GF Fund Li Chen: The key to success is to be steady and use thin water to outline the value trajectory

"The general who can really fight has no battle to fight, because he has done a good job of defense and preparation, others know that he is very strong, and he does not want to fight with him at all, and he has reached a state of victory without a fight."

This is the concept that Li Chen, fund manager of the value investment department of GF Fund, agreed with when studying "Sun Tzu's Art of War". As an investor with 21 years of experience, she naturally extends this to investment management. "The same is true for investing, you have to make sure that the portfolio as a whole does not take big risks, and then create the conditions for yourself to win." That is, the key to winning is robustness. ”

Li Chen, Fund Manager of GF Fund Value Investment Department

Therefore, before each investment decision, Li Chen will first consider the risk, under the premise of controllable risk, and then do long-term layout, and strive to obtain excess returns. At the same time, she is good at thinking and summarizing, facing every change in the market with an open mind, and constantly improving and iterating on her investment system.

Wind statistics show that Li Chen has managed GF Consumer Goods Select A since February 23, 2016, and as of July 20 this year, her cumulative return on her tenure is 172.61%, the annualized return is 20.36%, and the increase beyond the performance benchmark of the range is 99.21%.

Go through 4 cycle tests and pay attention to risk control

As an early investor, Li Chen has experienced multiple rounds of bull-bear cycle conversion in A-shares. Among them, in the second year of the management portfolio, she encountered a once-in-a-century global financial crisis, and the sharp fluctuations in the market made her have a deep understanding of risk, so she paid special attention to the risk control and long-term returns of the portfolio.

In June 2007, Li Chen embarked on an investment position during the bull market and became a public fund manager. At that time, the domestic economy was still in the stage of extensive growth, and the resource products closely related to the economic growth rate, such as chemical, petroleum, steel, coal and other cyclical industries, were the "stars" of the market. Their common feature is that the performance and profitability are elastic, and the growth rate reaches 1 or even several times.

This makes cyclical products become the object of capital competition, and Li Chen has also joined in, with a lot of flexible cycle plates. Thanks to this, in the market rising stage, Li Chen's performance is extremely eye-catching. However, in 2008, the financial crisis and tsunami swept the world, and the global capital market suddenly turned bearish, including A shares.

"Every day the opening falls, pessimistic market sentiment pervades everywhere", the impact of this risk outbreak on the portfolio, so that Li Chen left a deep experience of paying attention to risk. Since then, she has experienced a bear market in 2011, a large volatility under deleveraging in 2015, and a bear market in 2018.

In the face of the sharp fluctuations in the market, she made a deep reflection in the torment, realizing that investment is a systematic project, and it is necessary to build a systematic and comprehensive investment framework. Looking back on these years, Li Chen said with emotion: "After several cycles of reincarnation, I have put risk prevention in the first place from the bottom of my heart. ”

In February 2016, Li Chen took over the management of GF Consumer Goods Selection, focusing on drawdown control, measuring and assessing risk from the dimensions of liquidity, fundamentals and valuation. Before each investment decision, she first considers the risk exposure of the portfolio. Years of tempering in the market have also cultivated Li Chen's keen intuition about risk.

In her view, there are three types of risks that must be paid attention to: first, the decline in the return on assets caused by the macroeconomic downturn, which is a systemic risk that no one can resist, and the risk must be controlled by adjusting the stock position; the second is that the industry itself is cyclical, and when the industry reaches the fundamental inflection point and the operational inflection point, it must be avoided in time; the third is that when there is a major risk at the company's operating level, it must know how to sell in a timely manner.

Falling into the portfolio management, Li Chen attaches importance to fundamental research, one is the study of macroeconomics, maintain a high degree of attention, the second is in the allocation of the target, not only pay attention to its profit growth rate and growth quality, but also pay attention to the degree of matching with the valuation, even if the company grows faster, but the valuation has exceeded the intrinsic value of the enterprise, Li Chen will dynamically adjust the position.

