In the first quarter of 2024, Meituan and Kuaishou returned to the top 10 heavy stocks of Qiu Dongrong's funds under management, and stocks with better performance in the range such as SciClone Pharmaceutical, Hunan Gold, and China Hongqiao were increased. Qiu Dongrong wrote in a quarterly report that the domestic economic recovery is layered and gradual. In the context of transformation, debt, geopolitical and other challenges, the economy or market is unstable, and the current equity assets are facing higher uncertainty.
Regarding the recent hot high dividend strategy, Qiu Dongrong also expressed his views. He believes that the high return of the high dividend strategy is likely to come from the superposition of other factors. The long-term returns of a high-dividend strategy are beta and not a low-risk strategy, and the more important thing to invest in is fundamentals and pricing. For the allocation of the market outlook, he said that he will continue to pay attention to opportunities in technology, resources and other subdivisions based on the value investment strategy of low valuation.
Stock positions fell, and Kuaishou and Meituan returned to the top 10 heavy stocks
On April 16, Zhonggeng Fund disclosed the first quarterly report of its products, and the changes in the positions of the five funds managed by Qiu Dongrong surfaced.
As of the end of the fourth quarter of last year, the stock position of Zhonggeng Value Pilot was 92.5%, a slight decline from before, of which Hong Kong Stock Connect stocks accounted for 44.87%. It is worth noting that Kuaishou and Meituan have returned to the top 10 heavy stocks, accounting for 3.94% and 2.84% of the fund's net value, respectively. At the same time, the increase in holdings also includes China Hongqiao, Saiteng shares, Chuanyi shares, COSCO Shipping Energy, etc. During the quarter, China Hongqiao and Meituan rose more, closing up 37.72% and 18.19% respectively.
Zhonggeng small-cap value's equity position was 90.06%, a significant decline from the previous quarter. Among the top 10 heavy stocks, Poly Development and Huagong Technology were added, accounting for 6.02% and 3.14% of the fund's net value respectively. At the same time, there are also Chuanyi shares and Changying Precision. During the quarter, the better performing stocks were Aidi Pharmaceuticals and Huagong Technology, which closed up 28.62% and 13.58% respectively.
The stock position of Zhonggeng Value Smart is 89.61%, and four new "new faces" have been added to the top ten heavy stocks, namely Huatong shares, Runfeng shares, Hunan Gold and Changchun High-tech. The four new heavy stocks accounted for 3.09%, 2.83%, 2.78% and 2.74% of the fund's net value, respectively. During the same period, the increased holdings included Bank of Ningbo and Huafa shares. During the quarter, the better performers were COSCO Shipping Energy and Hunan Gold, which closed up 37.5% and 22.89% respectively.
The stock position of Zhonggeng Value Quality is 93.42%, Meituan has returned to the top 10 heavy stocks, and COSCO SHIPPING Energy has also entered the top 10 heavy stocks, with the two stocks accounting for 2.85% and 2.76% of the fund's net value respectively. During the quarter, the better performers were China Hongqiao, Meituan and SciClone Pharmaceutical, which closed up 37.72%, 18.19% and 15.23% respectively.
The position of Zhonggeng Hong Kong Stock Connect value stocks in closed operation is relatively high, reaching 99.47%, of which the vast majority are Hong Kong Stock Connect stocks. Among the top 10 heavy stocks in the fund, Kuaishou and AAC Technologies have been added. In addition, SciClone Pharmaceutical, China Hongqiao, Leapmotor and Meituan have also increased their holdings. In terms of performance, China Hongqiao, Meituan, SciClone Pharmaceuticals and AAC Technologies rose significantly.
Emphasize that a "high-dividend strategy" is not a low-risk strategy
Qiu Dongrong said in the quarterly report that in the first quarter of 2024, the domestic economic recovery is layered and gradual, and the three aspects that were previously focused on at the macro level are being realized. First, the competitiveness of China's industrial manufacturing is becoming stronger, and the global manufacturing cycle, inventory cycle and capacity building cycle are picking up, especially the resilience and demand space of non-US economies, and China's economy will continue to benefit. Second, the policy is bottom-up and structural, the fiscal is moderately strengthened, the risk points are resolved in an orderly manner, and the contradiction between supply and demand has improved. Third, risks continue to be cleared, balance sheets are slightly repaired, new productivity leads, and consumption and investment confidence are slowly recovering.
In the context of transformation, debt, geopolitical and other challenges, Qiu Dongrong believes that the economy or market is not stable, the current equity assets are facing higher uncertainty, and the pessimistic factor is reflected in higher risk premium compensation. The important thing is to effectively allocate exposure to take risks correctly and obtain excess returns by continuously exploring investment opportunities.
Based on the value investment strategy of low valuation, Qiu Dongrong believes that equity assets are still in a systematic and strategic allocation position. Looking back, the subtraction and addition of economic fundamentals and risks have been done for many years, and the impact weight of real estate and local debt risks has been reduced after years of subtraction. At the same time, the addition of productivity improvement and breaking through the bottleneck is continuing to advance, and results have been achieved in some areas. Not only that, the layout of trade, production capacity, resources and other layouts is increasingly oriented to the world to raise the security threshold.
Regarding the recent popular high-dividend strategy, Qiu Dongrong also expressed his views. He believes that the long-term returns of high-dividend strategies are beta and not low-risk strategies, and that investing is more important about fundamentals and pricing. In his view, the high return of the high-dividend strategy is likely to come from the superposition of other factors, but investors like to continuously strengthen the successful strategy, prefer linear trading, and ignore the continuous accumulation of real risks. In fact, the possibility of cycles, growth, capital supply or innovation can all challenge the stability of high dividends.
Focus on opportunities in technology, resources and other subdivisions
In terms of the fund's investment ideas for the future, Qiu Dongrong pays more attention to these types of opportunities:
The first is technology stocks such as pharmaceutical, Internet stocks and smart electric vehicles with strong business growth attributes and large future space. Specifically, Hong Kong pharmaceutical technology stocks have greater innovation possibilities, gradually have global competitiveness, supply leads demand, huge space, low valuation level, and high return potential; Hong Kong Internet stocks have consumption attributes, taking into account certainty and growth; Hong Kong stocks have huge space for smart electric vehicles, autonomous driving leads the growth inflection point, and the entering companies are clear and globally competitive, waiting for the intensity of competition to be reduced and traditional companies fall behind, with non-linear growth opportunities, and the whole life cycle is currently characterized by low valuation and high expected returns。
The second is the contraction or rigidity of the supply side, and the value stocks with high growth or earnings elasticity, the main industries include resource companies represented by base metals, energy transportation companies, real estate, etc.
Third, there is room for demand growth and cost-effective companies with competitive advantages in supply, and the main industries include machinery, electronics, pharmaceutical manufacturing, power equipment and new energy, agriculture, forestry, animal husbandry and fishery. Specifically, it includes AI-led innovation cycles, where products and applications are about to explode, and the domestic industrial chain is deeply involved, based on the huge population base in China, some segments with certain demand can be explored, industries with continuous losses that lead to a significant reduction in production capacity, and leading companies with unique competitive advantages in the broad manufacturing industry.
Fourth, small and mid-cap growth stocks and value stocks. Qiu Dongrong adheres to three criteria: demand growth, supply contraction, and subdivision of industry leaders, and excavates real low-valuation small-cap growth stocks and small-cap value stocks from the bottom up, such as electronics, machinery, pharmaceutical manufacturing, power equipment and new energy, agriculture, forestry, animal husbandry and fishery, auto parts, etc.
Editor-in-charge: Wang Lulu
Proofreading: Gao Yuan