In the falling market in recent years, what are the "bear" weapons?

It's almost the end of the year in a blink of an eye, and the soul torture asks: In the bear market in recent years, how many hearts are dripping blood?

If you just look at the Shanghai Composite Index, the feeling may not be miserable! From 2019 to 2021, it closed three solid positive candles in a row, fell by 15.13% in 2022, and has only fallen by more than one point so far in 2023. Wind statistics show that in the range of 2019.1.1-2023.11.16, the Shanghai Composite Index has risen by 22.34%, and it still performs well after crossing the bull and bear, and long-term value investment is still effective.

However, if you only start to buy or increase your position significantly at the peak of the bull market in 2021, you can deeply experience the frustration in a bear market. Taking the common broad-based index as an example, in the range of 2021.1.1-2023.11.16, the CSI 300 fell 27.69%, the CSI 500 fell 23.78%, the STAR 50 fell 36.55%, and the ChiNext index fell 40.47%. No matter how the broad-based index is matched, the losses over the years will not be less, and the heavy growth sector index is particularly sad.

Since 2021, the index of common equity funds has fallen by nearly 20%, and the index of partial equity hybrid funds has fallen by more than 24%. The commander casually asked the friends around him who bought funds, and there were not a few accounts that had shrunk by more than 30% in the past two years. The thematic funds in his hands, such as medicine, even broke bones at the worst time.

Among the 31 Shenwan first-level industry indexes, only 8 industries have achieved positive returns since 2021, accounting for about a quarter. Among them, coal, communications, petroleum and petrochemical have been among the top gainers. There are 6 industries with a cumulative decline of more than 30%, distributed in real estate, building materials, commerce and retail, household appliances, non-bank finance, and beauty care.

However, despite the weak performance of market indexes, active equity and industry sectors, several equity products have performed relatively well, becoming a "bear" weapon in this round of bear market. So, what are their distinctive features, and are they still worth starting?

The commander divided these fighting "bear" weapons into several categories, let's take a look at them together! Data source: Wind, time range: 2021.1.1-2023.11.16. If there are multiple types of shares, take Class A as an example.

Dividend factor pie

Most of the listed companies with the ability to continue to pay dividends also have the characteristics of relatively low valuations, so their defensive attributes are more prominent in the bear market. Judging from the performance in this round of bear market, most of the "dividend" factors are relatively resistant, and the dual factor of "dividend + low volatility" has positively strengthened the performance return to a certain extent.

For example, since the beginning of 2021, the dividend of S&P A shares has increased by 12.47%, the dividend of Shanghai Composite has increased by 8.76%, and the dividend of CSI has increased by 8.71%. SZSE dividends fell by 37.08%, mainly due to the distribution of industries, the top two weighted industries are: food and beverage (25.36%) and household appliances (19.10%), and the leading stocks fell significantly in this bear market.

Since the beginning of 2021, the TOPIX Dividend Low Volatility has risen by 21.13%, the Dividend Low Volatility 100 has risen by 20.77%, the CSI Dividend Low Volatility has increased by 16.98%, and the S&P China A Large Cap Dividend Low Volatility 50 has risen by 13.7%. Considering that the dividend index also implies dividend income, the corresponding (all-return) index will perform better in long-term excess returns.

It can be seen that dividends or "dividends + low volatility" factors are good weapons for fighting "bears". It is worth noting that when selecting, it is necessary to avoid industries with a high proportion of weighting, which are at a high valuation level.

Bulk Cyclical

Since the beginning of 2021, the energy ETF (159930) has risen by 88.02%, the coal ETF (515220) has risen by 82.22%, the energy ETF fund (159945) has risen by 68.01%, and the resource ETF (510410) has risen by 42.07%.

For example, CSI Energy and CSI All-Index Energy are mainly distributed in the coal and petroleum and petrochemical industries, including China Shenhua, Sinopec, Shaanxi Coal, etc. Another example is SSE Resources, whose constituent stocks are mainly distributed in non-ferrous metals and coal, including Zijin Mining, Northern Rare Earth, Huayou Cobalt, etc. From the perspective of industry characteristics, they have certain bulk attributes, and the stock market performance is also inseparable from the futures/spot trend.

Taking the main thermal coal contract (ZC888) of the Zhengzhou Stock Exchange as an example, the lowest price was 660 yuan at the end of 2021 and the highest was more than 900 yuan last year. The strong trend of coal futures prices also drove the performance of the coal sector. For another example, in recent years, the price of international crude oil futures has risen rapidly from a low level, and Brent crude oil once rose to nearly $140 per barrel. For example, the gold sector in the non-ferrous metals industry, under the background of "gold hoarding" in various countries, the international gold price has risen all the way and has become a hot investment product in recent years.

If combined with the 31 Shenwan first-class industries in the above table, the above plates have risen sharply against the trend in the bear market, which is inseparable from the good performance of coal, petroleum and petrochemical, and non-ferrous metal plates.

It can be seen that cyclical industries with low valuations (PB) can also become a good weapon for fighting "bears" when commodities go in a bull market.

The tuyere rotation faction

Even if the overall performance of the market is not good, there will always be a few themes emerging in the stage. For example, in the first half of this year, the themes of ChatGPT and AI artificial intelligence, and the concept of Huawei's industrial chain and video short dramas in the second half of the year drove the continuous growth of the TMT industry.

For example, the Dacheng 360 Internet + Big Data 100 Index A has risen by 68.77% since 2021. In addition to the common scale, growth, quality, and reversal factors, the tracking index adopts a quantitative strategy, and also introduces a search (heat) factor to comprehensively select the 100 stocks with the highest scores, which are closely related to tuyere events. The latest top 10 weighted stocks are concentrated in the TMT industry, including Tianwei Video, Longyun Shares, Chaoyang Technology, Weishi Electronics, etc., and the market capitalization style is biased towards small-cap stocks.

For another example, the Wells Fargo Central Enterprises Innovation ETF, which tracks the CSI Central Enterprises Innovation Driven Index, selects 100 stocks with better innovation and profitability from listed companies of central enterprises, with a cumulative increase of 28.09% since 2021. Since the current round of bear market, the concept of central enterprises has brought two waves of market rhythm, one is in mid-2021, and the other is the "special valuation" market in the first half of this year.

It can be seen that the theme index on the (large) tuyere event can also become a weapon for fighting "bears", but it is difficult to grasp the rhythm of rotation.

Well, at present, the market trend has not yet improved significantly, and the above three kinds of "bear" weapons still have a place to use, which one will you pick? The commander looks forward to the allocation of equity assets in 2024, with low dividend volatility + technological growth + pharmaceutical reversal, which may be able to better balance offense and defense.