Reverse layout adhere to long-termism

"Someone once asked me, there are two kinds of life in the world, which one will you choose, one is a big rise, may fall, the other is smooth and stable, I do not hesitate to choose the latter." 」 Li Chen mentioned in the exchange that the investment philosophy of a fund manager is often closely related to her experience, growth, knowledge accumulation and values.

"My analysis of my personality traits, values, and perception of things determines that I am more suitable as a quiet contrarian investor." Li Chen said that she has an independent personality since she was a child, her thinking mode is reversed, and she does not like to gather people. Staying in a quiet environment, she will be very calm inside.

This personality trait is also reflected in her portfolio management. She believes that herd mentality is an important factor affecting trading behavior, and she prefers to look for long-term investment opportunities from a contrarian perspective. "I will remain cautious about market hotspots. Instead, I'll spend my energy researching sectors that aren't as high a market focus. ”

"I do more is the left side of the reverse investment, many heavy stocks have a holding cycle of several years, the turnover rate is relatively low." Li Chen said that she has analyzed the excess return of the portfolio, on the one hand, from the value return benefit brought by value discovery, on the other hand, the return brought by the long-term growth of high-quality enterprises.

Years of practical experience have given Li Chen a clear understanding of his style. "I'm not a transactional player, nor am I a trend investor." Li Chen pointed out that no matter how good a company is, it is inevitable that it will experience stock price fluctuations, and her strategy is to select good companies through in-depth fundamental research and obtain excess returns through long-term holding.

As of the end of September 2020, 6 heavy stocks had more than 9 quarters of holding period, and 12 heavy stocks with a holding period of not less than 4 quarters, of which 10 exceeded the increase of the industry index and 11 exceeded the increase of the performance benchmark.

Standing at the moment, Li Chen believes that there are still many opportunities for long-term reverse layout. "With the transformation of the economic structure, the proportion of related industries such as consumption and technology in GDP has continued to increase. The fluctuation of the industry cycle is reduced, and fund managers can find some high-quality enterprises with relatively high profit quality and sustained and stable profitability. ”

With the big picture in mind, moving forward in evolution

Insiders commented that Li Chen is a person who likes to think independently and constantly seeks progress, and in the past 12 years, she has continuously corrected and evolved her investment framework. "My investment framework is evolving, starting from the bottom up, and then I started to study macro, combining top-down and bottom-up, with a greater focus on long-term quality companies. ”

In the past two years, the market has continued to stage a pattern of "strong and strong", which Li Chen believes is different from the industry rotation and average reversion in the past decade. On the one hand, the cyclical fluctuations of the macro economy are reduced, and the industries that are in line with economic transformation and upgrading have broad development space for a long time, for example, consumption upgrading, scientific and technological progress, advanced manufacturing, etc. all belong to this category; on the other hand, in recent years, the structure, aesthetic preferences, valuation standards, etc. of A-share investors have undergone some changes, and for assets with sustained and stable growth, funds are willing to give a certain valuation premium.

Based on this, Li Chen began to include new tracks in the investment and research framework under the change of industrial pattern, such as CXO, medical beauty and new energy automobile industry chain. "The original investment framework is a very effective investment method in the stable industry competition pattern or mature industry, but investment opportunities in emerging industries will continue to emerge." If you follow the original investment framework, you may miss these companies. ”

Emerging growth companies are beginning to incorporate her portfolio. "I divide the position into two categories, one is the core position, which has long held high-quality companies in stable growth industries. Another type of small position, I will try to invest in some companies that can see the prospects clearly and can see the rapid growth of the industry. For emerging growth companies, she said, there will be a slight relaxation of valuation constraints.

Since entering the fund industry in 2002, Li Chen has gone through 18 years and managed public funds for more than 12 years. As an experienced investor, Li Chen still maintains an open mind and maintains a passion for learning new things and new industries. "The barriers for investors are accumulated with time. I would like to make an update to the investment framework in the hope that the opportunity will be better seized. ”

（CIS）