Wang Rui, a mesozoic leader in investment: Looking for protected growth

Since 2021, the A-share market has fluctuated and the differentiation has intensified, looking forward to the fourth quarter, it still faces many challenges: economic downward pressure, valuation constraints on the target of high-boom and long-term tracks, etc. How will the future market trend be interpreted, and what investment opportunities will be available on the popular tracks?

On the evening of October 9, CITIC Prudential Fund and China Construction Bank jointly held a live broadcast of the debut with the theme of "Looking Forward to Popular Track Opportunities, Looking for Protected Growth", and conducted a live broadcast of nearly 20 authoritative platforms such as China Fund News All Media, Sina Finance, Financial Associated Press, Wind, Flush Finance, and Huangu.

This live broadcast invited Wang Rui, director of the equity investment department of CITIC Prudential Fund, Wang Weiyu of the personal finance department of China Construction Bank Headquarters, and Zhu Ang, founder of Dianshi Investment, to discuss investment strategies and market views.

01

What are your thoughts on the market interpretation in the fourth quarter? Towards the end of the year, what are the influencing factors that need to be paid attention to in the near future?

Wang Rui: First of all, we are very confident in the medium- and long-term development of China's capital market.

If we compare the entire equity market to a stock, then it is the performance growth rate and valuation level that determine its trend. We believe that the long-term performance growth of this stock in the Chinese economy depends on two factors, one is institutional guarantees, and the other is structural adjustment. Institutionally, we should be more and more confident that After the epidemic, China's production recovery and economic growth are globally leading, reflecting the advantages of our system in terms of efficiency, and structurally we can see that in the most difficult time of the epidemic, we have also adhered to the tone of housing and not speculation, and the role of emerging industries and advanced manufacturing in the economic structure has become more and more prominent; coupled with the strengthening of the engineer dividend, the long-term sustainable growth of China's economy is guaranteed.

Looking at valuation, that is, the liquidity of the market, the continuous inflow of foreign capital in the past few years is an incremental part of the liquidity of the capital market; next we believe that the wealth of residents will be a long-term trend. This can also be seen in the substantial growth in fund issuance over the past two years. Based on the judgment of economic growth and valuation levels, we are optimistic about the performance of the capital market in the medium and long term.

The long-term direction is determined, and the probability that short-term fluctuations are opportunities is greatly increased. Whether the overall performance of the market in the period before the National Day was differentiated or based on concerns about two issues, one is the weakening of the economic recovery and the other is inflation. In fact, the market has long been unanimously expected, and the impact is not large, because the liquidity will usually be relatively abundant in the process of economic weakening, which is beneficial to the market, especially for the growth of science and technology.

Inflation is a problem or risk that is relatively difficult to grasp at present, which is also a problem facing the world, which will restrict the extent and progress of liquidity release to a certain extent. But the source of this round of inflation is from the supply side of the stage imbalance, we think that like the overheating from the demand side of the situation the government is more proactive, not particularly worried, the early market has been feedback, if there is further fluctuations instead of opportunities. As for the market structure, as the economic system becomes more stable and mature, the slowdown in economic growth is inevitable, so that high growth will always be a scarce resource, and structural opportunities will be the norm before a full bull market, which is the advantage of active management.

02

This year, the performance of growth sectors such as new energy is significantly better than that of blue chips such as consumption, but the fluctuations are also very obvious, how to look at the opportunities after that?

Wang Rui: We have always been adhering to the concept of value growth. First of all, we pay attention to the growth and sustainability of the industry, and secondly, we also pay great attention to the issue of valuation, because even the best assets should have a pricing problem. Electric vehicles and new energy themselves have reached the node of industry outbreak, and at the same time, superimposed on the background of double carbon, the industrial prosperity will not have much to worry about in the next few years.

At present, the main cause of controversy is that the new energy sector has experienced a relatively large rise in the past two years, the valuation level has also risen, and the valuation of some individual stocks has a certain bubble. From our point of view, the industry is still a good industry, but individual stocks may also be differentiated in the future, and the market value of some good companies in the next few years may have a more obvious growth than now, but some of them may fall behind in the competition, and the future market value will shrink, which will test our ability to actively manage stock selection.

03

What do you think about valuation and the cost-effectiveness of realizing investments?

Wang Rui: On the one hand, valuation elongation must be useful; second, valuation is not a sword, in different industrial cycles and boom cycles, valuation should also have appropriate fluctuation ranges. When we pricing, we will support the rationality of valuation from multiple dimensions such as vertical history, horizontal industry comparison, overseas valuation system reference and industrial boom cycle judgment. Comparing multiple dimensions in this way, we can basically establish a valuation level that we can accept ourselves, and through this valuation level, we can do pricing and calculate the future market value space. Of course, the first thing we value in value growth is growth, that is, the speed of digesting valuation, and we cannot look at valuation without static growth. Finally, the valuation we give when we do pricing will be relatively conservative, so that our probability of getting the expected yield will increase.

