In 2023, the A-share market will open high and move low, and it will fluctuate throughout the year. In the first half of the year, AI investment was in full swing, and in the second half of the year, Huawei, diet pills, and humanoid robots took turns to perform, and structural opportunities and risks coexisted in the market.
Sohu Finance's "Fund Q&A" column has launched a special series of reports on "Jiyu 2024", reviewing the market in the A-share market segments during the year, looking forward to and predicting the investment opportunities in various popular tracks in 2024, grasping the main logic of asset allocation in the future, and looking for fund products with investment potential.
The fund manager who is a guest in this issue of "Jiyu 2024" is Lu Di, the manager of Chuangjin Hexin Fund, who focuses on investment opportunities in the media sector in 2024.
Lu Di, with a master's degree from Peking University, has nearly 7 years of experience in the fund industry, and has been engaged in research in technology and consumption-related industries in Haifutong Fund and HSBC Jinxin Fund, and joined Chuangjin Hexin Fund in April 2021. The investment style is biased towards value growth, the combination of contrarian investment and trend investment, and likes to invest on the left side, that is, to buy good companies in a good position and take risks correctly.
As of December 18, the media index rose 32% for the year, ranking first among all sectors in terms of absolute and relative returns. Recently, affected by the policy, the sector has fallen into a correction, and investors are concerned about the future market of media stocks.
Lu Di said that the rise of the media sector in 2023 is due to the right time, place and people. At present, most of the A-share content sectors, which are most directly related to AI innovation and cultural going overseas, have reached historical highs. In terms of fundamentals, platform-based Internet companies, short videos, and medium video leaders that benefit from AI innovation have lower relative valuations and expectations.
Looking forward to 2024, Lu Di said that the main line of investment may focus on innovation, branding, and supply chain upgrading. In terms of specific directions, it is relatively optimistic about TMT, consumer services, Hong Kong stock Internet and consumption. True growth companies with reasonable valuations can cross bulls and bears and cross styles, which is the focus of attention in 2024 and beyond.
In terms of position selection, Lu Di said that the A-shares near 2,900 points at the current stage, the Hong Kong stocks at the bottom of the history, the implied return of the market is very rich, and the high position will be kept full. In terms of portfolio construction, while maintaining low PB and low PE, we also select stocks with explosive growth and tap alpha.
The following is the full text of the interview:
Fund Q: In 2022, the media sector will rank third from the bottom among the 31 Shenwan first-class industries with a decline of -26.07%, but since the beginning of this year, the media sector has risen ahead of most industries, what are the reasons behind the reversal of the media sector?
Lu Di: Everything is a cycle, risks are rising, opportunities are falling, this year's media sector has risen, and there are factors that are favorable to the time, place and people.
Timeless is a global AIGC technology innovation that began to emerge at the end of 2022, and there are a large number of sub-sectors related to text, images, and videos in the media sector, such as publishing, games, videos, and digital marketing, etc., which are closely related to the innovative application of AIGC, and are affected by AI innovation in different aspects such as data information, production cost, and content quality, and there is the possibility of change.
The geographical advantage can be understood as the recovery of entertainment-related demand after the epidemic, such as film and television theaters, offline tourism, offline cultural and creative product retail, etc., these sub-sectors have been hit the hardest in the past few years, and the overall data is relatively bright in the relatively weak economic environment in 2023.
It can be understood as a gradual breakthrough in cultural going overseas, and this year's short dramas and other themes are more lively, which is behind the continuous promotion of online articles going overseas over the years, and the massive number of users and time of tiktok short video applications accumulated overseas. It is unrealistic for the four famous works, the four books and the five classics to go to sea, and it is not easy to promote them in China, and the dissemination of culture overseas still needs to be down-to-earth, and the content and form of communication that are easy to understand are relatively easy. In the past, American dramas from Hong Kong, Taiwan, Japan and South Korea were popular in China, and now Chinese cool dramas are gradually going to the world, and "Three-Body Problem" is being filmed by Netflix, these are the gradual revival of humanistic culture after the economic strength is strong.
Fund Q: From "Internet +" to "AI+", under the new round of industrial revolution, which segments are more worthy of attention in the future?
Lu Di: From the perspective of the history of scientific and technological development, the industrial revolution and the technological innovation of human society have been improving efficiency and changing the world along the information side and energy measurement. AI+ is essentially the improvement of the efficiency of the information side in scientific and technological innovation, including the generation mode of information, the display mode of information, and the use of information.
If we review the division of labor in the industrial chain in the Internet + era, it is not difficult to find that the industrial chain mainly includes content, channels, and payers. The monetization methods in the Internet+ era mainly revolve around marketing, e-commerce, and games.
