconductors may be the demand for materials after China’s production capacity is put into operation. The opportunities come from the terminal links of materials.
Moderator: since this year, looking back at the segments related to automotive intelligence that received little attention in 2021, including high-precision map, high-precision navigation and automotive radar, all performed well. Do you think automotive intelligence will become the investment theme of this year?
Shi Cheng: we have invested in automotive intelligence and automotive electronics before, but this year, we have not made a relatively large position configuration, so we are worried. This year’s increase in battery costs is mainly due to the increase in the cost of lithium metal, which has led to the increase in the cost of cars. For example, Byd Company Limited(002594) other cars have a price increase of thousands of yuan and Tesla 10000 yuan.
First, intellectualization mainly depends on the new forces of new energy vehicle enterprises to promote, and their willingness to promote intellectualization and the degree of product innovation are relatively high. First of all, the growth rate of new energy this year has a ceiling, and it will not grow indefinitely as last year. Secondly, the cost of new energy vehicles is rising. In this environment, the very core problem is how to reduce the cost. In this case, we have doubts about many intelligent configurations. Because of the rebound of many auto enterprises, they say that reducing the cost may reduce some unnecessary parts. From this point of view, intellectualization is not absolutely necessary. It may conflict with the rising trend of cost. For example, if you don’t have enough to eat, you shouldn’t want to add a few more abalone to your meal. It’s more reliable to buy rice with this money.
Second, we also saw the case of smart phones at that time. We are very impressed that in 2019, the three cameras of the mobile phone broke out very quickly. Its background is that after two years of rise in the price of mobile phone memory, there was a sharp correction that year. At this time, we have money and enough surplus food, because after the price reduction, the mobile phone will not reduce the price with the decline of the cost of raw materials, Instead, it reduces one of its pricing bands, and the mobile phone will be equipped with additional devices. I think the price rise of automotive electronics has come to an end, especially when it falls rapidly. Maybe intelligent things will be updated very quickly because there is enough money to do it. In my opinion, the core factor in 2022 is to solve the problem of supply guarantee plus downshift.
host: we see that there are often some new concepts in the field of science and technology, the more popular metauniverse recently. Conceptually, metauniverse presents a large-scale, interactive and highly realistic virtual world. Do you pay attention to the investment opportunities of metauniverse?
Shi Cheng: relevant notes, but it is difficult to land the meta universe and have a mature business model.
One is NFT, the other is virtual human. First, I feel that such virtual transactions are relatively difficult in China, and companies that may do overseas business have space in this regard. Second, virtual people have special product differentiation at a certain stage, or the embodiment of core competitive factors and competitiveness. We have not observed this situation. Third, from the heart, we think that the investment opportunity of pixel universe will not be as big as before compared with the previous wave of mobile Internet. The wave of mobile Internet has turned 1.3 billion people in China into mobile Internet users, and the number of users has increased several times. You can stay in front of the computer for a few times longer than the second day, but you can’t stay in front of the computer for a long time. At the same time, because mobile Internet payment is much more convenient than computer payment, and the payment rate and amount of single user have increased a lot. These three layers have expanded the scale of the Internet industry by dozens of times, as if it were more than 50 times. Therefore, this will give birth to the barbaric growth of China’s Internet leader at that stage.
At present, there are no other fundamental changes in the meta universe, which is an upgrade of the Internet to a certain extent. First, the number of users should not increase; Secondly, the convenience of payment may not increase; Third, the length of stay may not increase, so all we can do is whether the payment amount of a single user will rise. Compared with the wave of mobile Internet, the meta universe is much smaller. From our observation, we think there may be a chance in the meta universe, but it is not a particularly big chance. More importantly, if the wave of metauniverse is still done by the original mobile Internet companies, its growth elasticity is very small. Tiktok is an example of the new tiktok compared with WeChat. According to statistics, people stay at WeChat tiktok for about 3 hours a day, if they are trembling, the usage time will increase by 1 hours or so, about 3:1. If China’s Internet leader has made both the original mobile Internet products and short videos, the thickening of its business, that is, about 30%, is very limited. Only companies that only do short videos will show enough growth. If we observe the meta universe, there will be enough room for growth unless there is a really new company specializing in the meta universe. In general, the metauniverse has not yet seen the emergence of very attractive spaces, companies and models.
Moderator: the whole A-share market in 2021 is characterized by a structural market, and the style of small and medium-sized stocks is relatively dominant. How do you predict the market trend this year?
