On August 17th, Lin Peng, Chairman and General Manager of Harmony Huiyi, attended the live broadcast event held by Guotai Junan and Securities Firm China, and shared hot topics such as investment philosophy and current A-share investment strategy.
Lin Peng believes that investing in the Chinese market can not only focus on low valuation, but also consider problems in the direction of growth. In terms of investment direction, China's manufacturing industry strong Hengqiang is a long-term general trend, will still be its key configuration, new energy vehicles pay attention to emerging parts and components investment opportunities, some sub-sectors in the consumer industry, the pharmaceutical industry in the field of innovative drugs may have huge investment opportunities.
Lin Peng, 23 years of experience in the securities industry, 10 years of investment experience, is currently the chairman and general manager of Shanghai Harmony Huiyi Asset Management Co., Ltd., and was the deputy general manager of Dongfanghong Asset Management and the general manager of the public equity investment department. In 2017, he was the champion fund manager of the public fund, and the products and teams he managed since his career have won heavyweight awards such as Taurus Fund for many times.
Key takeaways:
1. At the level of core values, we will continue to adhere to it, hoping to accompany the best enterprises in China to grow together.
2, to invest in the Chinese market, you can not only focus on low valuation, but also must consider the problem in the direction of growth.
3, China's manufacturing industry strong Hengqiang is a general trend, we will still focus on the investment in manufacturing industry.
4. Some emerging industries have shown the characteristics of manufacturing, and it is likely to follow the successful experience of China's manufacturing industry in the past, making China's catch-up in the fields of innovative drugs, new energy vehicles, intelligent car automatic driving, artificial intelligence and other technologies, and the latecomers have become the most powerful countries in the world.
5, the market is very keen on the new energy vehicle battery related fields, I personally think that the need to be cautious, may not be as large as imagined in the future space.
6. In the field of innovative drugs, there may be huge investment opportunities, similar to medical services and CXO in the past few years.
7, in the consumer industry, there are valuation and company fundamentals are at the relative bottom of some sub-sectors, such as dairy, instant noodles, etc.; there are also in the period of rapid development, but there is still a lot of room for development of the industry, such as sporting goods, these industries will have good opportunities.
8, the overall degree of differentiation of the market is almost the highest in history, which means that in those snubbed corners, there may be good investment opportunities, but also we must strive to seize the opportunity.
Summary of live text transcript:
Q: You once quoted Soros as saying: A portfolio is my body. The portfolio you manage has been internalized as part of your body, so be sure to invest comfortably. What is a comfortable investment?
Lin Peng: From the perspective of building a portfolio, 1/3 of the stocks are the most cost-effective, 1/3 of the stocks are slightly better than the market average, and 1/3 are potential varieties, which will make me feel more comfortable. In addition, if the listed companies in the portfolio are in the process of increasing competitiveness and in a better state of operation, it will also be in a very good state.
For ordinary individual investors, I do not recommend investing a large proportion of personal assets in equity assets, although in good market conditions, this may indeed lead to a very high return on investment. Individual investors can choose some products of stable style fund managers, which can be regarded as being in a relatively good investment state, and it is more helpful to maintain and increase the value of personal assets.
Q: You left Dongfanghong last year and founded Harmony Huiyi, can you introduce the current investment team and investment framework, and what are the similarities and differences between the investment framework and the past?
Lin Peng: At the level of core values, we will continue to adhere to it, and there will be no change. Our core value is to accompany the best companies in China to grow together. What we propose is "accompaniment", not "buying", "buying" means choosing opportunities, always thinking about when to sell, and "companionship" means that if the company can have very good prospects for development and continue to improve, as long as the valuation is reasonable, we will not consider selling, with the goal of holding for as long as possible.
