Over the past week, 100 billion head private placement of Jinglin assets has become the focus of the market.
On the one hand, the central stock market is coming to the darkest moment, make complaints about the net products of Jing Lin products in a heavy warehouse have been retraced substantially. In the teeth of the storm, Zhou Jinglin’s market share was once turned into a customer Tucao meeting. The customer make complaints about “not putting the price as a fig leaf”.
How does Jinglin view the gains and losses of the past year? How to judge the market? What do you think of zhonggai stocks in the gap? How to treat withdrawal? What will happen next? On the 23rd, Gao Yuncheng, general manager of Jinglin assets, held an exchange meeting with channels and customers to face the problems of investors and solve everyone’s doubts.
It is worth noting that Gao Yuncheng revealed in his share that in the crash, they not only did not panic to sell stocks, but increased their positions in promising enterprises at almost the lowest point.
The reporter noted that more than 7300 high net worth customers participated in this exchange online.
The exchange meeting between Gao Yuncheng and investors was mainly divided into two parts. In the first part, he talked about the gains and losses of recent investment, shared what he felt should be changed and adhered to, and his views on the short-term volatile market. The second part answers some common questions of investors. The reporter sorted and shared it with you.
part I: review the gains and losses of the past year
1. The influence of the environment and cognitive perception: many times, the most honest way is to admit that you can’t recognize or predict something
Gao Yuncheng first shared his influence and cognitive perception of the environment.
First, the impact of the epidemic. He believes that the epidemic since the beginning of 2020 is an event that has refreshed our understanding. From the initial panic about this strange virus to the subsequent continuous variation, with the application of vaccines, drugs and various physical isolation methods, most people were difficult to predict that the epidemic still exists in the third year and affects the operation of the economy. For the evolution path of epidemic prevention policy, we can only be an observer and responder.
Second, in view of the impact of the Russian Ukrainian war, this event is still in the process of development. It will have a far-reaching impact on energy prices, inflation, energy security of sovereign states, the process of globalization and so on. As an asset management institution focusing on bottom-up research and investment in individual enterprises, we may never have more forward-looking judgment and decisive trading behavior on these macro events.
With the accumulation of experience in the cycle of experience and various events that are not easy to expect, he is now more willing to spend more time and energy on things, organizations and people that he can predict and understand. Many times, it’s the most honest way to admit that you can’t recognize or predict something.
However, he also pointed out that we really need to have deep thinking and long-term scenario deduction on the far-reaching impact of these events, and put this possibility into the future fundamentals of the enterprises we invest in.
2. Analysis of the decline of zhonggai shares: changes in liquidity and expectations caused by four major reasons
In the last year, most Chinese assets (including Hong Kong stocks and China concept stocks listed in the United States) fell significantly, and the price fluctuated greatly. According to Gao Yuncheng’s analysis, there are mainly the following reasons:
First, regulatory policy factors: the antitrust and prevention of disorderly capital expansion from the end of 2020 have a great impact on the Internet, education and other industries.
Second, the liquidity crisis of private real estate enterprises: the liquidity crisis of private real estate enterprises since the second half of 2021 has had a serious impact on the whole real estate industry chain
Third, the global inflationary pressure brought about by the rise in commodity prices.
Fourth, the impact of China US relations and the international situation on Chinese companies listed abroad.
From liquidity to expectation, the above indeed made business operators, investors and consumers have expectations with contraction effect, superimposing the repetition of the epidemic. From the fourth quarter of 2021 to now, we are experiencing a stage of great downward pressure on China’s economy.
3. Market outlook and judgment: the most difficult panic selling stage has occurred! At present, we should buy heavily and hold for a long time
However, Gao Yuncheng believes that some changes have also been seen recently. The recent meeting of the State Council, especially the financial committee, has clearly seen the discussion and setting of the above-mentioned issues, the subsequent introduction of policies and the recovery of economic fundamentals. He believes that it will gradually appear in the next three quarters of this year.
