Image source: Visual China
Recently, there has been quite a dramatic scene in the A-share market. The first product managed by the former secretary of the board of directors of listed Haixing Power after switching to a public fund was liquidated, as the green-themed fund fell by nearly 55% in more than two years since he was a fund manager, while the share price of his old club rose 207% during the period. The scene that happened in the most growing sector of the Chinese market reflects the treacherous development of the new energy market and highlights the complex situation in which investors are located.
In a market with turbulent undercurrents, the investment logic of a linear narrative is clearly no longer applicable. As Hong Hao, partner and chief economist of Sirui Group, said at the Fortune Innovation Forum in March this year: "China's stock market is particularly difficult to do, and it can be said that it is counterintuitive. In a normal market, when the productivity of a certain area is far ahead, we will definitely make money in that field, but now we think that we should be able to make money from some of the major industries that promote economic development, such as electric vehicles and new energy industries, China is far ahead, but the problem is that the more China leads, the more likely it is to be sanctioned or restricted by other regions. ”
In fact, not only is it difficult for A-shares to do, but the global market has entered a stage of dense dangers. In the case of the Japanese stock market, the brightest star of Asia's capital markets, the Nikkei rose 20% in the first quarter of this year after surging 30% last year, the largest quarterly gain, and this record was set at the time when the Bank of Japan announced the exit of both YCC (yield curve control) and negative interest rates (which would normally cause the stock market to fall when the central bank raised interest rates). Can Japanese stocks still "get on the bus"? It is difficult for investors not to get entangled.
On April 10, the inflation data released by the United States exceeded expectations for three consecutive months, pushing the yen to plummet against the dollar by about 150 points, reaching the lowest level in 34 years at 153.23, which is also recognized by industry insiders as a level that may trigger the intervention of Japanese policymakers. It is yet another reminder to global investors that they are in unprecedented depths, willingly or not.
"King Ning" passed by Buffett
Returning to China's new energy industry, in the midst of the chill, it is worth noting that the industry leader CATL has brought rare warmth.
In the "encirclement and suppression" of sharp fluctuations in raw material prices and sluggish consumer demand, many companies in the new energy industry chain are deeply in losses, but CATL's annual revenue in 2023 will exceed 400 billion yuan for the first time, and its net profit will exceed 40 billion yuan for the first time. What's even more surprising is that in 2023, when the price war continues to escalate, CATL's gross profit margin will continue to increase. The same price reduction seems to be a fire and ice for the head enterprises and second- and third-tier enterprises, or because the head enterprises have scale advantages and premium capabilities, the cost reduction can exceed the price reduction, and the gross profit margin is higher.
Another factor that cannot be ignored is that the pace of leading enterprises going overseas is faster, and overseas markets with higher gross profit margins can even "feed" the domestic market. At the same time, the risk of policy restrictions described by Hong Hao also casts a shadow over the overseas expansion of such companies. Partly as a result, "even though these highly productive industries produce amazing economic results, they are still the worst performing sectors in the Chinese market." On the contrary, companies that represent the 'old economy' are doing better in the market, such as PetroChina and China Shenhua. Hong Hao said.
However, CATL announced at the same time as the release of the annual report that it intends to pay a dividend of 22 billion yuan, with a total dividend amount of nearly half of the total net profit, setting a record since the company's listing, and is expected to break the cycle of "investing in new energy is not as good as investing in old energy" from the perspective of return on investment. At the same time, the "Ningwang", which has made great progress in the past 10 years, has significantly increased the dividend ratio, which means that its capital investment will slow down - the slowdown of industry leaders and the pace of capacity expansion may also be a sign that the involution of the new energy industry is nearing the end. The strong rebound in the new energy sector in March partly reflects this expectation of the market.
In fact, the choice between betting on new energy or "old energy" is not easy for investors. In the momentum of new energy breakthrough, Warren Buffett has always been a supporter of "old energy". Berkshire Hathaway has been adding to "old energy" in recent quarters, with only two of the top 10 holdings in the fourth quarter of last year being Chevron and Occidental Petroleum, which are now fifth and sixth respectively in Berkshire's top 10 holdings. Warren Buffett is always looking for companies with long-term stable demand, stable cash flows, reasonable valuations, and strong moats, which the "old energy" industry often provides.
Warren Buffett's "stubbornness" is well known, in addition to the heavy position of "old energy", it is also manifested in the respect for technology stocks. Even after buying Apple in 2016 and increasing its holdings to the top spot, he insisted that "Apple is a consumer goods company that uses technology, and it belongs in the consumer goods industry," lest people think his attitude towards technology stocks has changed. So it's no surprise that in his letter to shareholders this year, there is almost nothing related to artificial intelligence, the only protagonist in the tech industry today. It's just that the $167.6 billion in cash on Berkshire's account is compared with what Buffett said in the past that he would "put most of his net assets into stocks", and his helplessness is also obvious - outside of technology stocks, it is too difficult to find targets that meet his investment logic and size requirements.
