In recent years, investors have become more cautious about equity investments. In the midst of market corrections, the once dense valuation bubble may have gradually dissipated, but in the midst of volatility and divergence, it is the time for the value of high-quality assets to be revealed.
A-share investment may have entered the value investment range
Loss aversion will make investors naturally reject the market correction, especially in the past two years, the adjustment received by A-shares has exceeded the historical average in terms of time and space. However, the risks and opportunities of investment are often like coins, and in the midst of fluctuations and downturns, multiple risks are gradually dissipating, and A-shares may have entered the appropriate range for value investment.
Comparing the valuation quantiles of the broad-based index of the world's major equity markets, the Shanghai Composite Index and the CSI 300 Index are both in the lower range, and the cost performance of investing in A-shares is more prominent.
Global Major Equity Indices P/E Quantile of Recent 10 Years (%)
Data source: Wind Information, statistical period: 2014.4.17-2024.4.16
Observing 31 Shenwan first-class industry indexes, a total of 28 industry indexes have price-earnings ratios below the 1/2 percentile in the past ten years, accounting for more than 90%.
Shenwan first-class industry index price-earnings ratio quantile in the past 10 years (%)
Data source: Wind Information, statistical period: 2014.4.17-2024.4.16
The P/E ratio of Wind All A Index and the risk premium of the 10-year Treasury bond yield (ratio method) are at the 99.80% quantile in the past 10 years, and based on the data of the past 20 years, whenever the risk premium reaches the 80% quantile or above of the 10-year distribution, it often means that the market is at the bottom and the opportunity is significantly increased.
Wind All A Index in the past 10 years and the quantile of risk premium
Data source: Wind Information, statistical period: 2014.4.18-2024.4.17
A comprehensive comparison of a number of important data shows that the valuation of A-shares has become more attractive, and in the long-term perspective, domestic equity assets may usher in a suitable allocation period.
The market investment style may be returning to value investing
When the valuation of the market and industry is at a significantly low level, investors' enthusiasm for mining low-valued high-quality targets is rising. With the advancement of time, the market has ushered in a deep adjustment, and the investment pattern and style may be quietly evolving.
Zou Xinjin
Executive Director of Guolianan Equity Investment Department▼
In recent years, the ecology of the A-share market has undergone profound changes:
First, the degree of institutionalization is increasing. This means that institutions have more and more say in the A-share market, and the A-share investment style is gradually moving closer to value investment.
Secondly, many industries deduce the pattern of the strong and strong of the leading companies, and the industry leaders have become the investment targets favored by funds;
Finally, with the tightening of supervision, the speculation of theme stocks has cooled down.
As the market gradually returns to normal, the market will also return to reasonable valuation levels and reflect the macroeconomic recovery.
The long-term endurance is outstanding, and the balanced value strategy has strong adaptability in a volatile market
The macro economy is in the transition between the old and new momentum, and the style switch is also increasing the volatility of the market, and many investors still maintain a wait-and-see attitude towards the current equity investment.
Looking back at Zou Xinjin's investment history, it can be found that his investment philosophy may have a higher adaptability to the volatile market, showing a relatively strong endurance in the market storms. In the past 14 years of fund investment, he has adhered to a steady and non-drifting investment style, not chasing hot spots or following trends, and insisting on value selection in low-valuation areas.
Undervalued value investing based on fundamentals
Judging from the Guolianan Value Preferred Stock (006138) managed by Zou Xinjin, the PE (price-earnings ratio) of Guolianan Value Preferred has always been lower than the average of its peers, and since 2021, the PE of the shareholding has decreased to less than 12 times. Even in the structural market of 2019-2020, when similar products have raised valuations, the valuation of positions has not changed significantly.
Changes in the PE of Guolianan Value Preferred Stocks
Changes in ROE of Guolianan Value Preferred Stocks
Data source: Wind Information, fund regular report, as of 2023.6.30. The secondary class refers to the Wind Information Common Equity Fund.
On the other hand, the ROE of Guolianan Value Preferred Stocks is above the 65th percentile of the equity market most of the time. Zou Xinjin's investment idea of "value investment that attaches importance to cost performance" has been reflected.
Long-term holdings, flexible adjustment of extreme markets
Since 2019, the annualized turnover rate of Guolianan Value Optimization has been significantly lower than the average of the same category, and the overall trend has been declining year by year since its tenure. At the same time, the "absolute return" thinking allows Zou Xinjin to flexibly adjust his positions and reduce product drawdown in extreme markets.
Annualized turnover rate of Guolianan Value Preferred Stocks (%)
Changes in Guolianan's value-preferred stock position
Data source: Wind Information, fund regular report, as of 2023.6.30, the secondary similar refers to Wind Information ordinary equity fund.
