Ding Feng · half-year view | Tian Chao: in the second half of the trend to adapt to the leader Baima trend Reserve a reasonable
Ding Feng Asset Manager, Deputy Director of Investment
Master of Engineering in Communication Engineering, Shanghai University, 9 years of investment experience in the securities industry. He joined Ding Feng Assets in 2010 and has served as a researcher and head of TMT industry research. He is currently the Ding Feng Asset Fund Manager and Deputy Director of Investment.
Tian Chao’s long-term stocks represent a sustained five-year steady return on the product, Dingfeng 5, since its takeover in 2012.
The following is his summary of the market in the first half of the year and the analysis of the second half of the year, for the customers and investment enthusiasts of the Ding Feng assets to refer to.
Tian Chao believes that the market's enthusiasm for large stocks in the first half of the year means that the pattern of capital games in the past five years has been ended by policies. In the second half of the year, it is necessary to follow the trend of leading white horses, but maintain independent judgment and clear-headed mind, reserve growth-oriented small-cap stocks with reasonable valuation, and pay attention to lifting the ban.
In 2017, more than half passed. In the first half of the year, China’s A-share market ushered in the so-called “beautiful 50” era. The market’s recognition of large-cap companies has increased to a relatively high level. All recommendations and research reports must mention “leading” two. word. There does not seem to be any mention of the "leading" and "white horse" as if there is no need to buy at all, which shows that the consistency of the market is expected to be strong. This is very similar to the stock market in 2015. The first thing to look at when it comes to stocks is that if you don't have 10 times your imagination, you can't justify it.
The market corresponds to some features of matching macro, capital, and risk preferences at regular intervals. Since the fourth quarter of 2016, the market has attached particular importance to deterministic gains. From the results, large stocks or blue chip stocks have large market value, and their volatility in business models and profitability is relatively small. It seems more reliable to obtain a deterministic return. The blue chip stocks that have not been noticed before have performed better due to the reduction of investors' expected return rate.
What is the reason behind this is that this year's style is so keen on big stocks?
The game rules of the market are essentially market optimal choices under existing regulatory requirements. My answer is: The pattern of the capital game in the past five years has been ended by policies.
Since 2013, policies have encouraged mergers, acquisitions, drumming, and restructuring. In line with the policy, many companies that are not well-operated have gradually transformed their businesses from low-earnings to high-earning-earnings.
To give a simple example, from the traditional manufacturing industry began to transform the game, film, Internet and other high PE business. We can see that there are many such companies in the A-share market that are either dual-headed or abandoned their former main business and enter new business. In the past few years, cross-banking mergers and acquisitions of high price-earnings ratio businesses, telling stories, speaking about space, managing market value, locking gambling, etc., the stakeholders of the entire chain have achieved a win-win situation. Listed companies, mergers and acquisitions, participating agencies Profit from it, easily tells the story of a market value from billions to billions.
However, with the change of policy from the supervisory level, strict controls on capital and finance have been tightened. The increase in the number of books and the difficulty in transition has gradually increased. The original game ecology has been broken. The acceleration of IPO has made the acquiree unwilling to be merged and acquired. Be inclined to go public. Cross-bank M&A encounters resistance to audits, and new IPOs continue to absorb market funds directly. Participating organizations have also become more cautious, setting new regulations and reducing new regulations so that listed companies pay more attention to long-term operations rather than short-term arbitrage. All of this has developed toward the direction of relying more on its own main business, and it has finally turned into a white horse's middle-level market.
Everything has a cycle.
As the saying goes, Hedong for 30 years and Hexi for 30 years. The tree cannot rise to the heavens, everything has its limits, things move back and forth, and the cycle is immortal. Looking at the history of the United States’ financial development over the past 100 years, the waste stock bubble, the beautiful 50 bubble, the Internet bubble in 2000, and the stock market disaster have all occurred. The bubble and the catastrophe were originally twin brothers. The bigger the bubble, the greater the share catastrophe, and the cycle is cyclical. The core is unchanged humanity. The previous round of games had blown small stocks into the sky and fell badly. For example, the Internet finance stocks in 2015 had only 20% of the market value at the time. Under the current rules, will the White Horse stocks blow out bubbles, even beyond the imagination of most of us?
Perspective 1: What money does the blue chip stocks earn this year?
In my crude statistics, such industries as insurance, household appliances, liquor, automobiles, and electronics, which performed better in the first half of the year, look at weights. About 20% to 30% of this year's rise is due to fundamental improvement and growth. 70 -80% comes from valuation increase. Stocks are always driven by two variables: performance and valuation. Performance comes from the listed company itself. Valuation comes from the pricing system in the market stage.
