- What is the definition of quality style? What are the features? What are the quality styles of fund managers?
Among the various investment styles, I most identify with and like the quality style, the quality style fund as the portfolio bottom position, long-term holding, keep moving, I believe this style can cross the bull and bear.
The term "quality style" seems to have been used by me all along, and many people don't know what it means. Today I will talk to you about it, and define the differences with value styles and growth styles, so that we can use the same definition to communicate.
<h1 class="pgc-h-arrow-right" data-track="4" >, what is quality style</h1>
I call the investment style of a good company that pursues certainty, high win rate, long-term holding of good industries, moats, competitive advantages, good business models, high ROE, and high quality as "quality style".
The investors with representative quality style include Buffett, Charlie Munger, Duan Yongping, and there are Chen Guangming, Zhang Kun, Liu Yanchun and so on in the public fund.
Representative industries are mainly pharmaceuticals, consumption, Internet, cloud computing, etc.
Representative stocks include Guizhou Moutai, Wuliangye, Hengrui Pharmaceutical, Tencent Holdings, Gree Electric Appliances, Midea Group, China Exemption, Mindray Medical, Hang Seng Electronics, etc.
The characteristics of quality style fund managers are industry concentration, shareholding concentration, high position ROE, low turnover rate, long holding time, and large scale and capacity.
<h1 class="pgc-h-arrow-right" data-track="11" >2. Why do I call it "quality style"? </h1>
In fact, this investment style is not unique to me, and some people also call this style "value growth". I think it's more appropriate to call it "quality". Because there is also a "quality factor" in quantification and a "quality index" in the smart beta index, there are many commonalities behind it.
Some people have calculated that in Buffett's historical performance, the quality factor has contributed the most (gray in the figure below).
The more representative quality style indexes are: MSCI Quality Index, CCTV 50 Index, Hang Seng A-share Industry Leader Index, and "Mao Index".
For example, the MSCI quality index is very close to the trend of The representative fund manager of the quality style, Zhang Kun, and the CSI Consumer Index. The chart below compares their trends over the past 5 years.
Here I'm going to spit on Bafit! He is the "culprit" of the confusing definition of Value Investment.
Buffett's early years under Graham were a deep-value style, looking for stocks with static valuations that were cheap. Later, under the influence of Charlie Munger and Fisher, he changed his investment style and began to pay attention to the texture and growth of the company, holding a good company with high ROE for a long time.
But he continues to hold the banner of value investment! Say you're a value invester! Now value investment has become a big basket, and everyone says that they are value investment.
So much so that when articles around the world introduce value investment styles, they have to further clarify their definition of value and growth. Otherwise the reader will not be confused.
So for clarity, I call buffett's evolved investment style a quality style.
<h1 class="pgc-h-arrow-right" data-track="23" > three, what is the difference between quality style and growth style and value style</h1>
The value style pays more attention to buying well, focusing on the current value, emphasizing low valuation and margin of safety, and diversifying positions.
The quality style pays more attention to buying good, pays attention to forward value, emphasizes the company's texture and competitive advantage, and is more concentrated.
The growth style emphasizes the growth rate and growth space, also pays attention to the long-term value, is more willing to participate in the fastest growth stage, and has a higher turnover rate.
The quality style emphasizes growth quality and growth stability more, and is more willing to participate in the stage of stable growth rate and hold it for a longer time.
<h1 class="pgc-h-arrow-right" data-track="29" > fourth, the characteristics of quality style investors</h1>
·“ Good industry, good company, good price, prosperity" these dimensions, more emphasis on the first two.
Pay more attention to the profitability, stability and predictability of enterprises, and pay attention to INDICATORS such as ROE, ROA, ROC, and free cash flow.
Think that buying stocks is buying ownership of companies, and investing in companies is to earn discounts on the future cash flow of the business. Less to do with people to play games, mainly to make corporate profit money, less to make valuation money.
Pay more attention to the certainty and winning rate of investment to make money, less pursuit of odds, less like uncertainty and change fast.
Pay more attention to the sustainability of making money, and look at the time dimension is relatively long, at least 3-5 years, or even more than 10 years. Pursue stable compound interest, less pursuit of short-term investment opportunities and short-term performance. Low turnover rate, long-term holding.
Positions are dominated by companies with strong monopoly and strong brand power and industry leaders, and sometimes they are often popular companies and companies that are familiar to everyone, such as Guizhou Moutai, Hengrui Pharmaceutical, Tencent Holdings, etc.
Bottom-up stock selection is the mainstay, and less is used to guide investment from top to bottom. Pay more attention to the company's qualitative analysis, strategic analysis, etc., and attach importance to the management of the enterprise.
At the mesoscopic level, more attention is paid to observing the supply side, such as the industry status of enterprises, the structure of industry competition, industry space, whether enterprises have moats, brand power, etc. Less focused on industry growth and demand side.
Investors not only pay attention to the in-depth research, independent thinking and long-term tracking and accumulation of individual stocks, but also pay attention to the accumulation of their own research compound interest.
In terms of portfolio construction, it tends to focus on good industries and good companies, with a small number of positions and a high degree of concentration.
Mainly rely on controlling the texture of the combination of positions, risk control, think that good companies will naturally be bought when they fall, so they will not fall too much. The next time you analyze an investor, if you find that it corresponds to the above characteristics, it can be classified as a quality style.
<h1 class="pgc-h-arrow-right" data-track="42" >5</h1>
According to my research, the quality style managers mainly include Zhang Kun, Liu Yanchun, Tang Yiheng, Jiao Wei, Xiao Xiao, An Yun, Zhang Feng (Dongfang Hong), Cai Xiangyang, Hu Xinwei, Xiao Nan, Guo Jie, Miao Yu, Han Weijun, etc.
The following chart is a comparison of performance and risk control in several ranges:
From Liu Yanchun to the present(2015-7-10 to 2021-10-12)
From Xiao Xiao to the present(2017-1-7 to 2021-10-12)
From An Yun to the present(2018-2-5 to 2021-10-12)
From Tang Yiheng to the present(2019-8-12 to 2021-10-12)
Quality-style fund managers are easy to confuse with pharmaceutical and consumer theme fund managers, and sometimes I am difficult to distinguish. You can't simply look at the position to judge, more or through qualitative analysis.
Quality style managers prefer to buy medicine and consume, but managers who hold positions in medicine and consumption are not necessarily quality styles.
Conclusion: It may seem like a quality style is impeccable, but any investment method is flawed and won't always work. Recognizing the advantages is not enough to help hold, and knowing the shortcomings can help hold.
In the next article, I will talk about the shortcomings of quality style, and how to invest in good quality style, welcome everyone to continue to pay attention to Zero City investment.
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Related Reading: What is the (Depth) Value Style?