Use the original intention and evolution to write the "three key words" of long-termism to know Li Wei of GF Fund

The term "ten years as a day" comes from the "Fifty Rhymes of the Birthday of Han Pingyuan on the Daizhao Temple", which refers to the long and unswerving engagement of the same thing, and is often used to describe someone's perseverance in doing things. We often have a heartfelt respect for those who do one thing "for ten years", because it requires great enthusiasm, lasting endurance, and a high sense of responsibility. These valuable qualities are the footnotes of GF Fund Li Wei's ten-year public investment road.

According to china merchants securities statistics, as of August 31, 2021, a total of 34 fund managers in the market have managed the same actively managed equity fund (including common stock, partial stock hybrid, balanced hybrid and flexible allocation) for 9 years or more. Of these fund managers, only four have tenure annualized returns of more than 20 percent, and Li Wei ranks second with an annualized return of 21.7 percent.

But in the field of investment, it seems that it cannot be completely "ten years a day".

On the one hand, there is a lot of uncertainty in this industry, from macro to meso and even micro environment, all the time is in change, no year of the market and history are completely repeated; on the other hand, asset management is a highly competitive industry, such as sailing against the current, if you do not advance, you will retreat. Therefore, for Li Wei, the ten years of perseverance still need continuous progress and evolution in order to keep moving forward.

Since September 2011, Li Wei has been working in the public fund investment position for ten years. From single to diverse, from focusing on corporate growth to focusing on certainty, Li Wei has explored and continued to evolve in the past decade, and has written an excellent report card in the river of time. According to the statistics of China Merchants Securities, as of August 31, the cumulative yield of GF Manufacturing under the management of Li Wei reached 607.7%; the yield of the past year, the past three years, the past five years and the past eight years ranked in the top 15% of similar funds.

The cumulative return of more than 607% in ten years is the report card presented by Li Wei to fund holders, which explains the answer of the fund manager's "how to insist on asset management in the long decade and do it well". For Li Wei himself, the past decade has been his journey to enlightenment about the nature of investing, as he says, "Investing is a practice that ultimately helps you become a better version of yourself, not just a job." ”

Today, we may wish to use three key words to understand and review Li Wei's decade from different perspectives, and at the same time try to glimpse what kind of future he sees from the changes in manufacturing.

Keyword 1: Value Original Long-termism

In Li Wei's ten-year investment history, long-termism is a key word, and its connotation becomes richer with the deepening of his understanding of the essence of investment.

In 2005, Li Wei, a university graduate from Beijing University, joined the self-operated department of GF Securities as an industry researcher, responsible for the pharmaceutical and communications industry. In 2008, he was promoted to investment manager and began managing accounts with absolute returns in mind. In 2010, Li Wei joined the equity investment department of GF Fund. In September of the following year, the management of the Guangfa manufacturing industry was selected, and one tube was ten years.

In 2011, the state launched a strategic emerging industry policy, "mass entrepreneurship, mass innovation" has become the trend of social development, nature of new technologies, emerging things Li Wei, focusing on information technology, new materials, high-end equipment, energy conservation and environmental protection, new energy and other high-growth tracks, built a more comprehensive growth investment framework.

Just as the market style always rotates, Li Wei's growth stock investment road is not smooth. From the second half of 2015 to 2018, the technology growth stocks represented by TMT were in the stage of shock downward movement and digestion of valuations. Even when fund managers select the best companies in the industry, the portfolio doesn't perform as well as it should.

In this context, Li Wei summarized and reflected on his investment methodology. "In the early years of growth stock investment, the dimension of the enterprise was relatively single, mainly looking at the growth of the enterprise in the next three years, and the research on the development trend of the industry, the competitive pattern of the industry, the business model, the profit quality of the enterprise and other factors was not thorough enough."

