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Gao Yi Assets 2019 Furnace Discussion: Adhere to the safety margin Buy the most competitive company
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Editor's note:Gao Yi Assets “Warring Room Discussion” is a reserved program reported to investors every year. Six fund managers of Gao Yi Assets gathered to exchange views and thoughts on the market. This year, under the new challenges brought about by the changes in the international situation, we are also thinking about the future direction and response. Share with you two words that we really appreciate -
Charlie Munger: "The macro is what we have to accept, and the micro is what we can do."
Roman Roland: "There is only one true heroism in the world, that is, to recognize the truth of life and still love it."
Chairman of Gao Yi Assets Qiu Guolu
Gao Yi Asset Chief Investment Officer Deng Xiaofeng
Gao Yi Assets Managing Director Sun Qingrui
Gao Yi Asset Chief Research Officer Zhuo Liwei
Gao Yi Assets Managing Director Feng Liu
Gao Yi Assets Managing Director Wang Shihong
Zhuo Liwei: Please review 2018 first. I think that 2018 is a very difficult year for me to work for more than 20 years. It is also a very anxious year. In the investment of 2018, what do you think is new in this process and not quite the same as in the past?
After the ebb tide, we must seize companies that can continue to grow and have high moats.
Wang Shihong:I learned a lot of new things in 2018, the most important of which are three things:
First, no matter what the market is, the most important thing is that we must go in the right direction. Although 2018 is a very difficult year, I have seen that many companies still have very good performances. Both A-shares, Hong Kong-based consumer goods companies, and US cloud and SaaS companies have good returns. We must stick to what we think is right, as long as it has long-term space, sustained high-speed growth, and a very good business model. Companies in these areas performed well in 2018, but those companies whose growth has slowed or increased in competition have performed very poorly in 2018. When the tide came, many companies performed very well in the past few years.When the tide recedes, there are still companies that have room for growth and high moats, and even if they suffer setbacks, the adjustment is very small. Therefore, we must focus on the long-term sustainable value creation of the company, so that we can cross the "cow bear."
Second, last year for private equity, it was important to control the retracement. The biggest difference between the Chinese stock market and the overseas stock market is that although the total return of the stock index in the past ten years is basically the same as that of the Nasdaq 100, the Nasdaq 100 basically has not much fluctuation, and the Chinese stocks are every three. In a four-year cycle, there is a large adjustment from top to bottom. This determines that we must control the retracement as much as possible in the event of large market volatility, and this volatility also brings many staged opportunities.
Third, we must adhere more strictly to the choice of buying and selling. When making a decision, ask yourself if each company is eligible to buy, such as a return of at least 20% and 30% in the future. When the stock price rises too much and the expected return rate shrinks in the future, is it resolutely to sell the too expensive company according to logic? When the market is in good shape, it is necessary to adhere to the necessary guidelines and not to relax the selling conditions. Conversely, when the market is in a downturn, for example, at the end of 2018, many companies may have a future return rate of more than 30%. At this time, it is necessary to control the retracement of the portfolio and buy companies with large space in the next few years.
Whether it is fear or greed, we need to constantly alert ourselves to future investments.
In 2018, the market seems to be in a "rebellious period"
Feng Liu:In 2018, the market was mainly style switching. The market seems to be in a rebellious period, looking for direction, but has not found it. 2018 may not reveal what will happen in the future, but it is obviously different from the past.
In addition, I made plans in early 2018 to reduce the proportion of Hong Kong stocks and increase the allocation of A shares. Since last year, I have basically shifted my position to A shares at a relatively steady pace. However, there is also a pain in the rollover, because first of all I have to meet my high position principle, so sometimes I will buy some transitional positions, which may not be the best opportunity. This is also the place that I think should be promoted in 2018. Man made a demand and pulled himself.
I saw a few big opportunities in the second half of the year, but it was too tangled, but I didn't regret it when I turned back.In the long run, some opportunities in 2018 can't stand the scrutiny. The revelation that it brings to me is that the market is in a rebellious period, so we must break the past. The act of rebellion certainly does not represent the future, but it will declare the end of the past. So the style of 2017 should not reappear in 2019..
Mr. Feng explained what is meant by the “rebellious period”?
Feng Liu:Rebellion is generally the beginning of the growth of the new generation. As long as it is different from the mainstream of the past, it may not have any rationality, so it is difficult to learn from it, but it must be taken seriously. The opportunities in 2018 are more partial themes and partial concepts. It is obvious that the market has the desire to express, but it is difficult to convince oneself to participate. It seems that there are some reasons but cannot stand up to scrutiny.
The key is how to pass this adjustment process
Deng Xiaofeng:Looking back on 2018, the process is still very tangled. First, the market environment has changed at the beginning of the year. I used to prefer high-quality companies, head companies, but these companies have performed well in 2016 and 2017, and the stock price has significantly exceeded the growth. At the beginning of the year, I saw that the direction should be adjusted and dispersed, because the return rate of traditional high-quality assets may not reach expectations, and even staged negative returns. So at the beginning of the year, I considered whether to relax the requirements for the quality of the company from the perspective of portfolio management. The market in 2017 was a division of “Death 3000” and “Pretty 50”. Except for the top companies, other companies performed poorly. At the beginning of 2018, you can look for quality that may not be the best, but experienced the adjustments of the past two or three years, investing in companies that have opportunities.
