What is it like to manage a fund for 10 years? Du Meng, investment director of Shanghai Investment Morgan: Equity investment is to invest in the excellent industries and companies of the times

Since its establishment on July 13, 2011, Du Meng, investment director of Shanghai Investment Morgan, has been managing the emerging power of Shanghai Investment Morgan for ten years. Wind data shows that as of August 4, the yield of Shanghai Investment Morgan Emerging Power reached 654.7%.

Recently, the Financial Associated Press talked to the investment veteran. As a fund manager who has been deeply engaged in investment for many years, Du Meng has also gone through several rounds of bulls and bears, and when asked about the unique secrets in investment, he said: "The investment philosophy has not changed much. Our long-term excess earnings come primarily from excellent companies. Investing is a long-term behavior that can span a year, three, five or even more. Adhere to the long-term value and take a long-term view, in order to develop more dividends for A-shares. ”

When looking back on the changes in the capital market in the past ten years, he sighed that the changes in the past decade are quite large. "We clearly felt the change in development in 2018. Before that, everyone was in a state of anxiety a lot of times, and big ups and downs often happened. Since 2019, A-shares have shifted from a transactional market to a allocation market, and more and more funds have begun to allocate A-share assets as long-term assets. In the next five to ten years, the equity market may become one of the most attractive large-scale assets in China. ”

"Changes in the market mean that there is less and less trading speculation and more emphasis on the long-term allocation of investments. For investment, it will pay more attention to fundamentals, and the company will invest in more and more important, rather than judging the style of the market. Du Meng stressed.

The Financial Associated Press sorted out some of Du Meng's investment "golden sentences":

Equity investment is more about investing in excellent industries and listed companies in this era.

In terms of strategy choice, if it cannot be implemented at the company level in the end, then all strategies are empty talk.

Good companies all have one trait in common, which is focus. We have researched a large number of excellent companies, and their common point is to focus on what they are good at, continuously improve their market share, expand production and increase income, and always insist on doing this one thing.

Equity investing is actually investing in the future. If a business wants to get a higher valuation, it must prove itself with growth.

The tech industry is a major track of the future, especially the hard tech track. We feel that the development of science and technology and the development of high-end manufacturing are more in line with the needs of social and economic development.

Invest in Hong Kong stocks, not because the Hong Kong market is undervalued, and then buy them, but because there are many high-quality investment targets in Hong Kong that can be used as a supplement to A-share investment.

Any investor should keep learning and keep a young mindset.

The following is a transcript of some of the interviews between the Financial Associated Press and Du Meng:

This year, more emphasis is placed on matching valuations with performance growth

Financial Associated Press: What is the difference between this year's investment environment and the past two years?

Du Meng: In the past two years, I have summed up that the whole society has repriced the equity market, in the past, A shares were basically used as a trading object, especially before 2018, the market came, everyone participated, the market was weak, everyone left.

But from 2019 onwards, the market began to shift and change. After 2019, the allocation of the A-share market by the whole society is to allocate it as an important and long-term asset. In the process, you can see that almost all of the core assets have risen well in the past two years.

This may end this year and begin to enter a phase of focusing on matching valuation and performance growth. Companies that can get more room for performance expansion will be more favored. Some traditional areas may not be very good, but in some high-boom tracks, there is still more room for growth in the long run.

So we feel that if we look back at the current stage, it is more important to see who can continue to grow at a relative height in the future. Most of the valuations of core assets are on the high side, and if you want to rationalize the valuation, you must use growth to prove yourself. If you can't prove yourself with growth, some companies may have a downturn.

This is a major change to be aware of in investing this year.

Financial Associated Press: Because the recent growth of new energy and photovoltaics is also very good, can the logic of new energy in the second half of the year continue? In addition to new energy, do you have any other tracks that you are more optimistic about?

Du Meng: From the perspective of the industry, it is still optimistic about consumption, medicine, and technology, which is a long-term optimistic direction, but there are also companies with expensive valuations in this large industry, and the focus is on growth to match the valuation.

The electric vehicle industry is very optimistic about us, which we mentioned a long time ago. The new energy vehicle sector has risen amazingly so far this year, but we are still optimistic about this industry. At the same time, we do not think that new energy is the theme investment, there are very good companies in this industry, some companies are more expensive, but the growth rate is also very high, and these companies are very competitive in all aspects, far ahead of competitors.

It is difficult to find such an excellent industry in China's emerging industries, and photovoltaics are also the same, but it is not to say that it is only one year. The trend in the second half of the year, I think it is difficult to judge. The trend of the market or some technical data changes in the industry may affect the trend of the plate, but the short-term downward adjustment does not affect our 3-5 years long-term layout view.

The tech industry is a major track of the future, especially the hard tech track. We feel that the development of science and technology and the development of high-end manufacturing are more in line with the needs of social and economic development. Related industries, including new energy, Internet, semiconductors, and Huawei's industrial chain, are the focus of our attention in the next three years. In addition, we are also optimistic about consumption and medicine.