From this point of view, Buffett's layout of "old energy" may also be a choice made in desperation. In other words, as the anchor point of global energy and economic transformation, the investment value of the new energy industry is self-evident, but the transition between new and old energy is destined to be tortuous and long - Buffett, who passed by "King Ning" at this moment, may have an intersection in the near future.
Soaring Japanese stocks and unavoidable headwinds
Compared with investing in energy stocks, Buffett's bets on Japanese stocks are more concerned. In his letter to shareholders, he revealed that since he invested in Japan's five major trading companies in August 2020, the floating profit has reached 61%, or 8 billion US dollars (about 57.6 billion yuan), by the end of 2023.
Japanese stocks have risen like a rainbow since last year, which makes people have to admire Buffett's old spiciness. Recently, Berkshire has officially applied for the issuance of yen senior notes, which has sparked speculation that it will further increase its position in Japanese stocks. However, after the Bank of Japan raised interest rates, investors also divided their views on the Japanese market, with one view that although the Japanese economy is emerging from deflation, its GDP was surpassed by Germany last year, indicating that the economic recovery is still on shaky grounds, and ending negative interest rates could raise borrowing costs for companies and hinder economic recovery, which will weigh on the stock market, and another view that ending negative interest rates is a sign of a solid recovery in the Japanese economy and therefore positive for the stock market.
"For now, in this turbulent world, Japan has become the most stable economic fortress. But in fact, it took a long time for Japan to reorganize, and if China took three years to complete something, the Japanese might have taken 20 years. Jesper Koll, director of Okinawa Institute of Science and Technology Graduate University, shared another perspective at the forum, pointing out that Warren Buffett was surprised by the efficiency of Japanese companies when he went to invest in Japan a few years ago, and that Japan now has two new driving forces.
First, the Japanese government is no longer stubbornly conservative in its prudent fiscal policy, and second, half of Japan's private companies are valued below their book value, and last year the Tokyo Stock Exchange issued a rule that put listed companies below book value at risk of being delisted, pushing them to unlock value through share buybacks and optimized capital allocation. "There is currently more cash flow on the balance sheets of Japanese companies than Japan's GDP, and even if these cash flows are halved, the return of Japanese stocks measured in ROE should double, which means that the Nikkei could reach 60,000 points, which is where it is going from now. ”
But Japanese companies also face headwinds, especially those expanding overseas. "One of the big reasons for Japanese companies to expand overseas is that Japan is aging, and one of the challenges of going overseas is whether Japanese companies overseas will be taken over, for example, with national security issues, as is happening with U.S. Steel. Jesper said.
Nippon Steel announced in December that it planned to buy U.S. Steel. On March 14, U.S. President Joe Biden expressed opposition to the acquisition, in response to which Nippon Steel issued a statement the next day, saying that the company was "determined to stay the course and complete the deal" and that it would "strengthen the U.S. economic defense against China." During Fumio Kishida's visit to the United States, according to US media reports, the US Department of Justice has launched an extended antitrust investigation into the acquisition, adding another legal obstacle to the completion of the transaction.
Considering that the United States and Japan are strategic allies, it is difficult to avoid such confrontations, which shows that geopolitical conflict has become the biggest headwind facing all investors at the moment. Jesper said bluntly: "The United States and China are both big markets for Japan, and when these two partners become more unstable or unpredictable, what can Japan do? If we don't take steps ahead of time to deploy our assets more effectively, we'll be caught in the middle of a conflict between China and the United States. Like the rest of Asia, we all wonder, why do we have to be forced to choose between the two?"
On a related note, CATL recently responded to overseas market issues, including the cooperation with General Motors, saying that the most important thing to deal with overseas uncertainty is customer recognition, and if the company's products, innovation, and reliability can help customers' products differentiate themselves in the market, the business relationship will last longer than other factors. "It takes 8-10 years for a business relationship to go from fixed-point to mass production to long-term cooperation. Overseas cooperation needs to be carried out in accordance with local laws and regulations, and more and more people appreciate the company's solutions, and we are not trying to find a way to snatch away all other people's things, but to share our good things with others. ”
It is worth mentioning that the macro uncertainty, led by geopolitical conflicts, has also been fully reflected in the non-linear logically explainable surge in gold prices this year. Perhaps, in the "non-linear" staggered world, when the "low-hanging fruit" is picked, "8-10 years" is the timeline that all investors must anchor. (Fortune Chinese Network)
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