At the beginning of the year, I invested in optimistic assumptions. Although there will be pressure on de-leveraging, it can be regarded as a factor of long and short. At that time, there were two main factors in the market. First, global growth was good. Second, domestic capacity utilization was high, while manufacturing investment was relatively low. Therefore, the profitability in the environment was stable. But when the deleveraging process began, the underlying pressure from deleveraging was underestimated. This round of de-leverage is mainly based on off-balance-sheet leverage, and the major shareholders of listed companies are greatly affected. Because they are the private entities that financial institutions are most willing to put in when credit is loose. In 2014 and 2015, traditional industries were under pressure and hoped to achieve new development through the transformation to the Internet. Many large shareholders of listed companies obtained off-balance sheet credits through equity pledge, conducted mergers and acquisitions, and sought transformation breakthroughs. These actions will have certain challenges when they are calm, but when they actually happen, the speed and impact will be more than expected.
Second, I have a feeling of anxiety in the first half of 2018. After the Sino-US trade friction, the external environment has undergone great changes. Sino-US competition will compress China's external demand and production space. If the world's factories do not match the world market, domestic enterprises will suddenly face huge demand pressure, and the capital market will also face systematic adjustment.
In the face of this change, we decided to make major adjustments in portfolio management. The first is a more cautious attitude, whether it is pressure on the future economy or pressure on the capital market. At the beginning of the year, everyone was full of confidence in economic growth. The entrepreneur's heart was very high. Everyone felt the demand and felt the power of expansion. The stage with the greatest risk is the rapid turn from the rising state to the falling state. When the transition occurs, it is a big challenge to the capital market and the portfolio manager. Need to accept reality, adjust ideas, and make a smooth transition. Today, Qiu always quotes Roman Roland: "There is only one true heroism in the world, that is, to recognize the truth of life and still love it." We recognize the current environment facing the market and need to accept it and deal with it. Entrepreneurs will have more feelings and more pressure. I am also observing this process.
But we also often feel the impact of positive energy in the enterprise. At that time, entrepreneurs felt the pressure of trade friction and economic downturn. There were also disputes in the society that private enterprises had to leave, but many companies responded with calmness and optimism. For example, in our research and observation of some leading enterprises, we feel that we are thriving, actively competing, and full of positive energy. Different from the general pessimism of the investment community, we think that "the sky will collapse." This bottom-up motivation is very motivating for us. A good company is the foundation of the market and the basis for future returns. Our job is how to get through the systematic downturn and gradually prepare for the future.
First, I must firmly adjust my strategy to a very cautious assumption. Second, I hope to have more positive actions when others "panic."If the downward pressure on the economy will continue in the future, it will only rely on the best companies and the best entrepreneurs to create returns in an unfavorable environment. The focus of the portfolio needs to be fully focused on high quality companies. From the experience of my past industry observations, when the economic situation is poor, the pressure of enterprises with worse quality and smaller scale is greater. In 2018, from the perspective of adjustment and shareholder structure, many companies seem to be in place, but I am still worried that in the future, with the downward pressure on the economy, companies with weak constitutions still have pressure.
How to internationalize and go out of good companies is still a huge challenge. For example, building a factory in Southeast Asia will greatly reduce the quality of life of expatriates. Moreover, not only entrepreneurs run by themselves, but also middle managers and technical backbones. Many grassroots cadres are often reluctant to stay in other countries. When we went to South Korea to investigate, we found that an important factor in the success of Korean multinational corporations is that the society has done a good job in educating the children of the company’s overseas staff. After they go out, their children can enter the local international schools and return to school in Korean international schools. In order to make the education of the children continuous, the society helps the expatriates to solve the worries of the future, and the society assists the enterprise in internationalization. In fact, Korean companies are not culturally easy to achieve globalization, because South Korea is a highly introverted, single, relatively hierarchical culture, but South Korea has still achieved great success. Mass entrepreneurship, innovation, the development of the Internet industry, the people-oriented investment ideas of the VC industry, the impact of a new generation of entrepreneurs on social concepts - Chinese society is more likely to accept the atmosphere of creating and sharing. Entrepreneurs create companies in the form of partners, and realize the benefit sharing mechanism of core management and shareholders to employees. This culture is more conducive to our globalization, because benefit sharing is more attractive. It is easier for such a company to go out. Although it is inevitable that mistakes will be made during this exploration process, it is culturally and morally attractive. This is very important.
China must integrate into the world, and companies need a global market to cope with Sino-US competition. If we isolate ourselves, then only 1.4 billion people in the market will never be able to beat a company with a broader market.In the final analysis, competition between countries is the competition of enterprises.