This round of AI+ innovation can be understood as superimposing AI+ on the basis of the original Internet model, on the one hand, from content to channels to payers, the relationship between supply and demand, and the industrial pattern may be reshaped. For example, on the content side, user-generated content may range from text, image, and short videos in the Internet era to micro-short dramas, mini games, and even animations in the AI+ era, transforming the market share of the original professional film and television content production companies into a market for individuals or small and micro teams.
On the other hand, AI+ may bring more innovation in monetization methods, such as users using various AI tools to help improve work efficiency, and companies and individuals converting the original work costs into fees paid for data inhalation and acquisition to AI.
These are all segments that will be worth paying attention to in the future.
Fund Jia asked: Will the popular short drama concept this year become a new growth point for media, film and television in the future?
Lu Di: Recently, there have been many hot spots in the field of short videos, including drama games, paid short dramas and short dramas going overseas.
Looking at the essence through the phenomenon, the phenomenon is that the short drama is popular at home and overseas. Behind it corresponds to the replacement of short videos for long videos, and it is also the same human nature, the recognition of good stories and values, which is basically the same across the world.
From the perspective of supply and demand, it can be understood that the short drama market is booming in both supply and demand. On the supply side, the online text platform provides content themes, the crew edits, edits, and produces, and short video apps buy and invest in customer acquisition to form a closed loop, which has profitability and increased supply. The demand side includes short video users, online text users, and long video users. Short dramas are essentially videos of online texts and edited versions of long-form videos, but compared with online texts and long videos, the viewing threshold is lower, and it also saves users' time and is in high demand.
Short dramas are very popular in China, on the one hand, China's developed online text market makes users highly receptive to the setting of brain holes. On the other hand, short video apps themselves carry a huge number of users and viewing time.
For the future development of short dramas, it is expected to present a situation of regulatory norms, scientific and technological blessings, and cultural going overseas. At present, the short drama market is still in the dividend period of regulatory filing, with the popularity of short dramas out of the circle, a large number of participants of all kinds of parties have poured in, and the fish and dragons are mixed.
In the medium and long term, short videos will continue to change the landscape of the video industry. On the one hand, AIGC and consumer electronics hardware innovation have further lowered the threshold and cost of content production. It is reasonable to imagine that in the future, everyone can shoot a simple short video from now to Douyin to make a short drama for everyone to pay to watch, and some online authors can directly convert their works into short dramas at a low cost and charge for the video side. Furthermore, with the improvement of AI-assisted production and translation quality, as well as the strong economic strength of our country, cultural going overseas will also bring many incremental users to the video industry. If content, technology, and production continue to improve, the video industry, as an industry that creates supply and demand, will have new development space and growth points for high-quality content and video platforms.
Fund Q: Looking back one year ago, most people in the market were quite optimistic about the post-epidemic recovery and economic recovery in 2023, but in fact, the magnitude and sustainability of the recovery were weak, how to understand this phenomenon?
Lu Di: I have been researching and observing the consumption and saving behaviors of different user groups and circles. It can be understood as a kind of post-epidemic scar effect, or in layman's terms, a hundred days of broken muscles and bones. After the loss of money, it takes time and hard work to accumulate, and after the vitality of the C-end, B-end and G-end is gradually restored, we believe that production and consumption behavior will gradually normalize.
From the perspective of user group analysis, in recent years, there are two groups that have been greatly impacted, one is the young people who have just entered the society and have relatively shallow life experience, and the other is the first- and second-tier middle-class families, from employment to assets, the risk exposure is relatively large. As far as I understand, for the individual, to the family, to the society in the medium and long term, the return of savings is a healthy and correct choice, young people learn to save, middle-class consumption behavior returns to rationality and cost performance, delayed gratification, and the medium and long-term probability will be rich returns. But it must be admitted that many times what is very right will be painful in a very short period of time, and it can be very uncomfortable, just like exercise, which is difficult and painful at first, but will be very fulfilling and healthy after completion. At this stage, I understand that the difference in short-term data is to accumulate energy for the future recovery and prosperity of healthy and sustainable consumption.
Q: What do you think about the current valuation level and market expectations of the underlying assets?
Lu Di: From the perspective of portfolio management, the pricing of assets often reflects not only fundamentals, but also market expectations and sentiment. For example, many companies that benefit from AI innovation are expected to be valued at a historically high level at this stage under the market's early deduction expectations, and at the same time, their businesses may be disruptively affected by AI in the long run.
For example, if in the future, with the help of tools and AI, everyone is a creator of short drama content, the threshold is lowered, and the supply is greatly expanded, then the original professional crew film and television companies may face more opponents instead of benefiting from the explosion of the industry. Just like the self-media that continues to develop with the emergence of the Internet, in recent years, it has begun to compete with professional media in terms of public influence and user attention span on many occasions.