The challenge for me to reorganize an investment research team is: First, whether we can find enough investment research team members who meet our values and ability requirements. More importantly, whether team members can continue to think independently and have the courage to challenge common sense. These two challenges were things I had long considered during my time in founding Harmony One. At present, our investment research team is composed of more than 20 very good investment managers and researchers, and the two major challenges mentioned above have been greatly alleviated, and the investment research team is also running very well.
My main investment philosophy and framework have not changed much, and I am still in the process of continuous evolution since I entered the industry in 1998, and I believe that I can still absorb some new investment methods, investment ideas and business models that are important for investment knowledge. But I'm talking about evolution, not revolution in the way investment is done. Although the market often undergoes very big changes, there will be unimaginable investment scenarios for a period of time, in fact, the evolution of China's securities market is in the same rhythm as overseas mature markets, but we are gradually moving closer to the investment model of overseas mature markets.
Of course, in some aspects, such as some advanced manufacturing, China's advantages in these industries are very prominent. Therefore, investment and research in these industries may already have the ability to lead the world. But in general, our approach to investing in mature markets is convergent and developing together. I believe that value investment based on the slight growth of value in the Chinese market will remain the most robust and reliable investment method for a long time.
Q: Do you see yourself as more value-oriented or more growth-oriented? Is this style relevant to the contrarian investment philosophy you have advocated in the past?
Lin Peng: I think I am still more value-oriented, of course, in the Chinese market, I think we should not use the pure value investment method of overseas markets to invest.
Many so-called value investments in overseas markets refer to purely undervalued investment methods, and a large proportion of them are invested in industries and companies with very low valuations but not much growth. I think such an investment method is not advisable in the Chinese market, our own GDP growth rate is 5 to 6%, there is also a certain inflation rate, the nominal growth rate of the entire economic economy is at the level of 8 to 9%. This means that our requirements for good companies should be maintained at a growth rate of more than 15%. Double-digit growth is already a growth stock investment in overseas markets, so we can't just focus on low valuations, we must also consider the problem in the direction of growth.
Q: At this point in time, which industries do you think are more significant in the next? Or where are the investment opportunities in the next stage of A-shares?
Lin Peng: Manufacturing is an area that I have been good at since I started my career. China's manufacturing industry from the initial textile, and then the industrial structure upgraded to the terminal such as household appliances, and then gradually to consumer electronics, construction machinery, automobiles and other industries continue to shift, which reflects the general trend of China's economic structural upgrading.
In terms of investment, we follow such economic trends and look for the best performing companies in the trend. Therefore, in the process of more than 20 years in my industry, I am more confident about the manufacturing company to grasp. In addition, our team has now established a strong pharmaceutical and consumer research force, and our confidence in investing in these areas has increased significantly compared to the original.
In the first half of the year, China's economy experienced some fluctuations, such as a sharp increase in exports, a sharp rise in the price of bulk raw materials and so on. In the process, everyone first developed a very optimistic mood about the overall economy, and then there was concern about whether the midstream would suffer a lot of losses in the process of rising raw material prices. In my opinion, these are all short-term factors, and in the long run, we still have to grasp several major trends:
One big trend is Hengqiang, the strongest in China's manufacturing industry. Although China's manufacturing industry is also facing a situation of rising costs and reducing the number of available labor, with the advantages of our overall industrial chain and the scale of the huge single market, manufacturing will still be the most competitive field in China in the next few decades, and no other country or region in the world can undertake the transfer of China's manufacturing industry.
There are some industries that we do not want to do ourselves may flow abroad, as long as we are willing to upgrade our own industries, even some very traditional manufacturing industries, there is also space. China's manufacturing industry is still in the process of being strong and strong, so our investment in manufacturing will still be allocated as a key point.
In addition, in some emerging industries, such as the research and development of innovative drugs in medicine, to a certain extent, it also shows the characteristics of the manufacturing industry, and it is likely to follow the successful experience of China's manufacturing industry in the past, making China's latecomer catch-up in the field of innovative drugs, new energy vehicles, intelligent car automatic driving, artificial intelligence and other technologies.