This means that this year is a year in which stocks have significantly increased their valuations. Although Moutai is still Maotai, the valuation has increased from 15 times a few years ago to 30 times this year, achieving a market value of 600 billion yuan. The same is true for Hikvision, and the growth rate has not improved. Instead, it has experienced a decline due to excessive volume. Generally, a reasonable valuation of 20% growth rate is a 15x P/E, and now becomes a 20% growth rate of 30x P/E. Since the rise in stock prices comes from valuation increases, let's look at whether this trend can continue. If corporate profit growth does not improve, can we increase our valuation to 40, 50 or even 60 times with a 20% increase? Personally think it is unlikely. Does that mean that the stock price will fall, I think it may not be. Under normal circumstances, the valuation has slightly declined. The future trend of Baima stocks comes from the growth of the company's respective performance. The company's performance increases by 20%, the stock increases by 20%, the company's performance increases by 50%, and the stock price correspondingly increases by 50%. The money that earned market valuations has been overdrawn in the first half of the year.
Any big company is made by a small company.
Tencent's 2004 market value of 10 billion yuan, now 2.7 trillion, 13 years, is also a week up.
Looking at the long-term cycle, if we see 2020 (for the next 4 years), the earnings of small growth stocks will exceed the current blue-chip stocks. Of course, within half a year, blue-chip stocks still have hope to make another round. The growth rate of small companies will exceed that of big companies. This is the objective law under the consideration of bases, but the premise is to find small companies with a continuously growing strong competitive advantage.
Perspective 2: The trend of A-shares Hong Kong shares and US stocks will continue?
I think this trend will definitely continue. From the viewpoint of Shanghai-Hong Kong Stock Connect, IPO acceleration and other policies, the future funds will be more objective and more institutionalized. However, it is necessary to recognize that A-shares are still the markets dominated by individual investors. I am afraid that this feature will be difficult to change within 10 years. Active funds such as hot money will also follow the hottest topics and directions.
In the future, A-shares will be converted into US shares and Hong Kong stocks. With the increase in the number of IPOs, the market will be more concerned with certainty and certain companies with a certain volume. The overall industry leader has a valuation premium relative to small-cap stocks but it is true in small-stocks. Growth, if endorsed by the seller, can also result in high valuations.
This is because the "value investment orientation" guided by the supervision will become a more permanent direction. On the other hand, there is no new technology growth environment, and more model small companies will gradually be falsified.
Perspective 3: About Investment Concept
It can be summarized as two points:
First: I believe that the continuity of compound interest, strive to make the bull market to keep up with the market, the bear market to avoid risks, shocks the market beyond the market.
Second: Firms believe that fast-growing companies can survive market fluctuations as long as they continue to perform. Whether you can increase the valuation is determined by the market, as in the first half of this year. However, I still believe that the company’s own growth rate can be tracked. The time spent on the company with 50% + growth rate per year, or the company with 10% + growth rate, is not the same.
This year, everyone is talking about how the blue chip stocks are, but if you look at the data, the company that I discovered on the GEM in 2014 has risen 8 times now. In 2012, the number of small and medium-sized companies found in the company rose by 7 times. At the time of 2020, there will be a group of companies that have risen 5-10 times, but the probability is not that of the current blue chip stocks.
Perspective 4: Risk points, strategies and optimism in the second half?
In the second half of the year, we must pay attention to the phased risks of a large number of liftings of the ban, a large amount of fixed-income funds, and the one-year non-pushing of the IPO acceleration since 2016.
The second half of the strategy:
Continue to follow the trend of leading white horses, but always maintain independent judgment and clear-headed mind, reserve growth-oriented small-cap stocks with reasonable valuations, and pay attention to lifting the ban in the second half of the year.
The next phase has the following six key priorities:
First, the use of energy during the Qing dynasty and changes in energy structure to improve combustion efficiency and energy efficiency.
Second, after the new opportunities in the post-ecommerce era and the penetration of e-commerce companies to a certain extent, they need to be combined with traditional retail sales and called new retail.
The three- or two-vote system brings opportunities for pharmaceutical business and the ageing trend for branded Chinese medicine.
Fourth, new precision manufacturing and equipment manufacturing, relying on the cost and the engineer's dividends, technological progress to a higher level with Europe and the United States.
Fifth, the traditional industry has changed from being the first in China to being the first in the world. Confidence in a huge market and all the way to the sea, many leading Chinese will become the world leader.
Sixth, the corner of the auto industry overtaking, automotive electronics and new energy automotive supply chain opportunities.