Therefore, we need to rationally distinguish between emotions and fundamentals. If you evaluate it objectively, look at it from two dimensions.
On the one hand, on the emotional side, most of the A-share content sectors that are most directly related to AI innovation and cultural going overseas have reached historical highs, such as some A-share companies related to film and television content IP;
On the fundamentals, there is a high probability of benefiting from AI innovation, cultural brands going overseas, and at the same time related to economic recovery and consumer demand recovery, such as Internet leaders, short video and Chinese video leaders, domestic sports brands, consumer electronics, etc., these sub-sectors have suffered from performance damage in the early stage, superimposed on the impact of capital flows in the Hong Kong stock market, and the valuation level has been pressed to near the bottom of history.
However, the market has low expectations or even overly pessimistic about the innovation potential of these emerging technology companies that have survived and grown up in a full and cruel competitive environment, as well as the implied growth space and possibilities under the medium- and long-term industrial trend.
On the other hand, from a cross-market perspective, the valuation of Hong Kong stocks TMT and consumer assets is much lower than that of A-shares. In the past year, Hong Kong stocks have fluctuated greatly in a short period of time, apparently due to overseas interest rate hikes and cuts, changes in inflation expectations, capital flows, and short-term changes in fundamentals. However, from the perspective of valuation, the asset prices of many Hong Kong stocks have fallen below the worst of the epidemic, and there are many companies with a 3% discount and a 5% discount year-to-date, while A-share TMT companies with similar fundamentals have risen significantly year-to-date.
In summary, in terms of fundamentals, platform-based Internet companies, short videos, and medium video leaders that have a high probability of benefiting from AI innovation have relatively lower valuations and expectations.
Q: How do you view "thematic investment", and will you choose to "chase the wind" in the process of investment?
Lu Di: Since the beginning of this year, there have been more individual stocks related to thematic investment, and there have been more hot topics related to media and computers. At the end of the year, when we review the gains and losses of portfolio management for the whole year, we are also thinking about the impact of thematic investment on the net value of the portfolio.
I started as an industry researcher, and in the media and computer industries, there have always been a lot of thematic investments, but this year's AI is too dazzling, so you may be more impressed. In general, I prefer fundamental research because the model of fundamental research is explainable, predictable, and replicable.
Thematic investment may be effective in a very short-term time dimension, such as 3 months, half a year, or 1 year, but there is no historical data to verify the effectiveness of medium- and long-term thematic investment in the long-term dimension. Fundamental research, on the other hand, is a long-term market test of effective investment methods.
Or to put it simply, if you find a computer company through fundamental research, under the condition of reasonable valuation, and the revenue and profit will increase by 10 times or even 100 times in the next 3 years, such a company will most likely be a big bull stock in any market, and there are countless cases of such bull stocks in the history of the global stock market.
And if you find a high-valuation company that gathers all the hot spots in the market through the idea of thematic investment, and the revenue and profit will fall by 50% in the next three years, in any market, no matter how many themes the company contains, the stock price of the medium and long-term dimension is likely to fall.
When it comes to investment selection, I don't take the initiative to do thematic investment games, but when we buy a company, the core is that the company itself has value when we buy it, and it has the potential to continue to create value. If the expected returns are realized in advance because of thematic investment, then we may switch to companies with more implied returns, which is our attitude and participation in thematic investment.
Q: What do you think will be the style of the entire A-share market next year?
Lu Di: I think the market style itself is a posteriori, and true growth companies with reasonable valuations can cross the bull and bear and cross the style, and become the focus of the market in 2024 and beyond.
In 2024, the main line of investment may revolve around innovation, branding, and supply chain upgrading, and in the process of promoting social evolution and development, innovative companies, companies with brand moats, and companies with supply chain upgrades are expected to continue to create value and bring returns to shareholders.
Q: Looking forward to 2024, which industries are you relatively optimistic about?
Lu Di: Our investment is more about bottom-up stock selection and top-down portfolio management, and in terms of specific directions, we are relatively optimistic about TMT, consumer services, Hong Kong stocks, Internet and consumption.
Q: What is the layout idea and investment framework for next year?
Lu Di: In terms of market selection of A-shares and Hong Kong stocks, considering the valuation and company quality, combined with the fundamentals, there is a greater possibility of a large proportion of Hong Kong stocks being overweighted. In terms of the selection of subdivisions, technology software and hardware, consumer Internet, the logic of the rise of domestic products, and the logic of brands going overseas.
In terms of portfolio construction, while maintaining low PB and low PE, we also select stocks with explosive growth and tap alpha. In terms of position selection, the A-shares at the current stage of 3,000 points and the Hong Kong stocks at the bottom of the history have very rich hidden returns in the market, and will maintain a high position full of positions.
Produced by | Sohu Finance
Author | Wang Mengting
Operations Editor | Xue Suwen
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