In his concluding letter to investors at the end of last year, he once proposed that the first quarter of this year could be the most difficult time for Fundamentals and valuation liquidity, and it is also the time to build a bottom. Now, he said that he frankly and boldly put forward his own expectations: he believes that the first and second quarters of this year are the most stressful time for the fundamentals of China’s economy or the fundamentals of listed companies, The first quarter is now the most difficult time for the stock market. Moreover, from the perspective of liquidity and expectations and liquidity and expectations, the most difficult panic selling stage in the stock market should have occurred last week. Last week’s financial committee, he believed that some extreme selling caused by liquidity depletion had been reversed in time.
“We should see the bottom of valuation, which is about to find the bottom of profitability and the bottom of enterprise performance. So looking forward from the area of double bottom of valuation and performance, I think some companies that have experienced cycles and maintained or even enhanced their core competitiveness should buy and hold them for a long time.” He said.
For the extreme market fluctuations last week, including last Monday and Tuesday, Tencent’s share price fell 10% for two consecutive days, which has not happened since its listing in the past 20 years.
Gao Yuncheng believes that the extreme price last week is a reward for reverse investors, and the bottom rebound in the future is also an encouragement to firm holders.
4. Why not actively make fluctuations or industry rotation? The stock market is not a zero sum game market
Gao Yuncheng admitted that after many rounds of market fluctuations and policy and cyclical changes in various industries, his experience is that if we basically make decisions with too many external factors, investment decisions will become equations. How many variables does this equation have? It’s not even enough to turn 26 letters into its variables, and it’s also a matrix equation with multivariable time series, which is a problem with great difficulty and difficult to guarantee the accuracy of proof in history.
When we focus on making decisions based on the core internal cause of changes in enterprise fundamentals, this equation is much easier. Maybe its unknowns are only a few important unknowns. When we think of the cycle of fundamental changes as a longer term, the weight of short-term factors in this equation will be reduced, so it is much easier for us to make investment decisions.
Of course, he also admitted that such an investment method can not reduce the volatility, but historical data statistics show that it can obtain better investment results with a high probability in a relatively long investment cycle. Because the stock market is not a zero sum game market, our final income comes from the sharing of the management and employees of the invested enterprise every year. If you own 1% of its shares, assuming that it is a 10 billion profit company, 100 million profit is what you should get.
He also shared a good way for him to sleep in the face of stock price fluctuations: before going to bed, think about whether the business model of the enterprise I own has changed? Is the management stable? Are consumers satisfied or even sticky with the products or services of this enterprise? The negative answer to these questions should be the reason why you can’t sleep, not short-term stock price fluctuations. If we find that such short-term fluctuations are more from some factors that are not related to the fundamentals of the enterprise, but may be more related to other factors, and more from emotional disturbances, we should be calm at this time.
5. Some gains and losses in improving portfolio stability in the process of large market fluctuations: the subversive impact of industrial policy on business model is indeed a position that needs to be paid more attention in the investment process
Reflecting and reviewing the large fluctuations of some industries in the past year, we also have a lot to improve on how to improve the stability and balance of the portfolio. The subversive impact of industrial policy on business model is indeed a position that needs to be paid more attention in the investment process. A more balanced investment in excellent enterprises in different industries and regions is also a more comfortable portfolio structure for investors. These Gao Yuncheng said that Jinglin will improve its investment in the future.
Part II: Investor Q & A
After sharing his views, Gao Yuncheng answered 9 key questions from investors.
\u3000\u3000 1. For the impact of macro factors, Jinglin has added an international research team, but the core is the enterprise itself
investors: in 22 years, the international situation was so severe, the impact of war, US interest rate hike and other factors on the economy, especially on the stock market, does Jinglin have any countermeasures, or stick to the views and practices of 21 years? What adjustments has Jinglin made to adapt to the latest macro environment?
Gao Yuncheng: this problem is actually quite big. Our views on the market or on an enterprise have been changing with the changes of the market and political and economic environment, but our methodology of making investment decisions based on long-term fundamentals has not changed.
