Under the volatile market, how should fund managers give investors “psychological massage” to alleviate anxiety? There are many measures to boost market confidence, and the most reassuring is undoubtedly the declaration of fund managers that “I am full”.
In the exchange activity on March 29, Li Xiaoxing, managing director of Yinhua Fund and deputy director of the active stock investment committee, said that at present, many risks have been fully released. Combined with the stock price and the company’s performance, the A-share valuation quantile is at a very attractive stage in history, and some panic voices in the market belong to “no fuss”. How to operate under market fluctuation? Li Xiaoxing admitted, “from my own personal point of view, including my family, the assets are basically invested in the funds I manage.”
research and judgment valuation has been completed to the bottom
Q: what are the main factors affecting this round of market decline? Have the fundamentals of the enterprise changed and the valuation has reached a reasonable level?
Li Xiaoxing: we think the recent market decline is initially due to the conflict between Russia and Ukraine. The conflict between Russia and Ukraine will make the world more and more fragmented and the risk appetite will decline sharply, which is an external factor. The internal factor is that the spread of Omicron has led some cities to take measures to close the city, which makes everyone less confident in short-term economic development and has some impact on consumption. Both internal and external factors make the market decline not small.
In terms of market judgment, we believe that from the perspective of valuation contraction, it is close to the end. The valuations of A-Shares and some high-quality targets are at the historical average or even low position. As long as there is no significant downward revision of EPS (earnings per share) in the later fundamentals, it should belong to the bottom area in terms of the market, and there is little room for further decline in the future. This is my personal view.
Q: we are concerned about the high expectations of the market for LPR interest rate reduction. The Bureau of statistics released the economic data in February, which performed better than expected. In March, LPR still stood still, and the market interest rate reduction expectation failed. How do you judge the trend of the money market this year?
Li Xiaoxing: in terms of monetary policy, my personal judgment is still “self dominated”. It is undeniable that from some external conditions, the Federal Reserve continues to raise interest rates. If our interest rate spread expands, it may lead to capital outflow, which depends on the decision of the senior management. We still believe that the focus of the government this year is still to focus on economic growth, and will choose to maintain a relatively loose monetary situation within the scope of options.
stock is the money to make the company’s performance growth
Q: since the beginning of this year, the valuation of some relatively crowded tracks has suffered a sharp drop. On the contrary, the previously low valuation sectors are gradually repairing, and the market seems to be returning to the mean. Does this mean that the style of the market will switch between high and low this year?
Li Xiaoxing: there are a lot of discussions on market style, but we can see that few fund managers with outstanding performance make bet on style. As Buffett said, how to judge the market tomorrow? He doesn’t know. In fact, there are several grassland migrations every year. Do you think it’s a change of style? As a result, each style has its own highlight moment. For example, at the beginning of 2020 and 2012, the performance of undervalued value and cycle is better. From my perspective, my understanding is that stocks ultimately earn money for the growth of the company’s performance, so we must look at the company whose performance can grow continuously. We believe that the load yield brought by the growth of Companies in the growth sector is higher than that in the value sector. Therefore, in this dimension, focus on the investment in the growth sector.
Q: since 2018, with the continuous escalation of the Sino US trade war, Western economies have been stuck in the import of China’s high-tech industries. The horn of domestic substitution has sounded since then. After years of efforts, have any industries come out first? Which industries may have greater investment value in the future?
Li Xiaoxing: the so-called “neck sticking” phenomenon is mainly concentrated in the science and technology industry. We are mainly divided into four directions: new energy, electronics, computer and military industry, with different effects.
The electronics industry has the greatest impact and constraints on us, because no matter how hard semiconductor tries to promote independent and reliable equipment and independent and controllable materials, as a production line that needs thousands of parts, there are always some products from the United States and its allies. In this case, we have made great progress compared with 3 or 4 years ago, but we can’t completely leave the supply chain of the United States and allies. At present, we can’t fully realize the autonomy and control of these industries.
The computer industry is relatively much better. In terms of software, China has the best engineers in the world, and there is no big gap between us and overseas. In terms of user experience, it is slightly worse, but in terms of things, the essential gap is not large. As far as computers are concerned, they have gradually got rid of the phenomenon of “neck sticking”. The whole industrial chain of the new energy industry is in China. We have some overseas exports open to the United States, but the whole supply chain is in China itself. This industry is not affected by the United States and its allies. The military industry is the first to complete independent control, which can be solved entirely by ourselves.
Q: from the perspective of investment, will the operation of many multinational enterprises be impacted by the rise of “anti globalization”? Under this background, which kind of enterprises have more investment prospects in the future?
Li Xiaoxing: our senior management is very farsighted and proposed double cycle and internal cycle very early. In terms of investment, I personally believe that there should be discount risk in the valuation of companies embedded in the global industrial chain in the future. For example, the supply chain and market are all in China, and the exposure to our friendly countries may enjoy some valuation premium.
Because our investment method essentially depends on the prosperity of the industry, the growth rate of performance and the valuation. We traditionally refer to some similar investment methods of PEG. Of course, it’s not so mechanical, but when comparing the two industries with the same growth rate and the same industry prospect, one exposure is overseas and the other exposure is in China. We think the exposure is in China, and the valuation of this industry should be higher than that of the exposure overseas. Therefore, in terms of investment, compared with this position, we are more optimistic about industries related to internal circulation.
talk about “new and old”
Q: we have seen the confrontation between traditional industries and emerging industries, which has always been a hot topic among investors. What are the differences in investment logic between the new and old industries?
