Li Yan, fund manager of Huaxia Xinghe Fund: Why did I switch from power batteries to the military sector?

Huaxia Xinghe Fund mainly invested in power batteries in the first half of the year. In the past 2 years, I have witnessed the transformation of power batteries from broken copper and rotten iron to heavy equipment of big countries. At the end of the second quarter, the fund's position gradually switched to the aircraft manufacturing industry in the military sector. I have two thoughts on this important position adjustment. On the one hand, the power battery is a cyclical growth industry, there is growth, there is more cycle, the industry's current supply is less than the pattern of demand caused by the industrial excess profit is difficult to maintain, will return to the average profit; on the other hand, the iterative speed of the power battery is not as good as the semiconductor chip, China's leading companies leading the European and American major competitors The largest amplitude is the current, the future may shrink, the power battery or new infrastructure, new infrastructure. Of course, the downstream application of power batteries is widely used and the prospects are bright, and I will maintain long-term close follow-up research. The gradual switch to the military aircraft manufacturing industry has the following considerations:

First, the situation does not treat people, China urgently needs to build a national defense strength that matches its economic status, President Xi Jinping said in his speech on the 100th anniversary of the founding of the Party, taking history as a mirror and creating the future, we must accelerate the modernization of national defense and the armed forces.

Second, to study the history of the War to Resist US Aggression and Aid Korea, compare the differences between China and the Western world's army, navy and air force today, the shortcomings are in the air force, and the performance of the new generation of main battle equipment developed by China's military industry, such as the J-20-15-20-20, has reached the international advanced level, and it is a good time for the air force to release the amount of main battle equipment.

Third, China's aviation industry started relatively late, from military to civilian, just in its infancy, with reference to the development history of the European and American aviation industry, military-civilian integration, the core company of the industrial chain will supply both military and civilian in the future, such as C919 fuselage carbon fiber composite materials, localization is the only way.

Fourth, the listed companies in the military industry in the past as a whole in the heavy research and development light production stage, in recent years gradually converted to research and development and production equal emphasis, the current from the industry tracking to see the production of the main stage, judging that the main engine factory less than 5% of the profit margin level will be improved in the process of production volume.

I hope that through in-depth research and analysis, under the premise of controlling risks, long-term concentrated investment in several particularly optimistic industries, driven by industrial fundamentals as the core, moderate left-hand investment, and at key moments to adjust positions and switch industries, to obtain higher investment returns. At the heart of the investment framework is a cross-cycle comparative study of industries based on political economy. Concentrated investment needs to focus on the cyclical stage of industrial development, although the focus is on growth industries, but growth industries also have cycles. Control the volatility of the portfolio by comparing the industry development space, the industrial competition pattern, the current cycle stage, the company's valuation and the relative margin of safety of the stock price.

In the second half of the year, we will continue to be optimistic about the development of China's capital market, focusing on high-end manufacturing in structural investment opportunities. The portfolio will maintain a key investment in the military aircraft manufacturing industry. At the macro level, taking history as a mirror, I have systematically studied the development history of the Chinese nation, focusing on the War of Resistance Against Japan, the War of Liberation, the War to Resist US Aggression and Aid Korea, the War of Self-Defense against India, and the War of Self-Defense against Vietnam; systematically study the political and economic changes of World War I and World War II, summarize the lessons learned by the United States, Japan, Germany, and Russia; and systematically study the Cold War between the United States and the Soviet Union. At the mesoscopic level, I have intensively investigated major listed military enterprises in the past quarter, and discussed with listed companies on industry development and the world situation. At the micro level, I continued to study the competitive pattern and development changes of all aspects of the industrial chain, focusing on the changes in the status of the main engine factory in the industrial chain, analyzing the deep impact of military reform and military pricing mechanism on the company, and striving to find the strongest alpha in the industry.

(Risk Warning: The Fund is a hybrid fund, and its long-term average risk and expected return are lower than those of equity funds, higher than money market funds and bond funds, and the risk level of fund products is medium risk (R3).) Opinions are for informational purposes only and do not constitute any material advice or commitment to investors, nor do they constitute any legal document. The market is risky and investments need to be cautious. ）