04

How to achieve balanced and decentralized industry allocation and achieve full coverage?

Wang Rui: I came from a cyclical stock, but now I don't spend too much energy to look at the cycle, but I concentrate my limited energy. I am now decentralized in limited areas, in the new energy, electric vehicles, new materials, TMT, medical and health and other growth areas scattered. Because these areas are not too correlated with each other in terms of industrial cycles and rising rhythms, most of the time we can still find some relatively undervalued areas to do overmatch.

05

What are the key time points in the investment growth path? How do you live up to your investment goal of "finding protected growth"?

Wang Rui: Less than a month after I received the fund, I encountered a plunge in June 2015, followed by a 16-year circuit breaker, multiple 1,000-share stops and 1,000-share stops, and then an 18-year bear market. These experiences have also made me firm in the idea of finding protected growth. Although there may be a more obvious decline in the short term, these companies can also increase the lost market value back or even more through their own rapid growth and reasonable valuation. It's not easy to find companies that are soaring, but it's harder to keep the fruits of victory. My goal for myself is to set a realistic and unconservative yield expectation in the expected time, that is, to find some stocks that have a three-year doubling opportunity to build a portfolio. After having this goal in mind, when the market fluctuates sharply, it will not be as anxious as in the past, and you will be able to stick to your own thinking.

06

Why is the investment goal of "doubling in 3 years" being constructed?

Rui Wang: First of all, we need to set a quantifiable goal. For the setting of the time dimension of "3 years", it is also repeatedly considered and summarized according to the past historical situation. I personally look at technology and growth stocks, if the time is too long, the related industries will undergo large and unpredictable changes; implemented in individual stocks, that is, the accuracy of profit forecasts for more than 3 years usually drops sharply. If the time is too short, the forecast will be disturbed by the short-term wind direction, which will interfere with your short-term judgment. The concept of "doubling in 3 years" is about a return of about 25%. First of all, this is not an easy target, and the median return of funds in the past is about 10%, and the relatively good one may be around 15%-20%. Of course, this is not the target rate of return of our portfolio, but the target of the investment target we choose. Because when it comes to the portfolio, there will be a winning percentage problem, such as if you pick 20 stocks, only 15 of them may be able to achieve the final predicted yield, and the others may also produce losses. Therefore, considering it comprehensively, "1 times in 3 years" is not a distant goal, but it is a relatively good goal that can be achieved through hard work.

07

Can you talk about Tesla's research history? The investment logic of smart cars?

Wang Rui: I personally should be a group of people who studied TESLA earlier in China, when it was about 2012, I saw TESLA's roadster electric sports car in the magazine, and saw that electric vehicles can be so cool, and then I went to find some information. Soon after, TESLA released the first mass production model Model S, which was also the first time that the electric vehicle industry had a particularly decent product, that is, the industry research had a grip. We went to sort out the entire industrial chain and grasped some good opportunities. In turn, we look at the transformation of the automotive industry represented by TESLA, which may be the biggest innovation in the field of civil technology in the next few years. TESLA or the current new car-making forces, in addition to electric vehicles, more attractive is that it is a smart car.

In the long run, intelligent driving is likely to change the way of life of human beings, before that, the degree of intelligence of the car will continue to increase, which is an unstoppable industrial trend, corresponding to the investment opportunity of no less than electrification. There are software algorithms, chips, cameras that are constantly superimposed, radar, smarter cockpits, more powerful OTA functions, and the Internet of Vehicles and autonomous driving behind them, and I believe that the speed of change in these areas will exceed most of the cognitive speed.

08

How to understand the company's investment research culture and philosophy? How will we use the platform resources to practice the company's concept of "firmly believing in the long term and focusing on growth"?

Wang Rui: Our equity team has achieved quite good results in the past two years, if you use two words to describe the culture of our entire team, I think it is persistence and sharing. We have always insisted on value growth, no matter what the external style is, we have never given up on the method framework that we think is effective in the long run, and there are difficult times, but we have persevered. In addition, sharing is a culture that our team and the entire CITIC system advocate, and our rights team will try its best to give full play to each person's research expertise, regular exchanges, collective wisdom and team combat, so that everyone's research results can achieve the greatest utility. The market is always ever-changing, and we firmly believe that long-term and focused growth can make us ignore short-term noise, persist in the long term in the direction we believe is correct, and continue to create value for holders.

09

Standing at the current point in time, what advice do you have for investors?

Wang Rui: First of all, thank you for the trust of the holders in our fund managers, what we can do is to do our best to create the value that all the holders deserve. Of course, in this process, there will be difficulties and headwinds, and I hope to give more understanding, and finally achieve the revenue goal together, to reach our ultimate beacon and the other shore.