Li Wei reflected and found that the prediction of corporate growth reflects the expectation of the future and has great uncertainty. If you give it too high a weight in the investment, once the judgment is wrong, it will often bring greater fluctuations to the portfolio. In continuous and in-depth thinking and reflection, Li Wei's understanding of the connotation of the long-term value of enterprises has gradually become comprehensive.

"The macroeconomy, industry and company have their own development cycles, and the dimensions of assessing corporate value are more diverse. In addition to looking at profit growth in the next few years, it is also necessary to evaluate the industry change trend, industry cycle, business model, competitive landscape, growth stability, etc., which will affect the long-term value of the enterprise. Along this direction, Li Wei optimized and iterated on his investment system.

At the same time, he further realized: "The value of an enterprise is composed of two aspects: one is the ability of the enterprise to create value on its own; the other is the return that the enterprise can provide to shareholders." Only companies that truly have long-term space and can create value on their own can provide sustainable returns to shareholders. In the subsequent practice, Li Wei concluded that starting from the long-term space, business model and management, the long-term value judgment of the enterprise will be more accurate.

First of all, industries with large long-term development space can produce companies with large market capitalization, and the space of an industry depends on whether it is in line with the trend of technological progress and whether it can improve the efficiency of the whole society and the welfare of the public. Second, companies with good business models and light assets are often able to grasp pricing power. Third, whether the company does well or not essentially depends on whether the management has done something valuable to society in the right way.

For good companies with long-term value, Li Wei will buy at the right price and hold it for a long time. From the perspective of historical positions, many of Li Wei's stocks have a holding period of two or three years, and some stocks have been held for more than five years, which has also become another footnote to his long-term doctrine.

Keyword 2: balanced and flexible, calm

Just as in the long-distance running to maintain a proper rhythm to run farther, in the three rounds of bull and bear cycle training, Li Wei continues to grow and refine, and slowly formed his own unique style. Unlike fund managers who focus on one or two tracks or bottom-up stock selection, he will work on multiple prongs in terms of position management, industry allocation, individual stock selection, etc., and the portfolio presents a "balanced and flexible" style.

For example, Li Wei adheres to long-termism, adopts a balanced growth allocation strategy, and rarely chooses the time. Judging from the historical industry configuration selected by GF Manufacturing, the plate with the highest allocation ratio is the midstream manufacturing plate or the TMT plate, and most of the sub-sectors with key configurations are electronics, power equipment, national defense and military industry, machinery, automobiles, etc. From the perspective of concentration, the industry configuration is moderately scattered, and the allocation ratio of a single industry rarely exceeds 20 points.

However, rarely choosing a time does not mean that Li Wei does not choose the time. When he anticipates that the market may be at systemic risk, he dynamically adjusts the position. "Although there are more long-term opportunities for A shares, the volatility will be greater when encountering extreme situations. I will adjust my position according to the comprehensive judgment of the macro economy, market valuation level, industry policy and market sentiment, etc., in order to improve long-term yields. ”

Most of the time, compared with stock position management, Li Wei prefers to conform to the cycle through industry and individual stock selection. In terms of industry configuration, he mainly selects several industries with good long-term space and business model and higher cost performance from the perspective of industry prosperity, changing trends, industrial policies, technological progress and industry valuation.

At the same time, Li Wei will make certain dynamic adjustments to the proportion of combined position industries, and will also rotate between subdivided industries. "The industry rotation or increase or decrease is equipped with two very important dimensions, one is valuation, and the other is prosperity. When an industry's prosperity begins to weaken or valuations are high, I consider taking the initiative to reduce the allocation ratio. Li Wei said.

At the individual stock level, Li Wei will also disperse the selection of good companies, and the proportion of active purchase of single stocks generally does not exceed 5%. At the same time, he will divide stocks into four categories: stable returns, cyclicals, stable growth, and high growth. When building portfolios, consider the market performance of these different types of stocks and assets.