In the past two years, there have been many and significant macro factors, which have indeed had a great impact on investment. We have added a more international research team and become more alert to the timeliness of research on incident issues. But as I just said, many things can only be an observer, and things that are not clear can not be judged easily. When this pattern is clearer, maybe we can do it and put it in the fundamentals of the enterprise.
There may be some macro problems in looking at the problem. Just now, we may have to be more vigilant about the disruptive impact on industrial policies and business models. What else remains unchanged? In other words, our decisions should be based on the fundamentals of the enterprise, and should not be disturbed by more of these interference factors. Because the macro political environment and industrial policy may also be part of the fundamentals of enterprises, we put this part into it. However, the core is the enterprise itself, the business model of the management, the differences of its products and its competitiveness. These places may remain unchanged.
\u3000\u3000 2. There is no risk of delisting in most of China concept stocks, and we are optimistic about enterprises that increase positions at almost the lowest point
investors: under the condition that the long-term competition pattern between China and the United States is difficult to change, will the willingness and confidence of foreign investment in offshore Chinese assets be hit for a long time, and how to avoid the political risk of zhonggai shares in the gap between the Chinese and American governments? What do you think of the delisting of China concept shares? After this round of slump, what measures does Jinglin have to deal with it?
Gao Yuncheng: the delisting of zhonggai shares is not a new problem, which is why most of the large market capitalization zhonggai shares have been listed in Hong Kong. In fact, the vast majority of China concept stocks do not have the risk of delisting. The ADR held now can be easily converted to the Hong Kong stock market. Because these companies with large market capitalization have been listed in both places, we have repeatedly confirmed with investment banks and listed companies, and even practiced this conversion.
But it is true that in the past period of time, some overseas investors chose to sell China’s offshore assets, including China concept stocks and Hong Kong stocks, because they could not see many problems clearly, which is also the reason for the recent sharp fluctuations in the prices of these stocks.
However, last week’s meeting of the financial committee has made it clear that it will promote the resolution of the audit draft of China concept shares, and also made it clear to encourage Chinese enterprises to make good use of China’s two foreign markets. This risk should be resolved with a high probability. The United States also sent a relatively positive message that it is exploring solutions. Even if there is no final agreement with the U.S. regulatory authorities, these companies can become major listing places in Hong Kong, and they are likely to enter the general standard of Hong Kong stocks in the future.
Therefore, there is no extreme situation in which some investors think that the stock is delisted and the price returns to zero. Because we know the conversion mechanism behind these operations, we not only did not panic sell stocks in the crash, but increased our positions in the enterprises we are optimistic about at almost the lowest point.
\u3000\u3000 3. Look at the US interest rate hike: in each interest rate hike cycle, the market adjustment often occurs before the first interest rate hike
investors: the US economy is facing high inflation, and the Federal Reserve may accelerate the rate increase. What is the impact on the US stock market? What is the impact of Jinglin’s holdings of zhonggai and pure American companies? For Hong Kong stocks and China concept stocks in the future, in addition to the current valuation depression, what is the logic and timing of rising in the future?
Gao Yuncheng: the problem of US inflation is composed of many factors. The main factor is that after the epidemic, the liquidity of the United States is very much, which pushes up inflation; In addition, in the face of excess liquidity, there has been a sharp rise in commodity prices. These two reasons may be a very important reason for its high inflation.
At present, the market is fully expected to raise interest rates in the United States. Our statistics show that in each interest rate increase cycle, the market adjustment often occurs before the first interest rate increase. Including this time, basically two weeks ago, U.S. stocks began to stabilize and rebound (pure U.S. stocks are not Chinese stocks), probably before the first interest rate increase, so the market has fully expected the current expectations of these interest rate increases.
As for the recent rally in Hong Kong stocks, it is clear to me that it is not the time before the rally in Hong Kong stocks. But if liquidity and fundamentals improve, I think these companies can be reasonably priced according to their own fundamentals.
Why do I say that? Because zhonggai and Hong Kong stocks are all walks of life, small and large, it is difficult for me to judge that the whole market will have an overall market, especially because they are mainly in China. Now China’s economy is indeed facing some pressure. In addition, the social control and suspension brought by the epidemic have indeed caused great difficulties to many enterprises. However, with the improvement of liquidity and fundamentals, some of these companies will stand out, so I don’t think it is enough to generalize as a whole.
