Qiu Guolu, chairman and CEO of private equity tycoon Gao Yi Asset Management, made a rare voice!
The China Securities News reporter exclusively learned that Qiu Guolu recently sent a letter to fund holders to conduct a detailed analysis of the current macro situation and market conditions. He believes that the current market is intertwined with multiple internal and external influencing factors, but the downward adjustment of the market has been relatively sufficient, and it is more necessary to maintain caution at special moments.
For the investment from the second half of 2020 to 2021, Qiu Guolu reviewed and reflected. He believes that not participating in the "hugging group" is an insistence on the investment system, and there is still confidence in the investment method of low valuation, but in the future, we should strengthen the attention to the policy, "not only looking down at the road, but also looking up at the sky."
Image source: Fund sales channel
Special moments should strengthen confidence
Recently, the domestic and international environment has faced great uncertainty, and some market indices have fallen significantly. Qiu Guolu believes that the domestic factors that the market is worried about mainly include: the possible impact of the new crown epidemic on production activities, resident consumption, logistics supply chain, etc.; the drag of the real estate debt crisis on the upstream and downstream industrial chains, resulting in the transmission mechanism from "wide currency" to "wide credit" is not smooth, affecting the pace of landing of the "steady growth" policy; worried about the impact of regulatory policies on the pattern of some industries, and it is impossible to see the future direction of some industries.
At the same time, the market is also facing overseas disturbances, inflation in Europe and the United States continues to be high, and the Federal Reserve has opened a cycle of interest rate hikes and balance sheet reductions, triggering the risk of "stagflation". The narrowing of the Sino-US interest rate differential, the depreciation of the renminbi, and the reduction of the allocation of Chinese assets by some overseas investors have affected the valuation center of Hong Kong stocks and Chinese stocks.
However, Qiu Guolu stressed that it is even more necessary to strengthen confidence at special moments. "Standing at the current point in time, we still believe in the resilience of the Chinese economy and the resilience of the Chinese nation, and remain relatively optimistic about the market prospects in the next 1 to 2 years." Qiu Guolu said that despite the current sluggish market sentiment, the Hang Seng China Enterprise Index has fallen to near the lowest point of the global financial crisis in October 2008, and from mid-February last year to mid-March this year, the Chinese Internet Index fell nearly 80% from the top.
"The downward adjustment of the market has been relatively sufficient, and the valuation level of the new decade has reflected most pessimistic expectations. In such an environment, we should be more optimistic about the capital market while remaining cautious, and more actively explore potential investment opportunities, rather than allowing panic to dominate the mood. He said.
The three stock selection conditions respond to the current situation
In response to the current market environment, Qiu Guolu proposed that the industries in the portfolio should strive to meet three conditions: first, the industry is relatively small affected by the epidemic; second, it must be able to resist inflation, have pricing power, and not be afraid of the rise in upstream raw material prices; in addition, it should also benefit from the normalization of the "steady growth" policy and industry supervision.
Qiu Guolu said that the high-quality companies in the banking, insurance, real estate, construction, energy, logistics and Internet sectors that currently hold positions are basically screened according to the above three conditions, even in the global "stagflation" environment, the next two years are expected to cash in relatively good performance growth. Specifically, Qiu Guolu has laid out urban commercial banks and leading property insurance enterprises in developed areas.
For the Internet industry, Qiu Guolu is still optimistic about some sub-industries. He believes that some sub-industries have excellent business models, clear competitive patterns, leading enterprises still maintain high profitability, and the management of these companies may be the most entrepreneurial group of people in China. There is no need to be too pessimistic about the relevant policy risks.
Correspondingly, Qiu Guolu has less layout in manufacturing and optional consumption, because in the context of the epidemic and inflation, these two industries may face greater pressure and wait for further clarity of the situation.
Review and reflection: Not participating in the "hugging group" is a system decision
In addition to talking about the current market view, Qiu Guolu rarely reviewed the investment process from the second half of 2020 to 2021.
"The second half of 2020 to the beginning of 2021 is the process of rapid valuation of leading companies in various industries, the consensus formed by the market is to buy 'core assets' to buy stocks, the average price-earnings ratio of 'Mao' in various industries has been speculated to more than 60-70 times, and the valuation has reached the highest point in a decade." The structural market differentiation in 2021 is more prominent, and the 'track stocks' represented by new energy, electric vehicles, semiconductors, military, etc. have huge excess returns relative to the market, including many stocks with a valuation of hundreds of times the price-earnings ratio, which continues to rise, making many people begin to think that 'talking about valuation is losing on the starting line'. He said.
Qiu Guolu admitted that from the second half of 2020 to the end of 2021, these 18 months were extremely painful for investors who firmly believed in "low valuation", and it was also very uncomfortable for contrarian investors. But the history of the capital market proves that "the tree will not grow to the sky after all", and the excessive valuation will fall back sooner or later. For the "core assets" that did not participate in the second half of 2020 and the "track stocks" in 2021, Qiu Guolu believes that this is determined by its low valuation and reverse investment system.
Qiu Guolu believes that what really deserves his reflection in the past two years is market allocation, asset allocation and sensitivity to policies. In terms of market allocation, most of its positions are in Hong Kong stocks and Chinese stocks, but in retrospect, it still significantly underestimates the valuation fluctuation risk of the offshore market. The pricing power of Hong Kong stocks and Chinese stocks is in the hands of foreign institutional investors, and the changes in the national allocation of their global portfolios sometimes lead to large-scale inflow and outflow of funds in the short term, resulting in a large fluctuation in the valuation of stocks in the offshore market; secondly, when the new crown epidemic first broke out in March 2020, Qiu Guolu carried out a relatively large reduction and hedging, and then the market reversed when the portfolio was not flexible enough, and he also admitted that he "missed a good investment opportunity"; in addition, he said that he was not sensitive enough to policy. Underestimating the impact of regulatory policies on the Internet industry.
Be confident in your undervalued investment approach
Qiu Guolu said that in his many years of experience, he has been adhering to four principles: cheap is the last word; reverse investment, "where there are many people do not go"; pricing power is the embodiment of core competitiveness; win and then fight, buy winners in industries where victory and defeat have been divided.
In the past two years, these four principles have been greatly tested and challenged by the market. Qiu Guolu said that no investment philosophy or investment method can win every battle, but a mature investor should stick to his philosophy in the face of adversity. The market style in the past two years has been too extreme, and the current pendulum may be swinging from one end to the other, although there are still repetitions in the process, but he firmly believes that the investment philosophy and investment principles he adheres to can adapt to the changing market in the long run, and he still has confidence in the investment method of low valuation.
For the improvement of investment philosophy in the future, Qiu Guolu said that the disadvantage of focusing too much on bottom-up stock selection is that it is not sensitive enough to policy and environmental changes, and now he is gradually transitioning to a combination of top-down and bottom-up, "not only looking down at the road, but also looking up at the sky."
Qiu Guolu said that in the great changes that have not been encountered in a hundred years, whether it is the adjustment of the international environment or the domestic economic structure, the speed and magnitude are far beyond imagination. Only by basing ourselves on the long term can we better grasp the present. On the one hand, they will actively expand their circle of capabilities in the context of careful thinking and in-depth research; on the other hand, they still have to find a margin of safety from fundamentals and valuations.
Editor: Zhang Jing
