Rongtong Fund Wang Di: Adhere to long-termism and dig up good companies in good tracks

Wang Di, the proposed fund manager of the Rongtong Advanced Manufacturing Hybrid Fund, pointed out in an exclusive interview with a reporter from China Securities News recently that adhering to long-termism is the key method to win investment, and it is necessary to invest the main time and energy into companies that can really produce research compound interest and dig good companies in a good track. In the next two or three decades, China has strong competitiveness such as engineer dividends and manufacturing industry chains, and is optimistic about investment opportunities in high-end manufacturing industries such as "carbon neutrality", military industry, and electric smart cars.

Four dimensions to dig up individual stocks

In investment, Wang Di follows the idea of combining top-down and bottom-up. He usually locks in a high-quality track and then mines high-quality stocks in it.

In terms of industry track selection, Wang Di pays attention to the following four dimensions: First, the industry moat should be wide enough and the barriers to entry should be high. This not only blocks new entrants, but also enables the industry to maintain a relatively stable level of profitability; second, a good business model; and third, market space. Market space determines the industry ceiling, an industry with billions of market space, it is difficult to give birth to a company with a market value of tens of billions, so the market space is large and easier to give birth to high-quality companies; the fourth is the growth rate, the best industry is in the growth stage.

Specific to the screening of individual stocks, Wang Di said that he will carry out value mining from the following four aspects:

The first is to pay attention to the company's core competitiveness. Wang Di said that the company's cost control ability, product quality, brand effect, corporate governance, management, etc. determine the company's core competitiveness, from which it can also be seen whether the company's growth is long-term sustainable.

The second is the quality of financial statements. Wang Di believes that in most cases, the core competitiveness can be presented in the company's financial data. For example, product competitiveness and cost control capabilities can often bring sustained profitability, long-term stable ROE, and sustainable cash flow to the company, which are the intuitive manifestations of the company's core competitiveness. However, caution is often required if accounts receivable are high in financial statements and cash flow and gross margin performance is poor.

The third is to have a good price. Wang Di said his tolerance for valuation is neutral. He believes that good companies naturally have discounts, and the market often underestimates the potential of good companies, and often overestimates the long-term growth of mediocre companies. As long as the valuation is not too outrageous and the future growth is clear, I am willing to buy a good company. Wang Di took the new energy vehicle sector as an example and said that the core reason for its valuation upward in 2021 is that new energy vehicles have changed from a policy-driven market to a consumption-driven market, and the future operation will be more stable.

Fourth, some companies with sufficient sharpness will be appropriately allocated, but the proportion of allocation will not be very high. Because of the sustainability of these companies themselves, they are often not as strong as the market expects.

Layout of the "Thick Snow Long Slope" track

Looking forward to the future, Wang Di believes that the A-share market has great potential and has the following advantages from the top down:

The first is the country's comparative advantage. Wang Di said that in the next two or three decades, China's engineer dividend advantage is obvious, and the completeness of the manufacturing industry chain and the convenience of transportation are far more than those of other countries. Therefore, China will enjoy a relatively long-term dividend process in the future in the high-end manufacturing industry. In the scope of manufacturing, it is relatively optimistic about the high-end manufacturing industry.

The second is to pay attention to the relative relaxation of liquidity. Wang Di analyzed that historically, the valuation of A shares is disturbed by liquidity is relatively large, once the liquidity is tightened, the strength of the valuation contraction will be very large, and vice versa. At the moment, our liquidity is in a relatively loose state.

Third, the industrial cycle ushered in a dividend period. Wang Di said that in the next 10-20 years, industries related to "carbon neutrality", such as new energy vehicles, photovoltaics, wind power, hydrogen energy and other fields, are "thick snow and long slopes" tracks, as long as this is grasped, investment will be more effective with half the effort.

The reporter learned that the Xinji Financial Connect Advanced Manufacturing Hybrid Fund, which is to be managed by Wang Di, was publicly offered for sale on January 13, 2022. For the new fund investment, Wang Di believes that in 2022, the market liquidity is relatively loose, which will bring structural opportunities, optimistic about new energy vehicles, photovoltaics, wind power, military, semiconductor and other industries. In addition, certain dilemma reversal industries, such as automobiles and auto parts, have a very high level of confidence in the recovery of performance growth in 2022.

Wang Di specifically pointed out that in 2022, the leading new energy companies will maintain a more significant long-term competitive advantage than the second-tier companies, but there will be some changes in the structure of the industry development. Since the price increase logic is more fully deduced in the second and third quarters of 2021, this logic is basically coming to an end in 2022, thus returning to the logic of volume, and is relatively optimistic about power batteries, lithium battery equipment, diaphragms, downstream vehicles and other links. In addition, there are still some links in the field of new energy excellent company competitive advantage is visible to the naked eye, short-term stock price fluctuations do not hinder the long-term development trend of these sectors, emotional catharsis brought about by the stock price killing, is often a better opportunity to build a position.