Li Xiaoxing: we believe that traditional industries tend to have high dividends, high dividends and undervalued, so-called cash flow businesses.
It may not grow fast, but its balance sheet quality is very good, its cash flow is very abundant, it has a lot of dividend ability, its valuation is very low, and its valuation safety cushion is very thick. This is the situation of the so-called traditional industry. Traditional industries are naturally linked to value investment. For example, coal and oil, which Buffett liked some time ago, are investments in traditional industries. In the investment of emerging industries, we pursue high growth sectors. These industries are inherently characterized by greater risks and higher potential returns because of faster growth.
It may be accompanied by industry instability. Emerging investment is investment change. The industry is unstable and cash flow is unstable, which may require large amount of financing. The investment in traditional industries remains unchanged and needs to obtain a more stable rate of return. If we can see the change direction of investment in emerging industries, the potential rate of return will also become higher. I think this is the biggest difference between the two industries.
Q: talk about new and old energy. How do you view the alternation between new and old energy?
Li Xiaoxing: similar to the dollar system, even if it gradually comes to an end, it is a long process. Looking at the dimension of 30 to 50 years, we confirm that fossil energy will be used less and less, but it is undeniable that with the existing energy structure, it is impossible to abandon fossil energy immediately. Therefore, in the next few years, fossil energy will still play a greater role. With more and more new energy installed, we may gradually move towards a process dominated by clean energy. But this process may take 10, 20 or 30 years. This is our view of old and new energy. Both old and new energy sources should be available. Traditional industries may be more cash flow, that is, we live in the present. New energy may represent the future and the direction of the future.
We believe that the opportunities for the new energy sector in the future are still relatively large. The core reason is that, firstly, through the rapid growth of its own performance, and secondly, through the decline of stock price, the new energy sector has been in a relatively low historical quantile in history. Looking at the next two or three years, or even from the dimension of 3-5 years, it will still maintain relatively fast performance growth. From the perspective of growth stock investment, we still believe that new energy is the most attractive growth investment sector.
Q: the new and old of the consumer industry is also a topic of great concern to the market. The traditional consumption industry, like Baijiu, has also undergone a long-term adjustment since the first quarter of last year. Has the relevant sectors been adjusted in place?
Li Xiaoxing: traditional consumption industry, such as Baijiu, catering industry related industries, including the selected products, soy sauce, etc., the adjustment range is not small. We feel that the valuation quantile has been adjusted in place. In the long run, there may be dimensions of more than half a year or more. These sectors have no small absolute income space. It’s just that the short-term structure is difficult to grasp, because the epidemic is still spreading, which has an undeniable impact on consumption.
Looking at the dimension of one year, I personally feel that the so-called “old consumption” has entered a better layout stage. New consumption, such as medical and beauty industry. From the national point of view, this industry has also been regulated. In the long run, it is conducive to regulating the development of the company, including some bad materials and anxiety communication. In the future, the emerging consumer industry will have good investment opportunities as long as the performance can be continuously cashed in. In the future, the products will maintain high position operation
Q: what is the operation idea of future products?
Li Xiaoxing: we still focus on the investment of growth stocks. Our growth stocks include consumption and technology, which is the investment method we have always adhered to. As you know, my investment method is prosperity investment. Some companies with upward prosperity, fast performance growth and reasonable valuation have also achieved good results in the past. Although we have seen very high-quality growth stocks since the beginning of the year, the adjustment range is not small, but after our research, most of their own performance has not been revised, but many have strengthened their advantages in the industry. Therefore, we will still focus on high-quality growth stock investment in consumption and technology. The position will remain relatively high. We think this valuation division is at a very attractive stage in history.
Q: over the past period of time, the equity market has also been generally volatile. On March 18, the index of partial stock hybrid funds has fallen by 15.22% this year, and the CSI 300 index has fallen by 13.65% in the same period. The investment experience of most investors in the market is not good. Everyone is more concerned about when the funds they hold can return to the capital. For everyone’s recent troubles, Xiaoxing always thinks there is a good idea?
Li Xiaoxing: we think the current market has reached a sufficient decline range. We can see that the adjustment range of the best companies is close to 40%, and that of the second tier companies is in the range of 50% to 60%. At the same time, the fundamentals of most of these companies have not changed much. I am still very optimistic about the investment opportunities in the equity market. My personal assets are basically bought my own fund. It is undeniable that the decline since the beginning of the year has caused periodic losses to holders. Personally, I am also anxious. After all, the holder handed over the money to us for management, hoping to maintain and increase the value of the assets, but the performance since the beginning of the year has not been very good, which has caused some periodic losses.
Q: we see that while the market is concerned about some layout opportunities, there are also some risk points to pay attention to. Next, please share with us how we should deal with these risk points in the whole investment process?
Li Xiaoxing: now, including the valuation contraction caused by the Fed’s interest rate hike, these risk points are not big risk points, but belong to “falling and panic”. Many people have made up a lot of ghost stories to scare themselves, which is beyond the scope of investment. There is a famous suggestion for investors to buy stocks in the United States when there is a big drop in the stock market. The reason is that if there is no war, you will make a lot of money. If there is a war, money may be useless.
As a fund manager said yesterday, my view is the same as that of him. First of all, we think the sky will not fall. If the sky is going to fall, it’s no use having money. From my own personal point of view, including my family, our assets are basically invested in the assets dominated by the funds I manage.