\u3000\u3000 4. Jinglin is not a track investment and will not only look at a few industries
investors: if there are no good investment opportunities in the track (Internet consumption) where Jinglin assets focus for a long time in the future, or the performance does not meet expectations, will Jinglin adjust the track of investment?
Gao Yuncheng: I think it’s a bit of a misunderstanding. In fact, we haven’t completely focused on several industries, but there have been good investment opportunities for listed companies in these industries in the past few years, and we happen to invest in these companies.
In fact, we have seven major industry groups and more than 30 researchers, almost covering all major industries. At the same time, we are also building the research capacity of overseas companies related to China’s industrial chain, and have set up relatively large offices in Hong Kong and Singapore Therefore, we were not track investment before, and we will not lose the ability to choose investment targets due to short-term pressure in some industries in the future.
However, we may look at the problem a little longer, which leads us to be more harsh in the process of selecting companies. We hope it is an industry with thick snow on Changpo. We hope that the selected enterprises are in a better industry and an industry with great growth space, and the enterprises have international competitiveness, not just China’s better companies.
For example, a company may do well in China, but in fact it is still a very uncompetitive company in the whole international competition ring. We may be more careful about such a company because it is not really excellent or there are still many obstacles to climb. Some companies are not only the leaders in China’s industrial chain, but also the most technologically advanced companies with the largest share in this field in the world. Such companies are quite competitive in the international market. Of course, such a company may have another dimension of concern, that is, will it encounter non economic and political pressure from the policy level in the process of international competition or expansion? But when we choose companies, we may choose more according to this line.
As for the lack of good investment opportunities in the consumption and Internet track, I think it may be a little arbitrary first, because consumption is a big concept. There are always some segments in China’s large consumer market, which have good investment opportunities; After the anti-monopoly and anti disorderly expansion of the Internet, we actually see a positive impact: it may slow down the very or even excessive competition between companies, and there are few new entrants. Looking at the upstream of the industrial chain, we are now investing in the secondary market. In the past two or three years, the primary market has spent almost no or very little money on consuming the Internet or pure Internet platform companies, especially investing in these small and medium-sized enterprises. Therefore, the industry may become relatively stable in the future. Maybe after the competition pattern becomes better, the profit margin will be better improved. Because it is true that some industries are actually very lively, but in the past, their profitability was not high due to competition.
\u3000\u3000 5. The positive impact of Internet antitrust is already emerging. What we are most concerned about is the disruptive changes brought about by the emergence of new technologies and new models
investors: the past 20 years are the information age. Will the logic of the Internet change, policies affect, and will the national antitrust law have a subversive impact on this industry? What do you think of the structurally differentiated market in the future? In the face of this policy, can Jinglin’s original research system withstand the test of the market for a long time?
Gao Yuncheng: Internet is just one of the representatives of efficient productivity. Just as we invented the electric light and the telephone in those years, there are some representatives of very efficient productivity in different stages. At the same time, the marginal cost generated by network effect is almost zero, and the characteristics of maximizing marginal profit and winners’ ability to break through the limitation of physical scope have indeed produced a large number of successful world-class enterprises, This is not just a unique phenomenon in China. About half of the top ten enterprises with the largest value in the US stock market are Internet related companies. Therefore, antitrust is indeed a regulatory necessity for the characteristics of some fields.
However, this does not change the efficiency improvement brought by the efficiency of data collection, analysis and distribution by modern information technology. It is called that the efficiency of information distribution is in direct proportion to human productivity. These have not changed.
What has changed is that both hardware, software and platform are faced with the possibility of being iterated by more advanced technologies in the competition. Therefore, what we are most concerned about in this field is the disruptive changes brought about by the emergence of new technologies and new models. Because now these companies are also very young companies founded almost 20 years ago. They can squeeze out some of the original market leaders and become the world’s giant companies in just 20 years. Therefore, it is also possible that they may be subverted by new people at some time.