Strive for sustainable excess returns
Zou Xinjin has always focused on the long-term steady rise in the net value of the product, creating a sustainable, low drawdown, and long-term high return on investment products. By minimizing portfolio volatility and controlling product drawdowns, the Guolianan Value Select Stocks under management have demonstrated strong excess return ability in past investments.
Performance Review:
Guolianan Value Preferred Stock was established on September 20, 2018, and the previous fund manager is Zou Xinjin (2018.9.20-present), the fund has returned 74.39% (annualized return of 11.10%) since its establishment, and the performance benchmark for the same period is 9.03% (annualized 1.65%), the fund's 2019-2023 annual return and performance benchmark: 40.65%/29.43%, 39.02%/22.61%, 1.72%/-3.12%, - 5.89%/-16.86%, -4.34%/-8.40%, performance comparison benchmark: CSI 300 Index yield * 80% + SSE Treasury Bond Index yield * 20%.
Guolianan Small Cap Select Mix was established on April 12, 2004, and has served as fund managers Yuan Bonan (2004.4.12-2004.9.18), Zhang Xuejun (2004.7.6-2006.11.16), Wang Yi (2006.3.18-2007.11.28), Wu Renhao (2006.12.21-2007.9.4), Wu Peng (2007.9.4-2010.3.16), Zou Xinjin (2010.3.6-present). The fund's net value has increased by 183.30% (annualized return of 10.97%) over the last 10 years, compared to 60.11% (annualized return of 4.82%) over the same period. The fund's 2019-2023 annual return and performance benchmarks: 32.40%/18.38%, 39.21%/16.78%, 7.32%/10.20%, -8.77%/-10.92%, -1.51%/-1.25%, performance benchmark: (Tianxiang Small Cap Index * 60% + Tianxiang Mid-Cap Index * 40%) * 60% + SSE Treasury Bond Index * 40%.
The above data is as of 2023.12.31. Data source: Wind Information, regular report of the fund, and the performance is reviewed by the custodian bank.
"Able to resist the fall and afford to rise", no matter how the characteristics of the market evolve, can firmly approach the absolute return target - this may be the meaning of Zou Xinjin's insistence on value balanced investment.
After five years, the veteran will take command and make another effort
At a time when China's A-shares are highlighting the cost performance of investment, Zou Xinjin is the proposed fund manager's new fund Guolianan Value Selection Blend (019430) is being issued. The new fund will, as always, implement Zou Xinjin's cost-effective-oriented value investment rules, attack in a balanced manner, and select sectors and individual stocks with outstanding cost performance.
In a complex and volatile market, there may not be a perfect investment strategy, but a "suitable strategy" that matches the characteristics of the market can often point to a more certain direction.
At present, the domestic equity market may usher in a better allocation opportunity, but in the future, the A-share pattern may continue to fluctuate and move forward with the market characteristics of shock and differentiation. At this moment, it may be more appropriate to invest around the concept of balanced value, which may help us share the dividends brought by the return of equity recovery valuation, and also diversify risks through diversified allocation, so as to make the investment path more stable.
Product risk level: Guolianan Value Selection Mixed Securities Investment Fund, Guolian Anderson Small Cap Select Securities Investment Fund, Guolianan Value Preferred Equity Securities Investment Fund risk level is R3 (medium risk), this risk level is only the evaluation result of the fund manager, and the evaluation results of the fund distribution agency are not necessarily consistent with the fund manager.
Risk Warning:
Funds are risky and should be invested with caution. This material is promotional material and is not intended as any legal document. The information provided in this material is based on or from sources believed to be reliable, is for informational purposes only and does not constitute material advice to investors. The fund manager undertakes to manage and use the fund assets in an honest, trustworthy, diligent and conscientious manner, but does not guarantee that the funds under its management will be profitable, nor does it guarantee a minimum return. The performance of other funds managed by the fund manager does not constitute a guarantee of the performance of a particular fund. The Fund will invest in the underlying stocks of the Hong Kong Stock Connect and will be subject to the risks of large fluctuations in the stock price of the Hong Kong stock market, exchange rate risks, risks that may arise from inconsistencies in trading days under the Stock Connect mechanism, and risks in overseas markets. The registration of a fund by the CSRC does not mean that the CSRC makes a substantive judgment, recommendation or guarantee of the risks and returns of the fund. Mainland fund products have been in operation for a relatively short period of time and do not reflect all stages of market development. For details of the fund, please carefully read the fund's prospectus, fund contract, fund product key facts statement and other legal documents. The fund manager reminds investors that the "buyer bears" principle for fund investment, and that after making any investment decisions, the investment risks caused by changes in the operation status of the fund and the net value of the fund shall be borne by the investors. Fund managers, fund custodians, fund distribution agencies and related institutions do not make any promises or guarantees for the investment returns of the fund. This product is issued and managed by Guolianan Fund Management Co., Ltd., and the agency does not assume the responsibility for the investment, redemption and risk management of the product.