Moving to investment, I think 2018 is the most stressful, because 2018 is like the process of landing, flying, and suddenly the engine is running out of oil, it is the most difficult, the most challenging, and the most risky. But in 2019, it has already landed on the ground, and it will not continue to slide. When the expectations fell, the stock price fell, the valuation level was adjusted down, and the profit was lowered.From the perspective of investment, 2019 will be more convenient and safer, because the process of landing has passed.
I believe that China’s resilience is in the long run of history.
Qiu Guolu:I am more optimistic. Last year, many investors thought that it was a very difficult year. It can be said that there is no place to hide, and even a very high-quality industry leading company will have a quarterly report. On the one hand, the valuation of high-quality companies in 2016 and 2017 has been greatly improved, on the other hand, the economy has also downward pressure, and it is difficult for excellent enterprises to be independent. I am not sensitive to market fluctuations, mainly slow, so I sleep well, I often comfort myself this is called "insensitive."
I have always felt that the road to internationalization in China is very long and very difficult. Internationalization is far less important to us than Japan and South Korea. The population of Japan and South Korea is much smaller than that of ours. Once the company is on the road of internationalization, the overseas market will open 10 times and 8 times more space. We have 1.4 billion people. Even if all of Southeast Asia is developed, the market is less than doubled and difficult. Very big, for example, there are so many islands in Indonesia, and there are so many states in India, it is very difficult, so I did not take them into consideration when I valued them. However, this does not mean “closed locks”. China needs to integrate into the world economy and conduct business in accordance with international standards. China’s economy has reached this stage and can no longer stay in simple low-cost manufacturing, our human resources, land and environmental protection. The cost increase can no longer support this business model, so this time we must start to focus on intellectual property rights and start to go out. This is a benign development.Even under various pressures, active change or passive change is not necessarily a bad thing in the long run..
In 2018, everyone felt nowhere to hide, but in fact the market differentiation is still very serious. I always believe that the more difficult it is, the more important the margin of safety is. This can be reflected in 2018. I prefer to buy a high-quality leading company. I call it the "moon". There are no rivals in the industry, there is pricing power, "thickness is thick and thick", and the ability to resist risks is better. These companies performed well in the first 11 months of last year, but there was a big correction in December. This is the characteristic of the down market. In the last stage, there are often dozens of punches with the wrong ones. If you are correct, you can also play eight punches. There is a process of making up the downs. There may be no fundamental reasons for the fall. I comfort myself. This may be the second half of the market downturn. As for how long the second half is, I don't know. I can only have one direction. Sometimes I feel better, sometimes I don't feel good. I belong to the people who compare Ah Q and often comfort myself. My characteristic is that I don't worry when everyone is worried.
China's stock market is not so direct with GDP growth and liquidity, but has a certain relationship with surplus liquidity, that is, the difference between the growth of money supply and nominal GDP growth. Last year's residual liquidity was relatively poor. From January 2017 to June 2018, it experienced 18 months of deleveraging. At present, our currency growth rate is the lowest point in the past two decades. If we look at M1, it seems that there is some flow. The feeling of sexual traps, many means of creating credit and creating money have been suspended. In this case, the adjustment of the stock market is also normal. After the adjustment, people's mentality is also normal. It is easy to lengthen short-term trends and short-term long-term problems. I have read many historical books. China's current economic environment is good both in Chinese history and in world history. I belong to the "unswerving fool". The big system and the big environment, regardless of macro, meso or micro, basically have no more stagnation. In the process, they may fall into the pit, but they can climb. come out.Believe in the resilience of the Chinese nation and believe in the resilience of the Chinese economyOur resilience far exceeds that of South Korea, India, Japan, etc. I still have confidence in this point.
I am not very fickle, so I don’t change much in 2018, I still insist on the margin of safety and insist on buying the most competitive company.Buy "moon" and buy a company with no competitors. Last year's monetary policy shift was in June and July, when it was clearly stated that from de-leveraging to stable leverage, many financial stocks actually rose in the next six or seven months. Even if the stock market continued to innovate low, they did not have low innovation.
In the past year, especially in the second half of last year, China’s business and investment circles have long been worried about the future in the past ten or twenty years. However, overseas investors are not as pessimistic as we are. Let's look at the picture of the five-year Chinese CDS basis: CDS is equivalent to insurance for bonds. If a bank has a high CDS, it means that everyone thinks the bank is going bankrupt. You need to pay 5% and 10% to buy. Insurance, China's current five-year bond CDS only needs to spend 0.5 percentage points, and last year was very stable, indicating that overseas investors are not worried about China. In 2008, Bear Stearns and Lehman no longer came out to deny that it was useless. The CDS of these two banks rose to a very high level and the market was very smart. We are also surprised to find that many overseas institutional investors are thinking about increasing China's asset allocation. On the one hand, because the weight of A-shares in the MSCI index will increase, 80% of overseas active investors still follow the index allocation position; on the other hand, they also see the attractiveness of the low valuation of A-shares.
We are now entering a navigation area without maps. Many things in China are unprecedented. China’s 40 years of reform and opening up is itself a process of constantly encountering and solving new problems. You have to put it in a bigger framework and The big background is placed on the background of human development. I have read the history of many countries, and now I am reading the history of Europe, the United States, Japan, and South Korea. The problems we have encountered have been encountered.