Shi Cheng: in the future, it may return to the time when the market is dominant. Generally, in the early stage of the industry, everyone comes in to run a horse and enclosure. At this time, there is no competition. Everyone is good. Whoever is radical will pass quickly, which has little to do with the operation. The second is the overheated period of the industry. The boom is too high. For example, only a can get orders, but now a’s production capacity is not enough, so the orders are diverted to B, C and D. at this time, marginal companies can also achieve good growth. The two corresponding situations, one in 2015 and the other in 2021, are boom spillovers. In the future, there will be an increasingly competitive market. In my opinion, just from the perspective of the company, the back leaders are better than these small and medium-sized stocks.
Moderator: the beginning of the year is the key time for fund companies to layout their investment in the new year. I noticed that you also have a new development fund “SDIC UBS industrial upgrading two-year holding hybrid fund”. Can you introduce this product?
Shi Cheng: This product is actually relatively simple. The investment direction is to invest in familiar industries such as growth and technology. Personally, I think the biggest difference is that this is a fund product held for two years. Over the years, we have also seen a lot of investors. For example, the early withdrawal of a product is close to 30%. After investors buy it, they lose money. After selling it, the product rises very much, and then investors regret it. Buying funds and engaging in the fund industry is a long-term race process. There may not be good earnings in a very short time. Frequent trading has a great impact on earnings and mentality, so we prefer to make a product with a long holding period. In this way, we think it will be better from the investor’s shareholding mentality and his shareholding cycle. When it comes to the previous products, our stock selection ideas are similar. For new products, we also consider adding new elements.
Moderator: just now you explained your way of investment in detail, including investment philosophy and investment methodology. You also shared your views on the future market and specific investment sectors. Now many people say that buying a fund is buying a fund manager. We are also interested in the more characteristic and life-oriented content of the fund manager. Let’s talk about this topic. Mr. Shi, do you have any hobbies besides investment?
Shi Cheng: usually occasionally watch the ball, play chess with children and read books by yourself.
host: what kind of books do you prefer to read?
Shi Cheng: read history books, both modern history and ancient history. Read more about China and less about foreign countries.
host: I talked to you before. I know you are more interested in the history of Wei, Jin, northern and Southern Dynasties. Why?
Shi Cheng: there are several stages of national integration or turbulence in China. The three countries are also considered, but relatively speaking, the complexity is lower, and there is less change after entering the steady state. The Wei, Jin, southern and Northern Dynasties was a relatively complex one, because at the beginning it was five lakes and sixteen states, in which there were both large states and small regional regimes. At the same time, it existed for a long time, and was compatible with this kind of Han nationality, family of door Lords and ethnic minorities, such as Xianbei nationality, Qiang nationality and various ethnic minorities, with different cultures and different styles. Later, in the northern and Southern Dynasties, Tuoba in the Northern Wei Dynasty and the door valve joint system in the Southern Dynasty, and then the cold door gradually occupied the dominant stage. There were many elements and changes, both scattered time and confrontation time of large groups. At the same time, there are many different nationalities and cultures, resulting in different separatist regimes and different attributes, so its elements are very many. The complexity and brilliance of the Wei, Jin, southern and Northern Dynasties are higher than those of the Three Kingdoms. Later, the Five Dynasties and ten countries are relatively less complex, but their charm is not as good as that of the three countries. On the whole, the Wei, Jin, southern and Northern Dynasties are the most interesting times with distinctive styles, various changes and rich characters.
host: I feel like reading history books. I have something in common with you in making growth investment.
Shi Cheng: yes, there are many changes, and there are things with different attributes.
Moderator: there are many “learning bullies” in the fund manager industry. Including you, there are many top students in the college entrance examination. They are very smart. What qualities do you think fund managers should have in addition to being smart?
Shi Cheng: we should have our own better methodology and some philosophical guidance. For example, Soros wrote “financial alchemy”. In fact, he didn’t want to write a book about investment. He wanted to explore his own philosophy as an experiment. In the end, he didn’t completely summarize it, but just wrote out the process of his attempt and the understanding and theory in the middle.
As fund managers, we should have our own set of philosophy, the underlying beliefs, our own methodology and the way of implementation.
host: what suggestions do you have for Jimin and investors in 2022?
Shi Cheng: from 2019 to 2021, the market has been in a relatively good stage. Although there are some fluctuations in 2021, the overall situation is good. These years are not the norm of investment, so the funders should still take a long-term view. When selecting stocks and bases, they should choose fund managers that meet the concepts and standards. Investment is a long-term thing, not an overnight thing.
host: thank president Shi for sharing today! I have learned a lot from it. I believe that the majority of investors have also learned a lot, and have a better understanding of Mr. Shi’s unique views on growth stocks and his prediction of the future market. We also hope that Mr. Shi’s new fund, SDIC UBS industrial upgrading two-year holding hybrid fund, can achieve better issuance results.
Shi Cheng: thank you.
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