Since the beginning of this year, the market has continued to diverge, and the performance of funds has varied greatly, what are the implications for our investment? Entering the fourth quarter, some of the high-prosperity growth tracks that have undergone shock adjustment in the early stage, such as the new energy sector, have recently attracted the attention of the market again. For the changes in the market since the beginning of this year and the recent hot spots in the market, Du Meng, investment director of Shanghai Investment Morgan, has the following main views:
First, about the market
1, this year's market differentiation is very large, unlike the past two years, basically holding a large white horse stock, the fund may have a better performance. This year's market fund income variance is very large, the performance difference between the beginning and end of the fund is very large, if the position structure is inconsistent with this year's dominant market, it may be a negative return or even a relatively large negative return. Why is this happening? We have seen the history of the market over the past two years, since 2018, after the risk-free yield decline, a lot of long-term funds have entered the stock market, and these long-term funds have reprised these core assets in the A-share market in the past two years. Companies such as pharmaceuticals and consumers have risen in the past two years mainly rely on valuations, and valuation improvements may account for 50% or even greater of the increases in the past two years.
This year, the process of valuation improvement is basically over, and whether the valuation matches the performance growth is even more important. We look back at the sharp decline in core assets this year, in fact, we can see that most of the reasons are not because they are expensive or not expensive, or whether the PE is high, but from whether its performance growth rate matches its valuation. For example, some of the companies in the "Ning Portfolio", peas are also very high, at that time, they were also divided into core assets, and their performance this year is still very good. Why is there such a state? In fact, because their valuation matches the performance growth, although the valuation is high, we can see that the performance growth in the next two or three years is still very fast, and it can keep up with the changes in valuation. This is a more obvious feature of the market this year.
2, so, this year we have sunk in the market value of investment. In the past two years (2019, 2020), the main focus of the market has been on stocks with large market capitalization, and many small and medium-sized market capitalization companies have basically no one to pay attention to, and most of these companies are concentrated in the manufacturing industry. With the development of the economy, including the drive of policies, many stocks with small and medium-sized market capitalizations were very attractive at the beginning of the year. Some of these sectors or companies, which no one has paid attention to in the past two years, have regained the attention of the market this year, in fact, because their valuations have not matched its growth.
3. Looking forward to the last quarter of 2021 and 2022, or even a longer period of time, the overall valuation of the A-share market is still within a reasonable range, and companies that match the valuation and performance growth rate can still be found. Therefore, in the follow-up, we will continue to strictly select those companies with long-term prosperity and high valuation and growth matching for medium- and long-term investment, with valuation and profit growth matching and cost performance as the first consideration.
Second, about the industry
1, consumption, technology and medicine, is the three directions that we feel are the largest market space in the future, of course, there will still be opportunities in the traditional industry, but from the perspective of alpha choice, we still like to select stocks in consumer medicine and big technology. When we study the industry, we will make a judgment on the changes in supply and demand in the industry in the next 3 to 5 years for many industries, that is, how the prosperity of the industry will be in the next 3 to 5 years, especially to judge the changes in demand. If we see that the change in demand in this industry is a rapidly rising stage, then this industry will be a key sector for our investment. Therefore, the direction we are currently focusing on includes emerging industries such as new energy, electric vehicles, semiconductors, high-end equipment, new materials, etc., as well as traditional industries such as the pharmaceutical sector and innovation empowerment. For example, although the overall pharmaceutical sector this year is still high because of the valuation, the cost performance is not prominent, but the CXO industry has always maintained a high profit growth rate; some new chemical materials sector, there is a clear demand increase logic in the medium term, but the supply is limited, the industry pattern is very good, we have a continuous focus on these directions.
2. Recently, regulators have intensively released relevant information on carbon peak carbon neutrality work, including the introduction of "double carbon" top-level documents. We believe that in the past 20 years, China's economic cycle is actually a real estate cycle, but at present, the real estate cycle can be said to be basically over. From the policy orientation, it can be clearly seen that the next cycle will be an energy cycle, and this energy cycle is a new energy cycle, relying on new energy to pull the adjustment of the economic energy structure and to stimulate economic development. Investment should keep up with the economic cycle or changes in economic structure, the past 20 years, need to keep up with the development of real estate, the past 10 years, is the development of the Internet, the next 10 years, may be the development of energy, so we need to closely follow the changes in the industry, grasp the energy cycle under the new energy industry investment opportunities. Therefore, from the current point of time and from the perspective of the industrial cycle, photovoltaics and electric vehicles are still in the initial stage of the industry.
3. We have seen that since 2020, public funds have continued to embrace the new energy industry chain, the allocation ratio has continued to expand, and some investors in the market are worried about whether there will be a problem of crowded transactions and a sharp decline in stock prices. We believe that the most fundamental factors that occur in the industry are mainly from the prosperity and performance of the industry, never because of the problem of buying more, the most impact of buying more is that there may be fluctuations, and the fluctuations come more from psychological factors. The real problems are from the industry boom problems, including the so-called stock price of the big white horse stock this year, the most fundamental reason is that the performance growth rate does not meet expectations, or the performance does not match the valuation, just because of the crowded transactions that lead to a large change in the stock price We think it is more difficult to appear. So what we should pay attention to and track now is whether photovoltaics and electric vehicles are really expensive, and whether the valuation does not match the performance growth. And we stand at this time, the valuation of the entire industry chain next year is still quite reasonable.