2019The remaining liquidity will be better than everyone thinks.The correlation between China's surplus liquidity and the stock market is very obvious. If there is more money, it is always necessary to find a place. Recently, there has been a marked rise in bonds. If the skin is thick and thick, there is a steady flow of cash, which is definitely lower than those. The rating bonds are much better. The low-rated bond yield is 7 or 8 percentage points. Some leading companies have a dividend rate of 5 or 6 percentage points. The annual profit growth is more than 10%, and the 7-to-8 times price-earnings ratio. Why can't you buy it?
I am not very fickle, but in 2018 I also tried to expand my ability circle, saw several stocks of the GEM and Internet stocks, and made some progress. I am also exploring other opportunities and slowly getting out of the comfort zone. Last year, the Internet in the United States also fell very badly. After the fall, it was found that some industry leaders only had 10-15 times PE, and at least double-digit performance growth every year. There is no newcomer in the industry, basically monopoly or half. Monopoly, in this case I am willing to upgrade the quality of the combination. Of course, I am slow, and I am not in a hurry to expand the circle of competence. Be cautious when entering new fields. Everyone knows that I have always been cautious about the GEM. When I was most enthusiastic about the GEM in 2013, I still "snapped" it. I was not optimistic about movies, games, internet finance and other industries. I think it might be a good idea now. For example, after spending some time studying the film industry last year, the researchers told me that the fundamentals are very poor, and I feel very bad after reading them. The two games in front of the game accounted for a big part, and these small game companies in the A-shares are not worth watching. Internet finance last year 80%, 90% have run. In fact, I especially like the industry that clears out.
I am still optimistic about banks and insurance. I also see that the differentiation between banks is very obvious. The quality of good banks and bad banks is three times and four times worse, but the valuation is only 50%-60%. The expected difference is very large. Everyone's expectations are now lower, and it is difficult to have a big opportunity for the mobile Internet from 0 to 1 in the past. At this time, it is necessary to buy some irrefutable leaders in mature fields. The Nikkei index was 70 times when the peak of the bubble reached nearly 40,000 points in 1989. If it was bought at 10 times price-earnings ratio, it would correspond to the Nikkei index of about 6,000 points, even if the middle experienced a bubble burst and continued deflation, the Nikkei index is now Still up two and a half times. I never know how the short-term market will be. I don't know how long it will fall again in the short term, but how much it will fall. But let's think about the worst situation first, and compare the situation in Japan over the same period.
Research leader, excellent company
Sun Qingrui:Regarding 2018, trade friction is definitely a big challenge. I also thought about it this year. In addition, I spent a lot of time thinking about China's potential economic growth in the next few years. In addition to taking the time to think about trade frictions and potential economic growth, I am concerned with the perspective of not being good at the past, and more in-depth research on leading companies and excellent companies.
In 2018, I spent a lot of time dismantling different faucets and observing the essence of business. We have discussed in depth a company before, it is a very good company, has strong execution and enterprising power, but finally found that the company has never earned money in the past ten years, because cash flow is not enough capital expenditure, and in the future It is difficult to earn money. When the economy is very extensive, opportunities may exist everywhere. When the economy is in a mature stage, companies with better business models and better track, even if they are under financial pressure or are in the stage of economic downward pressure, they are resistant to risks. The ability will be better. In the future, only the best, most competitive, and most capable companies will survive and grow up in the midst of change.
China's economy is relatively extensive. One industry is thousands of companies. Although some industries may grow up, the competition between companies is still very fierce, and the process will be more painful. In addition, some industries may have a certain degree of barriers in the past, and they will grow to a certain scale. However, in the current situation of highly developed information and high degree of digitization, there will be impact in the future, such as the restructuring of the industry by Internet companies. I spent a lot of time thinking about these aspects in 2018.
The end is bright, but the path can be complicated
Zhuo Liwei:The first point is that Deng and General Qiu always talked about the issue of globalization. My understanding is that for many companies in China, going out is not only to gain a bigger overseas market, but also to increase the space for expansion and expansion. It is to learn to get along with the world, communicate, and be more adept at using international rules, thereby improving their strategic and management capabilities. Chinese companies need to improve their capabilities in this area, because this is the ability of traditional manufacturing companies to upgrade from 1.0 to 2.0, and it will also help to do better in the domestic market in the future. This is even true for China. We cannot move towards an introverted, closed cultural orientation. Although I also believe that globalization is currently facing certain challenges, I am very optimistic about the long-term prospects of globalization. Now that it is at a fairly high level of globalization in human history, history cannot simply return to the past, the economy The deep globalization of information and economic division of industry and the Internetization of information will suppress the escalation of conflicts to a considerable extent. Both the decision-making level and the enterprise level must recognize this historical trend and maintain its strength. We cannot In the more complicated international environment, the judgment of the general direction is lost. Globalization is an important test and test for our company and our country to enhance their comprehensive capabilities.