Q: There are several very prosperous industries, such as new energy, semiconductors, cyclical products, etc., where do you think the investment opportunities are? How is the point in time configured now?
Lin Peng: Our research on these industries is based on a very long time span, and we hope that our investment in these industries is based on its real and credible performance and continuous improvement in the future, rather than speculating on the theme and chasing hot spots. We want to find companies that are truly competitive in these areas and that will deliver tangible returns to shareholders in the future.
Specific to various industries, through our research, in the field of consumer electronics, we are still optimistic about products based on emerging consumer electronics, and the opportunities brought by future technological upgrades to Chinese consumer electronics suppliers. In the field of autonomous driving technology based on new energy vehicles and new energy vehicles, we are also very optimistic in the medium and long term, but we will have different views on the very mainstream views in the market now, such as the enthusiasm for batteries and battery-related upstream industries.
We will compare new energy vehicles to the smartphone industry 10 years ago, and the two are very similar. At that time, a very large number of participants entered, and eventually formed a competitive pattern of Apple, Samsung and domestic Huawei, Xiaomi, OPPO and VIVO. 10 years ago, it was unpredictable, but the relatively certain investment opportunities came from some parts industry brought by smartphones. Through the review of the smartphone industry over the past 10 years, we believe that it can also be used as an analogy to the new energy vehicle industry.
Now the market is very keen on battery-related areas, I personally think that we need to be cautious, maybe the future space is not as large as imagined. On the contrary, the market attention is not so high, such as the opportunity of some emerging parts brought by smart cars, and it is possible to give birth to a number of parts suppliers for smart cars, and these companies may have very good performance. It should be noted that it does not necessarily come from existing auto parts suppliers, it is possible that consumer electronics companies are now cutting into the supply of auto parts, which will bring great changes to the original industry pattern.
In addition, in the pharmaceutical industry, the CXO sector and the medical service sector have performed very well in the past two years, bringing high returns to investors. On the contrary, because of the concerns about the collection and competition of innovative drugs, the stock prices of some excellent companies in the innovative drug sector have not performed satisfactorily in the past two years, and some have even fallen sharply this year. For these areas that others have snubbed, we will study its industrial competitiveness, whether there is a cognitive bias in it, and look for investment opportunities from it. In fact, we feel that there may be huge investment opportunities in the field of innovative drugs, similar to the medical services and CXO in the past few years.
In addition, in the consumer industry, not all consumer companies have performed so well in the past few years like liquor, and there are also some sub-sectors where valuation and company fundamentals are at the relative bottom, such as dairy, instant noodles, etc.; there are also industries that are in a period of rapid development, but there is still a lot of room for development, such as sporting goods.
On the whole, the whole market seems to have experienced considerable gains in the past two years, and the stock prices of many companies may have been overdrawn, but there are more or less opportunities in the subdivision industry, and the stock price differentiation of the overall market is very large, and this differentiation has almost reached the highest in history. This means that in those corner that are left out in the cold, there may be better investment opportunities, which is also an opportunity that we should strive to seize.
Q: Does your investment logic reflect more of a reverse thinking?
Lin Peng: We have always had the courage to challenge the mistakes in the market consensus. Market consensus is not always correct, and market consensus often makes mistakes. If in the process of challenging the market consensus, we finally prove that our judgment is correct and the market is wrong, the investment opportunities in this may be very large. Because such opportunities often exist in the cognitive bias of the market, it generally brings relatively low attention and valuation to the stock.
Investing in these areas, we call defensive counterattacks. Defense is that even if there is no particularly good situation, we will not lose a lot of money, and once these places that we judge are different from the market view, and are found and reflected by the market, this counterattack may bring a good contribution to the combination.
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![Beauty star: Lin Peng[fig]](data:image/gif;base64,R0lGODlhAQABAIAAAP///wAAACwAAAAAAQABAAACAkQBADs=)