In the past few years, in a magnificent consumption bull market, the consumption white horse was once called “lying win” assets. However, with the valuation level reaching the extreme high, the leading white horse and traditional consumer investment are no longer the pastry in the eyes of the market, and even contributed negative returns last year.
In the context of steady economic growth, can the consumer sector, which has been adjusted for more than a year, take on more responsibilities? Is there an appropriate layout time point at present? Which segments deserve attention?
In fact, there are not many active equity fund managers who are clearly optimistic about the consumer sector this year. Even fund managers who have continued to hold heavy positions have shifted their focus to it. However, there are still some value styles or consumption themes, and fund managers are still optimistic about the opportunities of falling out of this sector and the long-term demand space brought by the continuous upgrading of consumption.
multiple factor disturbance recovery logic
first quarter fund layout consumption tends to be cautious
Since 2022, affected by multiple disturbing factors such as the Fed’s expectation of raising interest rates, the warming of Russia Ukraine events, the relaxation of real estate policy and the rebound of epidemic in many places, the A-share market as a whole has shown a unilateral downward trend, with the CSI 300 index and the gem index falling by more than 15% and 20% respectively. At the same time, the industry differentiation is obvious, with more decline and less rise. Among the eight industries with a decline of about 20% this year, food and beverage and home appliances occupy two seats.
According to Wang Ran, general manager of the Equity Research Department of Dongfang fund, the performance of the consumer sector in the first quarter was inferior and lower than expected, mainly due to the high price of raw materials driven by the warming of the events in Russia and Ukraine and the rebound of the epidemic in many places, undermining the logic of the previously expected easing of cost pressure and travel relaxation.
Zhang Weisheng, fund manager of ICBC Credit Suisse consumer industry, believes that although the conflict between Russia and Ukraine and the intensification of the epidemic have interfered with the steady economic growth and recovery, from the consumption data of the Spring Festival and the performance of social zero data from January to February, the overall consumption is still in the recovery channel. During the first quarter, Zhang Weisheng increased holdings of some varieties with significantly underestimated value, such as food and beverage, household appliances and some Hong Kong stock Internet companies, and reduced holdings of some varieties whose performance did not meet expectations or whose medium and short-term performance was greatly disturbed by the epidemic, such as the short-term performance of catering and tourism companies was greatly disturbed by passenger flow.
Wu Yue, director of large consumption investment of Harvest Fund, said that since this year, based on the judgment of China’s macroeconomic downturn, weak consumption capacity and willingness, and inflation in the upward cycle, he was cautious about the A-share market in the first quarter. At the same time, external Black Swan factors such as the Russian Ukrainian war, the outbreak of the epidemic in Shanghai in March and Sino US finance have increased concerns about the short-term market and consumer sectors. Therefore, an extremely cautious position building strategy was adopted after the establishment of the new fund in January.
In Wu Yue’s view, at a certain stage, consumption white horse is called “lying win” assets, but since 2020, consumption and investment have bid farewell to the old era. “Looking forward to 2022, even if there is an upward market in consumption, it will appear in front of you in a more difficult and complex way of investment. One or two major asset switches may be required in the middle of the year, and the new alpha source represented by the dark horse of small and medium market value will become an important winner and loser.”
Out of caution, the portfolio managed by Tan Li, the value style investment director of Harvest Fund, has also maintained a relatively low position level since the beginning of the year. In terms of structure, it has adjusted within the optional consumption, reduced its holdings of automobile stocks that increased significantly last year, increased its positions in individual household appliance stocks, and increased the proportion of necessary consumption. The portfolio is relatively balanced within the large consumption, including retail, textile and clothing stocks, Instead of concentrating on traditional Baijiu and food.
During the first quarter of this year, Jiao Wei of Yinhua Fund, who has always loved consumption and investment, also changed its previous investment strategy, no longer focusing solely on consumption and medical treatment, but changing to a C-end business model supplemented by a b-end business model within a limited range.
\u3000\u3000 “The consumer industry was affected by the double effects of rising upstream costs and weak downstream demand, combined with the withdrawal of foreign capital. The performance in the first quarter was poor, especially in the food and beverage industry affected by the consumption scene. In the first quarter, we made the following adjustments and Reflections on our positions: first, our positions were more concentrated on high-end deterministic targets and undervalued targets, reduced positions appropriately for overvalued targets and targets greatly affected by the economy, and increased the proportion with the economy Configuration of aquaculture industry with weak relevance. Second, we need to face the short-term reality that the impact of the epidemic on consumption will last for a long time. Therefore, we should rationally treat the growth of consumer goods companies and have a reasonable expected correction to the performance. For high-quality targets, do not be blind in the short term and pessimistic in the long term. Third, realize the importance of valuation and marginal changes to most companies in the portfolio, no longer stick to the creed of resolutely not selling good companies, but change to dynamic balance. “
Jiao Wei pointed out that when the prosperity of the food and beverage industry is good, it is necessary to be stable, accurate and firm to ensure the flexibility of the combination. However, when the current consumption is obviously affected and the food and beverage is relatively under pressure, it is also necessary to take the initiative to find other relatively deterministic opportunities, try to control the pullback and smooth the fluctuation of the net value.