The second point is that everything has two aspects in a relatively complicated process. We cannot short-term long-term difficulties.This is actually the relationship between the final and the path. The final game is very bright, but the path can be complicated.Even watching microscopic things sometimes feel depressed and even anxious. Although I am actually a very broad-minded and optimistic person, I was anxious for quite a long time last year. But then I figured it out, seeing this thing bigger and longer, and anxiety can be largely eliminated. The path is complicated but the end is bright. There is a lot of depression on the micro level. But when you look bigger and look a little farther, many of them may change at any time. Many variables are the process of the game. It seems that there is an invisible hand going in the long-term historical direction. History The power of the tide is always greater than any individual. What we have to do is not to fall into the ditch, and we need to determine the strength.Just like Charlie?What Munger said, "The macro is what we have to accept, and the micro is what we can do."
Throughout the year of 2018, among the A-share market, Hong Kong stocks and China stocks, a small number of companies in the areas of brand consumption, service industry, Internet, the best manufacturing, and financial services still have certain positive returns.
Since the process is complicated, the requirements for investment quality and quality are very high. Just as Qiu and Sun have just talked about, we are from the quality of the business, the quality of the company, the quality of free cash flow, and the valuation. The quality, the four quality dimensions to find, can still find a lot of companies. We are still much better than Japan in the past. We have a very deep basic market of consumer services and a huge unified market for advanced manufacturing. We have a huge space for engineers to release, and we are constantly deepening the process information to the upstream of the supply chain. Industrial innovation and production methods innovation in digital and digital operations, and from the valuation point of view, our current valuation is only equivalent to 1/4 to 1/3 of Japan's level in the early 1980s.
Choose a good business with "skinny" and "thickness"
Zhuo Liwei:I want to ask Qiu a question. Qiu has repeatedly talked about "thickness and thickness." From your point of view, what are the business characteristics and financial characteristics of these "thick and thick" companies?
Qiu Guolu:"Flesh thick" shows that it is a good business, and it is not hard to earn money. Good business is very simple, ROE, net profit is relatively high, the company is very good when the economy is good, and the volatility is relatively small when the economy is bad, so the "thickness" is better understood.
What is even more difficult to understand is "skin rough". Lao Tzu's words are "Golden Jade Full House, Mo Zhi can be kept". If gold and jewelry are in the courtyard, it is definitely a high house compound. The characteristic of "skin rough" is the moat. It must be deep and wide, and it is best to deepen and widen each year. How to judge whether the company has a first-mover advantage? There are either network effects, scale effects, or high conversion costs, or unique patents, exclusive resources, or unique licenses. These conditions are called rough. China, which is thick and fleshy, is really very few.
It used to be an incremental game, and now it is a game of reduction.
Zhuo Liwei:Asking Feng a question, in 2018, did you have a different strategy in stock selection than in the past?
Feng Liu:First, the previous environment is more suitable for incremental games, because the market environment and economic environment are relatively good. In this case, I generally don't buy the boss because there are too many people staring. The feature of the incremental game is that the east side is not bright. As the feng shui turns, there will always be opportunities for others. In 2018, especially after the fourth quarter, I realized that there was a problem with the past style of play. Now it is a game-reducing environment. It is necessary to put the sharpness of the company first and give priority to the leader. However, considering that such large companies have been fully demonstrated in the past few years, only some small companies with small market capitalization can take care of them. I put more attention in this direction.It is required to be very competitive in the industry, with sharp sharpness and undisputed competitive advantage. It is hard to imagine that it will be eroded by others. The industry in which it is located is either a sub-sector or a large industry but an industry. Concentration is particularly low, and because of its strong competitiveness, the future will benefit greatly.In the game of reduction, the situation may be worse, but the advantage of deterioration is that everyone feels bad, and people without confidence do not invest. As a competitive boss, there may be surprises. Everyone will quit and let you give it. Some markets will be easier than before.
Second, many people in the market are pursuing in-depth research. The whole market is studying some very large companies because the research efficiency is high, and the top ten is so that some small-cap companies are abandoned by the market, but it is not necessarily bad. At this time, I went to see it. Although it is shallow research, I rely on some basic framework to improve the accuracy, and then rely on the quantity to ensure the throughput. When people buy a company, I buy ten, and then the research volume of ten votes is similar to that of a person. It is compensated by methods, frameworks, and strategies to ensure opportunity-driven rather than research preferences and demand-driven.
Zhuo Liwei:Mr. Feng’s logic is similar to that of Qiu’s best company in the clearing industry.
Feng Liu:This is not the same as clearing out. What is clear? The company lost three years and five years and was forced to quit before it was called out. Now it may surrender automatically, and it does not require such a fierce battle. Therefore, the reduction is not all bad, the resistance is weak, and there is no need for such a fierce bayonet. The process may speed up, and there may be accidents, so it is still necessary to dialectically.
