At the beginning of 2022, A-Shares started continuous adjustment, and the gem index fell by nearly 6% in three trading days. Among them, the high view track represented by new energy led the decline.
Will track stocks with high growth rate and high valuation be favored by funds this year? On this issue, recently China Industrial Securities Co.Ltd(601377) and two chief strategic analysts of Minsheng securities have shown great differences of Views: China Industrial Securities Co.Ltd(601377) chief strategic analyst Zhang Qiyao believes that the excess return is shifting from high return on net assets (ROE) to high growth rate (g) in 2022, and the importance of growth has increased significantly; Mou Yiling, chief strategist at Minsheng securities, believes that this logic is flawed. It is not that the higher the growth rate, the better the performance of the stock.
Interestingly, the discussion on high growth track stocks is not the first “confrontation” between the above two analysts. As early as the beginning of 2021, the two analysts also debated whether southbound funds could seize the pricing power of Hong Kong stocks.
China Industrial Securities Co.Ltd(601377) Zhang Qiyao:
excess returns are moving towards high growth
Recently, China Industrial Securities Co.Ltd(601377) chief strategic analyst Zhang Qiyao mentioned in the research report entitled top ten forecasts for 2022 that “small high tech” is an important source of annual excess return.
Zhang Qiyao said that since 2021, common prosperity has been promoted to a very important position, making a big cake and dividing a good cake go hand in hand, and A-Shares will also meet another important turning point: in the future, the “small high tech” field with smaller market value, higher growth rate and in line with the “new increment” of science and innovation will become a trendsetter in the era of science and innovation common prosperity and is expected to become the main source of excess returns in the future.
Zhang Qiyao respectively expounded the meaning of the three characteristics of “small”, “high” and “new”. Among them, “high” represents that capital aesthetics is changing from roe to g. Zhang Qiyao believes that high growth stocks have sprung up in the “new increment” field of science and innovation, A-Shares have ushered in an important turning point, the excess return is shifting from high roe to high G, and the importance of growth has increased significantly.
He said that in 2020, the high roe portfolio (80% to 100% quantile range) achieved the highest excess return, surpassing other roe portfolios and far exceeding the high growth portfolio. However, in 2021, the high G portfolio achieved the highest excess return, far outperforming other growth portfolios and high roe portfolios. Roe will give way to G again in 2021, and growth will bring higher excess returns. In the future, as more high growth stocks will be born in the field of “new increment”, the importance of growth factors will continue to increase, and the aesthetic of funds will further shift from roe to g.
Minsheng securities Mou Yiling:
high growth does not mean everything
Mou Yiling, chief strategic analyst of Minsheng securities, put forward in a research report released yesterday: high growth does not mean everything. He said that the profit growth rate G, as an important indicator of short-term prosperity, is considered by most investors as one of the important standards for stock selection. In the past three years, the “track” and the perfection of growth style are obviously related to the market’s continuous pursuit of high growth G.
However, Mou Yiling believes that the above logic is flawed:
First, historically, it is not that the higher G is, the better the stock performance will be (in 2021, biomedicine II is expected to rank g 31 / 108, but the annual rise and fall rank 100 / 108; computer software is expected to rank g 30 / 108, but the annual rise and fall rank 65 / 108).
Second, in the long run, roe rather than g is the source for listed companies to create returns for secondary market shareholders.
Third, in the market environment where most investors value g, the high growth rate in the future may have been priced. In fact, some boom tracks in 2021 have increased beyond the expected growth in 2020, which may be the source of excess return in 2021, not the growth itself. Investors should rationally combine the upstream resource supply constraints, changes in competition pattern and other factors to find the source of exceeding expectations in the future, rather than the expected growth itself.
Fourth, the essential difficulty of requiring “good becomes better” is the same as “bad becomes not so bad”: Historically, only about 26% of the stocks in the top 30% of the current performance growth can be ranked in the top 30% in the next three quarters. “Strong constant strong” has no higher expected rate of return than “poor improvement” in the absence of valuation protection.
roe or G? Why debate at this time
analysts’ debate on roe or G is essentially a disagreement on the market style in a short time. In the significant structural market in recent years, the importance of market style research and judgment has been much higher than the market forecast.
Specifically, if the money is returned to ROE in the short term, the blue chip white horse stocks that have been adjusted to the market last year are expected to get attention again. The core assets of Baijiu and medicine will be repaid. If the capital aesthetic continues to focus on G, the growth stocks represented by specialized Texin will continue to have a strong momentum, and the small and medium market capitalization style will continue to outperform the market blue chip style.
However, if the time dimension is extended, the two indicators are not contradictory, but complementary. Especially for many potential “dark horses”, if the net profit achieves high growth for a long time, it will inevitably produce high roe and be promoted to the ranks of core assets. Therefore, the cause, quality and sustainability of performance growth of listed companies are the key to study and judge the company’s long-term investment value.
Tianfeng Securities Co.Ltd(601162) previously said in the research report that the growth law of cross grouping of roe and growth rate indicates that there are two possibilities for high returns: first, high growth rate + low ROE (such as scientific and technological growth); Second, medium growth rate + high ROE (such as traditional industry leaders with stable pattern).
However, it is worth mentioning that few companies really promote their core assets through continuous high growth. As the buyer of wasteland assets, Ling Peng once made such a statistics: during the ten years from 2010 to 2019, there were only 3 A-share companies deducting non net profit growth of more than 50% for seven consecutive years, only 11 companies deducting more than 40% and only 29 companies deducting more than 30%.
Zhongtai Securities Co.Ltd(600918) Li Xunlei, chief economist, quoted the above set of data in the book the power of trends, saying that this confirms that companies with sustained high growth have only one in a hundred probability in the A-share market. Li Xunlei said that after entering the era of stock economy, it will be more difficult to become a high growth enterprise.
“It’s not easy for investors to become Bole; like Buffett, it’s really too difficult to obtain an annualized return on investment of more than 20%. Therefore, when investing (in the future), we should reduce the income expectation.” Li Xunlei said.
is not the first “confrontation”
Interestingly, the discussion on high growth track stocks is not the first “confrontation” between the above two analysts.
As early as the beginning of 2021, southbound funds continued to flow into Hong Kong stocks on a large scale, and the proportion of southbound funds in the market value of Hong Kong stocks was also gradually increasing. There was a discussion on whether southbound funds could seize the pricing power of Hong Kong stocks in the market.
Zhang Qiyao, then chief strategic analyst of Guosheng securities, released a research report entitled “southbound funds change Hong Kong stocks”, which highly affirmed the important increment and ballast role of southbound funds in the Hong Kong stock market. It is considered that the scale of southbound funds has exceeded that of northbound funds. In the future, southbound funds will reproduce the process of northbound funds affecting A-Shares in the past few years, seize the pricing power of Hong Kong shares and become a decisive force affecting the performance of Hong Kong stock market.
Subsequently, Mou Yiling, then chief strategic analyst of Kaiyuan securities, released a research report entitled “it is difficult for southward funds to seize the” pricing power “. The report believes that if the southward capital flows into Hong Kong stocks to “regain the pricing power”, it needs to face the current overseas institutional investors who are several times their own positions and have different views, so as to win more with less.
(Shanghai Securities News)