Financial Associated Press: What do you think about cyclical stocks, is there a relatively optimistic cyclical sector in investment?

Du Meng: We can see a phenomenon that in the past 5 years, the beta and amplitude of cyclical stocks have become more and more convergent. The price of many cyclical products has risen, but the corresponding stocks have risen less and less. From the perspective of long-term investment, if it is a pure cycle, it cannot contribute to long-term production growth, and the future fluctuation range will continue to converge.

Some of the cyclical stocks we are focusing on now, although they are in the cyclical industry or the traditional industry, these companies are constantly expanding their production capacity, enhancing their core competitiveness, or constantly innovating to expand their business, these companies are assets that we feel can invest in.

Investing in Hong Kong stocks is a target of scarcity

Financial Associated Press: And what do you think of Hong Kong stock investment? Is there a difference between the focus of A-share investment and A-share investment?

Du Meng: It is indeed difficult to invest in Hong Kong stocks, and historical data also show that it is difficult for Hong Kong stocks to obtain strong excess returns. On the one hand, because it is an offshore market, there is no local capital; on the other hand, Hong Kong stocks are also affected by many factors, from this point of view, the capital side of the Hong Kong stock market is neither as good as A-shares, nor as good as US stocks. But the advantage of Hong Kong stocks is that the response to fundamentals is relatively direct.

The very important role of Hong Kong stocks for domestic investment is that it has a good supplement to A shares. For example, almost all good Internet companies choose to list in Hong Kong, some good consumer companies, and some better biomedical companies are good choices for us to invest.

Therefore, the main focus of our investment in Hong Kong stocks is those targets that A-shares do not have, to make up for our entire investment chain in a standardized manner. We feel that investing in Hong Kong stocks, not because the Hong Kong market is undervalued, and then buying them, this should not be the main problem of investing in Hong Kong stocks, but because there are things that Hong Kong stocks have that are attractive to us, specifically those scarce targets.

Although short-term policies put market sentiment under pressure, in the long run, the Internet industry represented by Hong Kong stocks still has a strong growth elasticity, and we are confident in the future of the Internet industry.

It is not expected that there will be overall systemic risks in A-shares in the second half of the year

Financial Associated Press: There is uncertainty in the global environment, what will be the main risk points in the future?

Du Meng: Concerns about tighter liquidity have always been one of the most concerned issues. However, from a domestic point of view, we have just experienced a comprehensive reduction in the RRR, so domestic liquidity is still in a relatively loose environment. From an overseas perspective, based on the current global macroeconomic status quo, we believe that central banks will be relatively cautious in the short term to take action to tighten liquidity. On the inflation side, we did not observe the transmission of PPI to CPI, and the recent performance of agricultural prices hedged the risk of rising industrial prices.

Therefore, I think that the overall market, especially the A-share market, is not expected to have any risks in the overall market in the second half of the year.

The so-called core assets are now at record highs, but there are still a large number of stocks in the market, and valuations are below the median valuation in history. And this year's overall profitability of the enterprise may be much better than the market forecast, we believe that this year's good growth itself can solve the problem, at most it is the problem of market structure differentiation.

The main risk this year comes from buying the wrong stock, not the market in which you are investing. Last year you just need to buy a leading company, you may have a good income, and this year if you don't have a brain to buy a leading company, it may not be suitable.

Equity investment is more about investing in excellent industries and listed companies in this era

Financial Associated Press: It has been 10 years since the emerging power of Investment Morgan, after many rounds of bull and bear markets, has there been any evolution or any change in your investment philosophy and stock selection?

Du Meng: After so many years in the industry, I feel that I have adhered to the investment concept and made breakthroughs at the same time. I always believe that equity investment is more about investing in the excellent industries and listed companies in this era. In terms of strategy choice, if it cannot be implemented at the company level in the end, then all strategies are empty talk.

The creation of excess returns in my portfolio comes from holding high-quality listed companies, conforming to the development of the times, looking for high-quality enterprises in the boom industry, and contributing excess returns to the portfolio through continuous growth of performance, which I have always insisted on.

From the experience of the past 10 years, these major gains of mine do come from the growing performance of these high-quality listed companies. In the future, I still hope to be able to pick assets that can be held for a long time, make money for holders for a long time, and when making investments, I also hope to see at least what kind of state the industry will be invested in in the next three years.

In addition, keeping an open mind and insisting on constantly learning new things is what I think a qualified investor must have.

Finally, if anything, I now have less concentration of individual assets in my portfolio than before. I hope to be able to keep the concentration of the industry within a moderate range, so that the volatility of the combination will also decrease. Reduce portfolio volatility while striving to thicken excess returns so that investors feel better. Simply put, I'm now more willing to do something long-term than a short-term investment.

This article originated from the Financial Associated Press