Qiu Guolu:I responded to Mr. Feng's point of view. He mentioned that there are fewer people studying small and medium-sized stocks, and it is more likely to create long-term gains. We look at the historical returns of US stocks. Small stocks have long outperformed large stocks. One important reason is that small stocks are less studied by institutional investors and easier to create Alpha, but only if the valuation of small stocks is lower than that of large stocks. . The valuation of Chinese small stocks has been very high, but the valuation of some small and medium stocks in the past two or three years has quickly returned to reasonable.Mr. Feng just talked about the concept of invisible champions and market leader.Even if you haven't heard of the name, it means that the parts may be the first in the world, the company's moat is good, but the market space and ceiling are lower.This is a good idea. Mr. Feng often thinks about things that are different from others.
Adhere to the dimension of value creation to see the industry and the company
Zhuo Liwei:For 2019 or a long time, whether it is from the perspective of the industry or the idea of stock selection, what good opportunities do you think?
Sun Qingrui:The most important point to focus on in 2019 is the degree of matching between economic growth and money supply. For example, what kind of growth rate is M2 on the deposit side, what kind of growth rate is the loan end, and what kind of matching is it with nominal GDP. If it is loose, how does the exchange rate behave and the exchange rate appreciates? And what is the reflection of the devaluation. There are many influential factors in this area. For example, what kind of growth is strong in the US dollar and the US itself? What is the strength of the euro?
Overall consideration of 2019, I still just concluded,The cycle of trade friction will be longer, and the potential growth rate of China's economy will slow down. The most competitive companies in this process will run out, so overall it is still necessary to find a more certain, competitive, and able to run out of the company.
Qiu Guolu:Regarding investment opportunities in 2019,I have been focusing on three areas for a long time: financial real estate, brand consumption and advanced manufacturing. Now there is a chance for the financial industry.
There are some corporate teams in China's financial industry that are still worthy of respect. This year's RRR cut is one of the most reasonable options. In the process of RRR reduction, banks will still benefit as an industry. Many economic measures must rely on the financial system as a blood system, and it is necessary to stabilize the economy first to stabilize the entire economy. The valuation of bank stocks has already reflected pessimistic pricing. Some banks have not many bad debts, and they are still relatively conservative banks in the industry, but the corresponding Hong Kong stocks are only 0.5 times the P/B ratio, which is better than the US financial year in 2008. In the crisis, a leading bank's valuation was 1.3 times the P/B ratio was still low. Think about it, our valuation has already reflected pessimistic pricing, financial crisis-style pricing, but the financial crisis has not happened. Although more than half a year has passed, excess returns are already reflected, but there is still room. Everyone should appropriately lower their expectations and give you a stable annual profit growth of more than 10%. The valuation is in single digits. In fact, it is quite rare.
The market may enter a new round of asset shortage, and quality assets will be scarce again.. Now it is obviously a small liquidity trap. Several mechanisms of currency transmission are blocked. Whether it is off-balance-sheet, local government or real estate, the largest capacity amplifier is broken, and liquidity is likely to be over-segmented. The liquidity is likely to run to quality assets. If you are calculating the price, you are willing to buy urban investment bonds in unknown areas, earn 6%, 7% a year, or buy the best quality enterprises in China, giving you 4-5% dividends every year, and a dozen% growth of? This multiple-choice question is very simple, no need to toss and turn. I am a person who likes to do calculations. The certainty comes from the calculation of each account.
I don't care about the growth rate, but more about the industry. Like the air-conditioning industry, before 2005, it was 30%, 40% annual growth rate, and only 10% growth rate after 2005, but the days of leading enterprises in the industry have become better. When the growth rate was very fast, everyone instead Fight you to die. If the growth rate is fast, the fastest growth in the past two years is sharing bicycles, from zero to tens of millions of vehicles. What is the final result?Low growth with thresholds is better than high growth without thresholdWhat is the use of growth, everyone can't earn money. There is no point in arguing for a hundred miles, and there is no point. Don't count the stars, but count the moon. After the industry pattern of growth has stabilized, the first-mover advantage of the leader is obvious, and the days are better. You don't want to see some industries eliminate 40%, 50% of players, only 10%, 20% of production capacity, which 10%, 20% turned out to disrupt market order and undermine pricing power. The marginal pricing power of some industries is now coming out.
I always say that I don't waste any falling market, just like the second quarter of 2015, I was very pessimistic, although everyone thought that 4000 points was the starting point of the bull market. Any imagination that is too good for the future is likely to be realized, and the excessive panic about the future is likely to fail. Anyone in the future can talk out of nowhere, because no one knows what the future is like. It is easy to grasp the present and it is difficult to grasp the future. Why do I have to see the pricing power, cash flow, and brand that I can now see? Because these things don't change, we don't have to pay a premium for these things, so we are not afraid of optimism and pessimism. Looking for change in the change, it should be changed invariably, more sluggish, and less sensitive.
High quality research to create alpha
Deng Xiaofeng:It may be easier to invest in 2019 than in 2018. I will look at portfolio management from two perspectives.
The first angle isAfter the performance of listed companies in 2019, the company knows where the profit of the head companies in this industry is. In the past, growth was the main line of society. The capital market paid more attention to the growth of earnings and the growth of EPS, while ignoring the quality of profit. Under the new situation, growth is no longer inevitable, and the mode of business and the quality of profit are more important.It is our preference to truly realize a company with quality profitability and growth in a challenging environment.