It is worth mentioning that many fund managers who were keen to invest in the consumer sector also began to turn to other fields. Love Baijiu Zhang Kun began to increase the allocation of technology industry, and Xiao Nan, who also love Baijiu, began to increase the allocation of coal sectors.
consumer stock valuation risk release
present or welcome the opportunity of strategic layout
Under the background of steady growth, can the consumption sector take on more responsibilities? The views of fund managers are not entirely consistent.
Tan Li believes that since last year, valuation has been a big problem to suppress the sector. With the superposition of weak demand, the valuation pressure is more obvious. However, after the correction in 2021, many consumer stocks have been adjusted to a reasonable or even low valuation level. Therefore, although there is still a lack of bright spots in the short-term fundamentals, there are more and more aftermarket opportunities as the valuation tends to be reasonable. In the second quarter, a certain position will be appropriately increased to capture some falling stock opportunities.
In Wu Yue’s view, after more than a year of decline, the valuation risk of most consumer companies has been released, and even the pricing in some directions has returned to a historically low level. At present, with the continuous decline, the risk return ratio of medium and long-term consumer assets continues to increase. From the spatial dimension, many targets have been able to ensure an annualized compound return of 30% + and now the depressed and pessimistic investment environment is the time for strategic layout and position building.
Wu Yue also said that in 2022, although the black swan incident affected the recovery rhythm, the view on the consumption sector remained unchanged. This year is still expected to become the inflection point of the consumption sector. In the second quarter, he is optimistic about the mandatory consumption sector with pig breeding + mass products as the core, and focuses on the possible reversal of optional consumption catalyzed by the event in the second half of the year. Based on the calculation of the medium and long-term risk return ratio and the potential reversal of fundamentals in the medium and short term, the stock position will be gradually increased in the second quarter.
“Time dimension”, the core concerns two events during the year. One is whether China’s epidemic control policy can be relaxed. Secondly, whether China’s macro-economy can achieve bottom up reversal under the policy of steady growth, if there is a cash recovery, the white horse, the core consumer leader represented by Baijiu, is expected to achieve a comprehensive reversal.
”Wu Yue said.
Hu Xinwei of huitianfu consumer industry believes that short-term factors do not affect the potential for sustained and steady growth of China’s consumer industry, let alone the general trend of continuous upgrading of consumption. Hu Xinwei also said that he continued to be optimistic about investment opportunities in China’s consumer industry. “We always firmly believe that China has a broad market and huge consumption potential. With the continuous improvement of residents’ living standards and people’s desire for a better life, China’s consumer industry is expected to maintain steady growth, which is one of the most certain investment opportunities in China. At the same time, China is in a huge wave of upgrading of consumption structure, which will continue for many years.”
Bo Guanhui, manager of Yinhua consumer theme fund, said that stabilizing the economy in the second quarter is still the core variable of the economy and market. At present, the best practice should be to look forward to and deal with it carefully. The uncertainty of the Russian Ukrainian war and the epidemic situation has increased the necessity of stabilizing the economy. The direction of the market should be strongly consistent with the focus of stabilizing the economy. Low carbon, infrastructure, real estate and consumption should all be within the investment framework. Home furnishing Baijiu is also worth our expectation. With the infrastructure and real estate making efforts to stabilize the economy, the impact of the epidemic is gradually subsiding, and the growth rate of household income is expected to improve. The consumption growth rate is expected to recover. At present, the valuation level of the consumption sector is relatively low, and there are many investment opportunities in household, household appliances, food products, high-end liquor and agricultural planting sector.
In addition, Cheng Zhou of Cathay Pacific Fund said that he is optimistic about the leading meat products, dairy products and characteristic API companies in consumer medicine. Yuan Weide of China Europe Fund also believes that the valuation of the service industry represented by Internet, computer and consumption is very reasonable or even undervalued after recent adjustment, and the high-quality companies also have strong investment value.
However, the deputy general manager of the equity investment department of a fund company in the north does not agree with the view that consumption this year is worth looking forward to. In his opinion, first of all, over the past two years, China’s social zero growth rate has shown a downward trend quarter by quarter. Although there has been a small rebound in some quarters, it has not recovered to the 2019 level since the outbreak. “From this data alone, I haven’t seen any power of China’s consumption to alleviate this trend.” Second, in the past two years, only the upstream resource products related industries have significantly improved the income level of all walks of life. The income expectations of most other industries in the past 1 or 2 years have been reduced quarter by quarter. In particular, the rectification and management of the Internet platform and education and training industries last year basically knocked out the ballast of China’s relatively large consumption. Whether there will be large industries that can support consumption in the next 5 to 10 years has not been observed. Therefore, he believes that it is difficult for consumption to perform better this year.