As a veteran who has been working in the investment front line for ten years, while grasping offensive opportunities, Li Wei also always maintains vigilance against risks and pays attention to defense. "To leave redundancy for risks, including anticipating risks in advance, dealing with risks, and how to stop losses when risks occur, are called redundancies for possible risks." Li Wei believes that to leave redundancy for possible risks is to admit that there are deficiencies in cognition and prepare for potential risks or fluctuations.

The sage Lao Tzu youyun: "Knowing is not dead." "It means knowing how to stop at the right time and not encounter danger." Li Wei also has a profound understanding of this. In his opinion, those teams that come to the end often do a good job of defense first, and then consider the problem of attack. When investing, sometimes defending is more important than offense.

Keyword 3: keep pace with the times, deep ploughing and manufacturing

Unlike other players with better long-term returns, Li Wei's longest-serving product, Guangfa Manufacturing Select, is an industry-themed fund focusing on manufacturing.

GF Manufacturing's selected equity assets account for 60-95% of the fund's assets; among them, the proportion of investment in the stocks of listed companies in the manufacturing industry is not less than 80% of the fund's stock assets. The manufacturing industries defined by the fund mainly include five Shenwan first-level industries such as electrical equipment, electronics, national defense and military industry, machinery and equipment, and automobiles, and two Shenwan second-level industries such as computer equipment and communication equipment.

In the process of long-term focus on investment in manufacturing, Li Wei clearly felt the context of the development of the times.

"China is a big manufacturing country, there are more subdivisions of industries, but the overall follows the path from demand stimulation to supply creation, from downstream to upstream, from simple to difficult to develop, through the accumulation of capital, the introduction of talents to slowly promote the development of the industry." At present, China has become the only manufacturing country in the world with a comprehensive industrial category and industrial system, and can find sustainable industry opportunities. Li Wei said.

In the past two years, Li Wei has observed that the domestic economy has undergone relatively large changes at the industrial level, which has also brought new investment opportunities in the manufacturing industry.

First, changes in the energy structure have brought about changes in the industrial structure, involving industries such as power batteries, photovoltaics, and wind power. In the near future, domestic energy may be dominated by photovoltaic and wind power generation. In addition, changes in the energy structure will also bring about the acceptance of clean energy, including energy storage improvement, smart grid construction, grid structure adjustment, etc.

Second, the level of automation brought about by scientific and technological progress has led to the rapid upgrading of China's manufacturing industry. At present, China's labor costs, environmental protection costs, land costs are increasing, when the manufacturing industry to complete the upgrading and transformation of automation, not only can improve production efficiency, reduce costs; but also help to enhance the position of domestic enterprises in the industrial chain, to provide higher value-added products or services.

In the process of industrial change, Li Wei is currently optimistic about excellent companies in the fields of photovoltaic, wind power, nuclear power, new energy vehicle power battery system, energy storage, chip design, passive components, panels and machinery. In addition, Li Wei believes that the military industry is in the upward stage of prosperity, and the profitability of leading companies in the sector has increased.

In the past ten years, the domestic manufacturing industry has gradually grown from a start-up small and medium-sized enterprise to a globally competitive leading company, and the change of industrial structure has also followed the needs of social development. Li Wei's investment keeps pace with the times, and the variety of positions can clearly reflect the development and changes of the industry. Taking electrical equipment as an example, in the early years, his investment target was traditional power equipment; in recent years, with the rise of new energy, especially photovoltaic and wind power, the combination configuration is photovoltaic modules, inverters, etc.

From her graduation in July 2005 to the present, Li Wei is about to enter her 17th year of work and her 11th year of managing public funds. Ten years of grinding a sword, I hope that Li Wei can adhere to the original intention of value, keep pace with the times in investment, and bring investors a better decade.

(Risk Warning: Past performance and past ratings of a fund do not indicate its future performance, and the past performance of other funds managed by the fund manager does not represent the future performance of the new fund.) The current direction of the fund manager does not represent the long-term inevitable investment direction)

This article originated from China Securities News