The second angle,If a large class of assets will have a positive return ahead of the overall equity class, it may generally meet several indicators: First, the asset itself has a strong Alpha attribute, which is both high quality and growth stage. Second, the negative expectations of this type of assets are reflected enough.Internet companies listed in the US are good representatives. Many Internet companies have become value stocks in valuation, and there are so many Internet companies with more than ten times price-earnings ratio. The core profit of many Internet leading companies with huge competitive advantages and obvious growth stages is about 20 times. US-listed Internet companies first made major adjustments due to trade frictions and downward pressure on the Chinese economy. At the end of the year, because of the adjustment of the US stock market, they were again slashed, and the double shocks were reflected enough. I have tried to get more attention in this direction since the fourth quarter of last year. From the perspective of valuation, the Internet has also become a traditional industry, but the Internet is essentially a growth industry. The traffic dividend phase has passed, but its application and penetration of all aspects of the economy continue.
I will track and observe very controversial topics, and major uncertainties often create excess returns. For example, changes in the electric vehicle industry need to correct our judgment based on changes in facts. For example, a leading electric car company in the United States is a company that constantly tortures everyone. Before the third quarter of 2018, everyone suspected that it might go bankrupt at any time because the money was too strong and there was no positive cash flow. But in the third quarter, it became a company with profitable and positive cash flow, and it was observed that it had a lot of business development space. The founder has done a lot of excessive and advanced commitments. From the perspective of product manufacturing, it is a very inefficient company. It has spent countless money. It was thought that the learning curve had passed in the third quarter, but from the fourth quarter and the first quarter of this year. In view of this, the efficiency of the manufacturing process has not been improved. It has been a matter of half the work in history. Although there are many innovations, how to make it stable and efficient, there are still many pits that have not passed. From the perspective of industrial development experience, these are sunk costs. What I am concerned about is the timing at which it has gone through the learning phase to improve efficiency. The key to maximizing efficiency is to lower the terminal price, obtain more effective demand, and continue to push the business forward. It once accounted for 30% of the same category of luxury car market in the third and fourth quarters of last year. This is definitely an amazing achievement. However, because the unit price is too high, it is impossible to produce a low-grade version with sufficient efficiency, and it will face the problem of insufficient follow-up demand for orders. It needs to be solved by the improvement of productivity. Before the third quarter of 2018, it was a company that was going to close down at any time. After 2019, it was to observe how good the company could be.
Its real impact is the impact on traditional car companies. If its market share suddenly reaches such a high share, what should Mercedes, BMW and Audi do? The value of the industry will definitely change greatly. The greater impact on the industry is what the original company will do. Will the global round of industrial restructuring start again, especially in the luxury car market? When many new products come out, they will bring about the redistribution of the original market value. Will this process happen again? Of course, the luxury car market is here. In China, it is an attempt to the mass market. The world does not know how to make suitable electric vehicles for the mass market. If a company makes it, the product features and definitions, everyone will follow, and the development of electric vehicles will advance by leaps and bounds. The market for electric vehicles will be more concentrated. The biggest impact of the development of electrification is the transfer of value. The transfer of value is also important for investors because the stock is very large. This requires continuous tracking and observation from the perspective of industry research, and adjusting its own judgment nodes and even rhythms according to changes in data and industry development. These are the directions I might spend more time in 2019.
Feng Liu:I like stocks that have been bearish for a few years,The face will be very wide, and the industry is very involved.Shallow coverage, find something at first sightIf you want to come together too much, it is usually a pit, because there will be too many other things, not pure enough.
Wang Shihong:The big difference between China and the United States is that China's industry iterative speed is very fast, big and hard, small will come out and quickly change the pattern. For example, in the Internet field, American social network companies can lie there to sleep, but Chinese social network companies are attacked by competitors as soon as they are slow to innovate. China has changed faster and has more opportunities, so small companies have more opportunities to challenge. Large companies will have higher returns. The faster the fast-changing economies, the more likely the returns of small companies will outweigh the big companies.
Looking at the primary market, there is also a reference. Last year, a company in the primary market increased its market value from 30 billion US dollars to 79 billion US dollars, while its revenue rose from 15 billion yuan to nearly 50 billion yuan. This year their income target continues to increase substantially. In the Chinese economic environment last year, the valuation of this company still rose by 150%. How did they do it? Rely on innovation driven by organizational and cultural foundations. For example, culture is a combination of the cultures of two large American Internet companies. A company is a small organization, the culture of “Day One”, and it is constantly innovating. What culture is another company? Basically, like a top investment bank in the past, use the best people to give him the highest income and let him achieve the best results. This company exemplifies this very clearly in the culture, combining the cultures of the two companies mentioned above. Such companies have achieved very significant revenue and valuation increases in the economic environment of last year.
In my investment world, I feel that such companies can continue to create value. As long as a company can continue to create value, product iterations can continue to maintain rapid growth, and can achieve very good returns. So from my point of view, I am still looking for companies that can continue to generate high growth and generate revenue in the next few years. These companies have determined that performance will bring us good returns.
