Optimistic about this kind of investment opportunities in 2024!

Reporter Zhang Yingguo and intern Huang Biying

Towards the end of the first quarter, the 2023 annual report of the public fund is intensively disclosed. As long-distance runners who have experienced market ups and downs, the veterans of CEIBS Fund believe that the market adjustment in 2023 provides a more suitable layout opportunity for stocks with real investment value.

Zhou Weiwen, a veteran of CEIBS Fund, said in CEIBS' new blue-chip annual report that the valuation of stocks and bonds also has a relative advantage in terms of price-performance ratio, so 2024 may be an opportunity to invest in long-term valuable stocks. For Cao Mingchang, a veteran of the "deep value investment school", the number of stocks with low valuations is still near the highest peak in history, which shows that the A-share market is in a low-level area from a bottom-up perspective and has greater investment value.

Cao Mingchang: The A-share market is in the bottom area and remains optimistic about the market performance in 2024 and beyond

In the past two years, the A-share market has undergone a deep adjustment, and the dividend style has prevailed. Cao Mingchang, a veteran of the "deep value investment faction" of CEIBS, has always adhered to low-valuation value investment, once again demonstrated good investment tenacity, and achieved relatively good excess returns. As of the end of 2023, the Shanghai Composite Index has fallen by 14.34% in the past three years, and the yield of CEIBS Potential Value Allocation managed by Cao Mingchang has been 15.29% in the past three years, which is 21.74 percentage points higher than the performance benchmark.

Looking back at 2023, from the perspective of industries, TMT and artificial intelligence-related sectors such as communications, media, computers, and electronics will be among the top gainers. In this regard, Cao Mingchang believes in the annual report that in the long run, we are optimistic about the application prospects and growth of new technologies such as artificial intelligence and virtual reality, but it is difficult to fully reflect the performance in the short term. The actual market performance of TMT is indeed relatively short-lived, after a sharp rise in the first half of the year, there was a relatively large adjustment in the second half of the year.

Looking ahead to 2024, from a bottom-up perspective of individual stocks, there is no shortage of investment opportunities in the market for undervalued individual stocks. Cao Mingchang pointed out that at the end of 2023, there were more than 1,500 companies with PE (TTM) valuations below 30 times, the same as at the end of 2022, and about 900 companies with PE (TTM) valuations below 20 times, slightly fewer than at the end of 2022. The number of undervalued stocks is still near the highest peak in history, which shows that the A-share market is in a low-level area from a bottom-up perspective, and has great investment value.

He said that in general, the current market valuation is in the historically low area, while the macroeconomic fundamentals and corporate performance are developing in the direction of expected improvement, although the market may fluctuate again in the short term, but as the famous investment predecessors said, the market is a voting machine in the short term, but it is a weighing machine in the long term, and eventually it will return to the fundamentals, and we remain optimistic about the performance of the capital market throughout 2024 and beyond.

From the perspective of industry investment opportunities, Cao Mingchang said in the CEIBS Value Discovery Annual Report that the portfolio will maintain a high position at the end of 2023, and will make some structural adjustments according to the macroeconomic environment, changes in the industry and relative changes in the valuation of individual stocks. We continue to be optimistic about the manufacturing industry chain such as automobiles and some consumption-related industries, and continue to be optimistic about and hold some related targets in the real estate industry chain, while maintaining attention to the very undervalued large finance and other large-cap value-related stocks and choosing opportunities to increase allocation.

Zhou Weiwen: 2024 is a good time to invest in long-term valuable stocks Optimistic about two types of investment opportunities

For Zhou Weiwen, a veteran of CEIBS who has been in the industry for nearly 25 years, 2023 will be a challenging year for active fund management. Reviewing last year's operation, Zhou Weiwen pointed out in the new blue-chip annual report of CEIBS that although the aquaculture industry has been bottoming out longer than expected, we believe that the high point of this cycle may come in the next one or two years, so we have maintained a high proportion of positions in the aquaculture industry. Considering the differentiation that will occur between the various sub-sectors of the new energy sector, the stocks in the photovoltaic sector have been significantly reduced. At the same time, the allocation of gold with safe-haven attributes, the chemical and machinery industries and artificial intelligence-related industrial chains that are in the low range of the cycle and have reasonable valuations will be added.

The veteran and the new generation of partners also bring more diversified investment perspectives to the fund portfolio. As the co-manager of CEIBS New Blue Chips, Feng Ludan started from the main line of technology investment that had a good market growth last year, seized the opportunity in the investment in the artificial intelligence and digital economy sectors and cashed in at a high level, which made a positive contribution to the net value of the fund.

Looking ahead, Zhou Weiwen also sees a positive side to the real estate and export data that the market is worried about. He said that in the long run, China's urbanization rate still has room to improve, residents still have to improve the demand, steady state, the real estate demand area is not much different from the forecast data in 2024, and the real estate industry continues to adjust little. In terms of exports, affected by the downward pressure on global economic growth, the exports of most countries are under pressure, but the structure of China's export destinations is constantly improving, which is also a support for exports. In addition, we expect that policies to support economic development will continue to be introduced, which will contribute to economic stability.

Overall, Zhou Weiwen believes that from the perspective of market valuation, the valuation of the index represented by the CSI 300 has a certain attractiveness, and the valuation of stocks and bonds also has a relative advantage in terms of cost performance, so 2024 may be an opportunity to invest in long-term valuable stocks.

Specific to the direction of investment, Zhou Weiwen said that he is optimistic about two types of opportunities, one is the excellent companies with long-term value but the short-term performance trend is frustrated by the industry prosperity, mainly in two aspects: 1) the export share can continue to increase the obvious global competitiveness of the manufacturing industry, 2) the industry profitability is low, the next 2-3 years of profit elasticity of the industry. The other category is some excellent companies in emerging industries that can continue to grow. For example, companies in the intelligent driving, artificial intelligence and robotics industries have growth opportunities in the future.

Wang Jian: The market is at the end of the bear market, focusing on the overseas export capacity of the manufacturing industry

As a fund manager at the helm of the long-distance endurance base, Wang Jian is also an investment veteran with more than 20 years of experience, specializing in the GARP (Growth at a Reasonable Price) strategy of investing in low-valuation growth stocks.

Wang Jian said in the CEIBS New Power Annual Report that the market has experienced the longest downward adjustment in the past decade, and is basically at the end of the bear market, with the market's expectations for the future economy relatively conservative and the valuation in the historically low area.

Looking forward to 2024, she believes that the domestic economy is at the low level of the inventory cycle on the basis of downward adjustment for more than two years, but the overall domestic demand is relatively weak, and the growth rate of corporate earnings is expected to show an inflection point. It is expected that policies to stabilize the economy will be introduced one after another, which will boost market confidence, and the emergence of an inflection point in corporate earnings will further support the market. At present, the A-share market is in a state of volatility due to the lack of confidence in the economic recovery and the large adjustment.

At the specific operational level, Wang Jian said that he will continue to carry out structural stock selection in accordance with the principle of matching enterprise valuation and growth, and the main directions include: first, enterprises that can continue to expand overseas markets, mainly relying on the output capacity of China's manufacturing industry; second, from the medium and long-term dimension, enterprises with the ability to achieve domestic substitution of imports at the end of parts or materials; third, the pharmaceutical industry with rigid demand in domestic demand.