Public Offering China Research Group | Cheryl
编辑、统筹 | Jamie
制作 | Jessica
Qiu Dongrong has a very high starting point, when he debuted, he created twice the performance in the past four years in HSBC Jinxin, and then joined Zhonggeng Fund in 2018 with the momentum of the champion, he single-handedly supported the scale of 10 billion yuan, which is the mainstay of Zhonggeng.
Yau's core philosophy is a "low valuation strategy", and his products are particularly outstanding in bear markets. In the 2021-2022 market style change stage, he continued to outperform the market, but since then, he has faced a sharp drawdown of funds and a continuous shrinkage of the management scale.
Qiu Dongrong's ten years, how to evaluate it?
The opposite
After three and a half years of management, the two funds have been unmatched by successive fund managers with returns of 193.86% and 111.85% respectively, and have won 15 awards for Yau Dongrong, making him famous in the capital market. Among them, HSBC Jinxin Large Cap A, as of Yau Dongrong's resignation in April 2018, ranked first among 36 similar common equity products.
In May 2018, Qiu Dongrong jumped to Zhonggeng Fund as deputy general manager and chief investment officer, with the latest scale of 19.854 billion yuan, in charge of nearly 80% of the scale of Zhonggeng Fund of 25.044 billion yuan, and in 2023, he will become a shareholder holding more than 5% of the shares, which is a veritable "helmsman" of Zhonggeng.
After joining Zhonggeng, Qiu Dongrong has successively issued 5 funds, including the independently managed Zhonggeng Value Pilot, Zhonggeng Small Cap Value, Zhonggeng Value Quality One-year Holding, Zhonggeng Hong Kong Stock Connect Value 18-month Closed, and Zhonggeng Value Co-managed with Wu Chenggen Smart and Flexible Allocation.
Zhonggeng Fund is not large, with only 6 funds under it, except for Zhonggeng Value Pioneer, the remaining 5 funds Qiu Dongrong participated. As of April 15, 2024, except for the negative value performance of Zhonggeng Hong Kong Stock Connect in the closed period, the remaining 4 funds have a return of between 38.32% and 110.51%, and are generally in the upper reaches of the same category.
Yau's core philosophy is a low valuation strategy, which is a road off the beaten track, which also means using anti-common sense thinking to play with market expectations.
At the end of 2018, Qiu Dongrong overweighted equity assets at the low valuation of A-shares, and slightly reduced the risk of position control when the market rose in 2019; Traditional undervalued sectors such as insurance are buying against the trend, and Hong Kong stocks will be at the bottom of the world in 2023, and Yau believes that there are investment opportunities with excellent risk-return ratios.
The investment direction that runs counter to the mainstream of the market made Qiu Dongrong underperform the index in the structural bull market in 2019-2020 and missed the opportunity to explode in the national fund tide, but in the 2021-2022 market style transformation stage, the annual return of the fund managed by Qiu Dongrong remained between -3.15% and 65.15%, and the drawdown was basically controlled within 20%, which was still strong when a group of star fund managers "collapsed".
Zhonggeng value piloted, with returns of 29.62% and 26.67% in 2019 and 2020, which were not as good as the CSI 300 index, but in 2021 and 2022, when the CSI 300 index retraced, the returns were positive, 31.94% and 4.85% respectively.
Until 2023, Qiu Dongrong's "independent market" is not independent: only the value of Zhonggeng small-cap of the 5 funds under management has risen slightly by 0.93%, and the rest are green across the board, with a total loss of about 690 million in 2023. Qiu Dongrong said frankly: "In the context of transformation, debt, geopolitical and other challenges, the economy or market is not stable, and the current equity assets are facing higher uncertainty. ”
However, he believes that the pessimistic factor is reflected in the compensation of higher risk premiums, and equity assets have a strong right-biased distribution characteristics at this time, and are the most risk-worthy assets. In addition, we maintain a high position in equity assets and actively buy low-valuation growth stocks.
So, what is a low-valuation growth stock that meets Yau's criteria? It starts with the PB-ROE framework he has practiced for 10 years.
Valuation, Growth, Risk
Qiu Dongrong once revealed his stock selection criteria: at the same time, he met the three conditions of low fundamental risk, low valuation, and sustainable high growth. This shows that Qiu Dongrong is different from traditional value investors, focusing more on the growth of ROE, rather than simply pursuing low PB.
Zhonggeng Value leads the top ten heavy stocks in Q1 2024, and the PB of China Hongqiao, Luye Pharmaceutical, China Overseas Land and Yuexiu Real Estate is less than 1, and it is not surprising to enter Qiu Dongrong's heavy position.
It is worth noting that Saiteng shares, which have a PB of 6.21 times, have entered the second place in heavy positions. Further analysis found that the company expects the net profit attributable to the parent company to increase by 105.22% to 134.53% year-on-year in 2023, and the sales scale and gross profit margin of some products have increased.
Extending the coordinate system of time can restore a more complete PB-ROE investment system.