Just now, Qiu said that the change should be constantly changing. I feel that investment is a process of constant change. The only constant in the investment process is that everything is changing. So IFirst, to find companies that constantly change our lives and change our world, such companies can give us higher returns; second, seek for companies with deepening moats; third, find founders constantly strive to build bottom-up organizations. Companies that continue to drive innovation and increase the moat. In this process, look at the trend and direction of the industry, and see what business is driving this change, and find a big direction, there will be a good return.
I always feel that investing is the same as doing industry. The first thing is to look at the right, then the industry is to find the right person to do it. The investment is to see which organization can make it. For investors, we can also see that this is a good business at that time, but we are not looking for individuals to do it, but to see who is doing better in this market, giving money to him, they put this business It’s done very well, and we continue to hold such a company and get better returns.
My optimistic business in 2019 is the same as the business that I am optimistic about in the next five years.I am optimistic about the long video paid by China, optimistic about China's short video, optimistic about the penetration of China's third- and fourth-line retail content, optimistic about cloud business, optimistic about software, optimistic about chain shopping. These businesses may be 3-5 times more than their own rules, and the income of leading companies will increase by 5-10 times. Maybe these businesses are not necessarily the best in 2019, but I believe the performance in 2019 will be good, especially last year. After the market valuation has fallen so much, the probability of good performance in 2019 is very high, and it may continue to perform well in the next 3-5 years.
Product strength and scientific operation ability become the winners of competition, and there is differentiation between industry leaders
Zhuo Liwei:It seems that Shihong is always looking for investment opportunities in the most important changes, and Qiu is more concerned about the value that has been unchanged for a long time. Shihong always considers the future to create great value. Qiu always pays more attention to the current situation. The valuation is already very cheap (price is lower than the actual value), and there are free option values in the future, twoThe logic of ideas still has a lot of commonalities, but it gives different weights before "changing and not changing".. The theme shared by General Deng is “Change and Coping”.Looking at the macro and seeing the world's pattern is very complicated, we must stick to what is unchanged. I think nothing more than the things that have been emphasized for a long time: First, value, both the present value and the ability to create value in the future; the second is quality, the quality of the company and business, the quality of cash flow; the third is the competitive landscape and the long-term future. Space, penetration, and market share increase, and the fourth is an attractive valuation.
For the structural opportunities of 2019, I pay most attention to these aspects: First, the basic disk consumption and service, even if due to the influence of population factors, etc., the high growth of the total is difficult to maintain, but based on quality and function. There are still many opportunities for structural upgrading and category innovation in spiritual and cultural appeals. This also includes financial services for family security and wealth management in the context of a more moderate population structure. Since the terminal demand is weaker than in the past, traditional channel coverage and traffic distribution are essential basic skills, and the improvement of system power, brand power and refined scientific operation based on deep consumer research is The winner of the competition.
Second, the industrial Internet, or to B Internet, technology to enable traditional industries, these claims are essentially the same thing, in this regard, there are large-scale Internet platform companies through big data, cloud services, AI algorithms and other technologies to assign The traditional industry can achieve more accurate user research and product solution implementation in the upstream of the supply chain, thereby crossing the traditional enterprise boundary, realizing the asset turnover rate, supply chain efficiency, capacity utilization rate, and human efficiency improvement of the whole industry chain, and realizing the supply side. Optimize with higher consumer satisfaction. Companies that can provide traditional enterprise-level software, hardware, or software and hardware solutions for traditional companies may also have good opportunities. What should be specially stated here is that “to B Internet” is a gradual innovation of “burning money and burning time”. In the end, only a small number of companies can truly understand and master, and only companies that continue to improve their product strength and supply chain efficiency. Only get more reliable growth and share.
The third is advanced manufacturing. Whether it is the most competitive market for multinational companies in the world, or gradually moving towards an international market, China has begun to show some excellent manufacturing companies with strong competitive advantages.
Fourth, the industry is at the critical point of technological accumulation and qualitative change. After long-term technological progress and process know-how accumulation, some industries are at the critical point of realizing industrialization and commercialization, such as cellular immunotherapy and biopharmaceutical innovation, new energy, etc. In the field, although the valuation of these areas is currently expensive, there is a huge room for long-term development.
In addition, I am also concerned that 2019 may be a year in which leading companies have differentiated. In the context of weakening economic growth potential and relatively weak terminal demand, the differentiation of capabilities among leading companies may emerge, and those products are more powerful and digitally operated. The ability to be stronger, the corporate governance structure is better, and the organizational structure is more in line with the few leading companies in the Internet era (but not necessarily the current first), and will gradually accumulate the "scale agile" innovation ability, between the industry's leading TOP5 Companies may also experience a differentiation in valuation.
In 2019, we will continue to explore the most essential driving force of the industry and the company around our long-held value creation thinking, continue to do our long-term in-depth research and build our investment portfolio. Continue to redouble efforts in 2019.
(End of the article)
Editor in charge: Robot RF13015
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