Therefore, our investment philosophy based on fundamentals remains unchanged, while the enterprise, industry, technology, world political and economic pattern has been changing. Tracking, learning, understanding and valuation are our routine daily work.
I think this research system can stand the test of the market. In the short term, the national policy does have an impact on this industry, but it may also have some positive effects on its more orderly and even slower competition. And I think the positive impact is already emerging. Maybe we can see a significant improvement in the profit margin of these enterprises by the end of this year and next year.
\u3000\u3000 6. China Shanxi Guoxin Energy Corporation Limited(600617) , there will certainly be world-class companies in the field of intelligent electric vehicles
investors: what do you think of China’s high-end manufacturing industry, including new energy vehicles, semiconductors, military industry and other industries? Is the recent sharp correction in the market an opportunity for medium and long-term layout, and what sectors are optimistic about in the future?
Gao Yuncheng: I think China’s industrial upgrading will happen.
First of all, new energy is mainly about photovoltaic power generation and wind power generation. We call it new energy, which is to use non fossil energy to generate electricity. Then I changed the new energy vehicle to intelligent electric vehicle, because the main difference between new energy vehicle and fuel vehicle is that it is driven by electricity and battery, but the electric vehicle driven by battery alone is actually nothing great. It appeared 100 years ago. The current change is mainly that the intelligent electric vehicle is a subversive change to the original fuel vehicle.
For new energy or non fossil energy and intelligent electric vehicles, the advantages of the industrial chain are in China. For example, the largest battery company, the largest Cecep Solar Energy Co.Ltd(000591) silicon wafer and the largest Cecep Solar Energy Co.Ltd(000591) component company are all in China, and the whole Cecep Solar Energy Co.Ltd(000591) industrial chain may have the main production capacity in the world in China.
Therefore, I think the advantages of the industrial chain are likely to be formed, or large enterprises with global competitiveness have been formed. Some have potential, and some are already leading companies with global competitiveness.
I’d like to share an interesting comment with you. A month ago, I opened a telephone meeting with Tesla. The last question I asked Tesla executives, if you think you have some real competitors, who would they be? His answer is: China’s new power of car making. Therefore, there are great opportunities in this field, but it may not be easy for me to judge who is the final winner. These entrepreneurs are also struggling on their own. I remember that at the beginning of 2020, many of these enterprises were still struggling on the edge of cash flow fracture. The cash flow was about to break, and then came back to life. Up to now, it is still booming.
Second, it is difficult to be an enterprise, which is also my recent understanding. Even a small enterprise is very difficult, it is very difficult to be a successful large enterprise, and it is almost an accidental event to be a large and long-term enterprise. Entrepreneurs may not be able to do their best every day. All our investors should thank these entrepreneurs who bring us benefits and make the enterprise bigger and stronger.
Because the stock market is not a zero sum game, the fundamental reason is that these enterprises and entrepreneurs have helped us create incremental value and incremental wealth.
So which sectors are optimistic about in the future? There will certainly be world-class companies in the fields of new energy and intelligent electric vehicles.
But in semiconductor and military industry, I think maybe we should be careful. There is a problem in the military industry, that is, there is only one buyer. The constraint on its profit margin is still obvious, or the pricing power of the enterprise may not be so active. The semiconductor industry is an import substitution and an independent and controllable logic. Has the easiest part been done, and how many years can the difficult part be broken through? This is a matter of respecting the law of industrial development.
\u3000\u3000 7. Concentration is not a problem. The problem is how high your confidence is
investors: Jinglin’s position style is dominated by sector leaders on the one hand and relatively concentrated on the other. How to avoid risks if leading stocks fall rapidly or thunderstorm?
Gao Yuncheng: we hope that the companies we hold now will create a large amount of cash flow returns now or in the future, or such companies may have significant changes in profitability and extremely enhanced profitability brought about by the improvement of competitiveness in the future. The statistics of our company’s position will prove that only about 3% of the incremental value of the whole stock market will be created.
However, in the future, we will conduct risk control through more balanced industry configuration and regional distribution.