The public offering China research team focused on Qiu Dongrong's four representative stocks, and tried to clarify Qiu Dongrong's cognitive boundaries on valuation, risk and growth from the bands of chasing China Hongqiao, killing China National Offshore Oil, stepping on Lei Sunshine City and Meituan.
Increasing positions on dips and reducing holdings on dips is the background color of low-valuation value investment. In 2021, China Hongqiao's share price fell from its high, PB also slipped to 0.75, Qiu Dongrong bought and gradually increased his position, and then, China Hongqiao ranked first in Qiu Dongrong's portfolio for a long time. Since January 2024, with the rapid development of the non-ferrous market, the share price of China Hongqiao has rebounded, and Qiu Dongrong has taken advantage of the situation to cash out.
When the valuation is no longer cheap, it is safe to leave the market decisively, even if you look back and find that you have sold big bull stocks. Since the purchase in Q4 of 2021, CNOOC has long entered the top 10 heavy stocks of Zhonggeng Value Pilot and Zhonggeng Value Quality, but in Q2 of 2023, it has encountered "one-click clearance". During the holding period, CNOOC's share price doubled, and after the clearance, it rose by more than 80%.
In the process of pursuing low valuation, Qiu Dongrong also fell into the value trap. In Q2 of 2020, based on the judgment of "real estate risk reduction, ROE is sustainable, and the valuation is extremely low, and the implied expected return is high", Zhonggeng Value Pilot and Zhonggeng Small Cap Value built a large position in Sunshine City, and then suffered a unilateral decline, and Zhonggeng Value Pilot still held it until Q4 2021 before selling. At the end of December of that year, Sunshine City thundered, which can be said to have completely experienced this round of plunge.
In the face of volatile markets, Qiu Dongrong will also change hands frequently with ups and downs, and the highlight of recent years - the swing operation of Meituan is a typical case. In Q1 of 2022, Qiu Dongrong bought Meituan for the first time, that is, he bought the first holding stock of Zhonggeng Value Pilot, and at that time, Meituan's share price once fell below HK$100 per share. In the third quarter, Meituan's stock price adjusted and reduced its holdings, and it was almost liquidated by the end of the fourth quarter. Someone once estimated that in 2022, his Zhonggeng Value Pilot earned nearly 200 million on Meituan.
Qiu Dongrong, who tasted the sweetness, bought Meituan again in Q1 of 2023, but since then, Meituan's share price has fallen all the way, from HK$130 per share in the first quarter to HK$74 per share in the fourth quarter. However, from the first quarter report of 2024, Meituan is still among the top ten heavy stocks of Zhonggeng Value Pilot, Zhonggeng Value Quality 1-year holding, and Zhonggeng Hong Kong Stock Connect Value 18-month closed 3 funds, with a total position of 46,000 lots, and further swing operations are not ruled out.
The confrontation with market perception is a process of extreme pulling, and ten-year veterans often lose. However, thanks to the risk diversification of positions, Qiu Dongrong's compound rate of return is generally stable, and investors have a better experience.
The darling of the establishment that has fallen out of favor
When he was still managing HSBC Jinxin Dual-Core Strategy A, Qiu Dongrong was known as the "darling of institutions" with the highest institutional holding ratio of 94.1%, and this institution's sought after physique also continued to Zhonggeng Value Pilot and Zhonggeng Small Cap Value, and the institutional holding ratio of the two funds remained above 50% for a long time. The outstanding performance in the 2021-2022 bear market has also attracted many retail investors to follow, and after the 18-month closed issuance of the value of Zhonggeng Hong Kong Stock Connect in Q1 2023, Qiu Dongrong's management scale was once as high as 32.013 billion.
In addition, over the years, Qiu Dongrong's management fee rate of 1.5% has led his peers, and he will earn 278 million management fees for Zhonggeng in 2023, which also reflects Qiu Dongrong's confidence and self-confidence.
However, in the face of consecutive falling results, investors naturally voted with their feet. In 2023, Qiu Dongrong's 4 funds will rise by 0.94%, -0.31%, -3.84%, and -5.69% respectively, although they still outperform the -11.38% of the CSI 300 and the -14.1% of the active equity base, but they obviously cannot convince institutions that value investment returns, as well as individual investors who come to them because of historical returns. In 2023, Qiu Dongrong will be reduced by all parties, and the proportion of Zhonggeng Value Pilot and Zhonggeng small-cap value institutions will both fall below 50%, and the "darling of institutions" will fall out of favor.
In February 2024, 4 funds hit a record high drawdown of more than 30%, and Hong Kong stocks with heavy positions continued to fall, and they failed again in the latest quarterly report. In Q1 2024, Qiu Dongrong's management scale has shrunk by nearly 40%.
In terms of management fees, since Q3 2023, the management fees of the early 4 funds have been reduced to 1.2%, and the newly established Zhonggeng Hong Kong Stock Connect Value 18-month closed has been reduced from 0.25% to 0.2%.
After the halo faded, undervalued value investors returned to the judgment seat. Qiu Dongrong, who wrote "The mountains and rivers are not without a road, and the willows will eventually bloom again", is now facing the problem of where the road is and when the flowers will bloom, waiting for answers.
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