For the rapid decline or thunderstorm of leading stocks, the reasons for the rapid decline are very important. If it is a fundamental change in fundamentals, we will make decisions based on fundamentals, especially long-term fundamentals. If it is the reason of market liquidity, maybe we will increase the position of the company when it is significantly underestimated.
Concentration is not a problem. The problem is how high your confidence is. At the same time, there is a problem whether you focus on one or two industries. Our most concentrated industries will not let go of the high weight, because we should avoid the subversive risk brought by some industrial policies. Our previous summary and reflection have also specifically mentioned this risk, which we will pay more attention to in the future.
\u3000\u3000 8. Jinglin’s management scale is far from the upper limit, but it will pay more attention to the timing of product distribution in the future
Investor: Jinglin’s income decreased significantly after the rapid expansion of its asset scale. How to view the relationship between scale and income? Has the current scale of Jinglin exceeded the current best management ability? Whether to consider controlling the scale?
Gao Yuncheng: first of all, all investors and channel partners, please rest assured that if we find that our management scale exceeds our best management ability, we will limit or even reduce the management scale. Long term performance record is the most important for us and the company, so please rest assured.
In the past year, it is true that our performance is not satisfactory, and the retreat with a high point is still relatively large, but in fact, it has nothing to do with our management scale. The decline in the last year is mainly due to the reasons mentioned earlier. We have always had a lot of positions in offshore Chinese listed companies. These have decreased a lot in the past year, so we see that the performance of the last year is not satisfactory.
This has nothing to do with the scale of management, because we also held these companies before and now. Of course, we may make some appropriate adjustments according to the changes of its fundamentals. If you like the concept Internet Index or the Hang Seng technology index of Hong Kong stocks, even after the recent rebound, they are probably down 70% and 80% from the high point. Our pullback may be far lower than this figure. We have made a lot of positive adjustments. Of course, we still need to summarize and reflect on the decline in performance in the past year, but some may not be easy to avoid.
We have calculated the acceptable upper limit of management scale, which is much higher than the current figure. Moreover, the management scale should be directly proportional to the market value of the invested enterprises. If you calculate the market value of the enterprises we focus on investing in, you will understand that our scale accounts for less than 1% or 2% of their market value.
Of course, I think we should pay more attention to one thing in the future, pay more attention to the timing of product issuance, and hope to avoid the high point and high market sentiment, and try to raise customer funds at the low or sub low level, which will bring a better experience to investors.
Of course, to achieve this also requires that our customers and channels have close values and market consensus with us. Through frank communication and common experience of some fluctuations, we will build better trust. With trust, we may be able to raise funds and invest when we are in panic and anxiety; When we are excited, we should restrain our fund-raising impulse, and even dissuade some enthusiasm to increase positions. This is where we need to improve and do better in the future.
\u3000\u3000 9. Jinglin hopes to find companies that can continuously create value from the dimensions of enterprise life cycle, economic cycle and industrial technology change
investors: what sectors will the opportunities appear in 2022?
Gao Yuncheng: we don’t look at problems on an annual basis. In fact, Jinglin is not a company that looks for new sectors every year, makes sector rotation and makes transactions; We also hope to find companies that can continuously create value from the dimensions of enterprise life cycle, economic cycle and industrial technological change.
In the final analysis, a product and service that can improve the efficiency of society, solve people’s needs or enhance their satisfaction is what consumers are ultimately willing to pay. Here I call it altruistic enterprises. Only altruistic enterprises can ultimately benefit investors.
There are many opportunities in the fields of new energy, artificial intelligence and consumption upgrading. Some companies have built core competitive advantages. Some companies have low market expectations due to the short-term impact of policies and the epidemic. The opportunities of these companies now far outweigh the risks.
Of course, we now say that the better time point for new funds to enter may be in the first and second quarters of this year, because this is the bottom of the economy and the bottom of the expected mood of the market. Often from the perspective of the cycle, it is a good time point for reverse investment.
Finally, as a conclusion, Jinglin’s investment style and methodology have not changed, but we will continue to summarize and refine some problems and areas that need to be improved.
