Interview with Zhan Jia of Everbright Prudential Fund: Innovative consumption, medical care, and technology have a huge room for growth

The Paper's reporter Ge Jia

"Those brands and enterprises that can meet people's innovative consumption and quality consumption have huge room for future growth." Recently, Zhan Jia, director of the international business department of Everbright Prudential Fund, said in an exclusive interview with the surging news (www.thepaper.cn) reporter that technological innovation is changing the way of life, and the future will focus on the four directions of innovative consumption, innovative medical treatment, innovative technology and low-carbon life, and seize innovative opportunities.

Zhan Jia, Director of international business department of Everbright Prudential Fund

In Zhan Jia's view, the future fundamentals are safe, and the industry with improved prosperity is expected to increase. Therefore, there is reason to be optimistic about the future stock market.

Regarding the consumer sector with high market attention, Zhan Jia said that due to factors such as the base, the performance of the consumer industry's semi-annual report is not good. But for now, the most difficult time for the consumer sector has passed, and fundamental factors including price expectations, cost pass-through capabilities, and inventories are gradually improving.

"From the perspective of investment cost performance, whether it is volatility or ROE level, the large consumer industry is in an advantageous position." Zhan Jia said that the consumer industry is a track with long slopes and heavy snow, and the rapid rise last year and early this year brought about the subsequent adjustment demand. However, after a large adjustment, it is now possible to wait for the opportunity to enter and seize the rotation opportunity.

Big tracks with future trends have gained a clear advantage

Zhan Jia believes that the rapid development of new technologies such as 5G, artificial intelligence, cloud computing, VR/AR, and the Internet of Things, the rapid rise of new economic models such as low-carbon economy and experience economy, and the continuous emergence of new scenarios, new models, and new applications are having a positive and significant impact on lifestyles and consumption patterns.

"Technological innovation is driving iterative changes in lifestyles, which has also created a huge incremental market space." From the perspective of demand side, Zhan Jia believes that the median per capita disposable income of residents has reached the global middle income level, and after reaching this level, residents will switch from producers to consumers.

"'Sugarcane is just emerging as the sweetest', when a new product or service method appears, if it meets the real needs of consumers, then this process from scratch is very explosive." For example, sweepers, laser TVs, blenders, etc. in the field of home appliances, sugar-free beverages in the food and beverage field, pre-mixed cocktails, etc., these innovative products have very good application scenarios. Zhan Jia said.

In addition, from the perspective of the supply side, Zhan Jia believes that after domestic enterprises have strong brands and suitable sales channels, their manufacturing costs and innovation empowerment are enough to reach the level of scale.

"Whether it is home appliance innovation or pharmaceutical research and development, or intelligent terminal manufacturing, more and more domestic enterprises have embarked on the road of innovation, which will be reflected in the company's revenue and performance." Zhan Jia said, "The definition of innovative life is not limited to the improvement of the quality of life, if it can bring about changes in lifestyle, it is worth paying attention to." ”

According to this, Zhan Jia revealed that she will focus on four major investment directions: innovative consumption, innovative medical care, innovative technology and low-carbon life.

Zhan Jia pointed out that from the perspective of demand, these four directions are highly in line with people's consumption awareness and consumption ability; at the same time, the listed companies in these industry tracks have obtained a relatively leading position in the world. "Historically, when we compare the consumer, medical, technology and new energy indexes with the CSI 300, we can see that these big tracks with future trends have gained significant advantages."

Excellent companies have the characteristics of "three highs and one low"

In terms of investment philosophy, Zhan Jia pays attention to risk-adjusted returns, rather than just pursuing income rankings.

In order to achieve the purpose of building a risk-effective portfolio, Zhan Jia has formed a "three high and one low" stock selection standard in stock selection.

"The three highs refer to the fact that enterprises must have high growth space, high competitive barriers and high capital efficiency, and all three can lay a good foundation for the long-term and steady development of enterprises, which is indispensable." According to Zhan Jia, the return on invested capital (ROCE) is the main basis he uses to judge the capital efficiency of enterprises.

Zhan Jia said that ROCE is the main basis for judging the level of income from actual investment in enterprises, which can reflect the true returns of subdivided industries. Buffett has repeatedly shown that the ROE and ROCE of good companies should be above 20%. Companies with high ROCE usually have the ability to consistently be profitable and cross cycles.

In addition to the "three highs", Zhan Jia also emphasized "one low", that is, low volatility, and selected stocks with lower volatility by using historical volatility in high-quality development enterprises. "ROE divided by annualized volatility is the cost performance of investment, if the space is small and volatile, it is not suitable for investment."

"In terms of plate selection, I look at the long-term matching relationship between annualized fluctuations and ROE in history. Such companies in A-shares are mainly distributed in consumer sectors such as food and medicine, and there are also some in science and technology manufacturing. "The field of big consumption and big health has thus become the track that Zhan Jia focuses on.

However, after screening out high-quality stocks through the "three highs and one low" stock selection method, Zhan Jia said that she would rotate during the specific construction of the portfolio and management.

"Under the framework of practicing macro asset allocation, is the macro wind direction in line with the current situation? In addition, between companies and companies, between different sub-sectors, their prosperity will also change, and they also need to do a certain rotation on individual stocks." Zhan Jia said.

Zhan Jia has 13 years of experience in stock investment research in the Greater China region and the international market, 8 years of stock portfolio management experience, and has worked for nearly 10 years in various well-known institutions in Hong Kong before joining Everbright Prudential.

Based on a global outlook, a lighter short-term ranking, and an eye on portfolio risk-adjusted returns, zhan jia managed two funds that achieved excellent performance.

According to Galaxy Securities data, as of the end of September, Everbright Advanced Service Fund ranked in the top 13% of flexible allocation products in the same period in the past two years; Everbright Industry Rotation, with a yield of more than 220% in the past three years, ranked in the top 7% among partial stock hybrid funds in the same period.

"Compared with most domestic public funds, I may understand the perspective of foreign capital, and the long-term international valuation benchmark may be more accurate, while compared with pure foreign capital, I am more sensitive to fundamentals because I live in A-shares and conduct more frequent research." Zhan Jia concluded.

Recently, Zhan Jia's proposed fund manager Everbright Prudential Innovative Life is in the process of being issued, and the fund has set a maximum of 50% of the equity assets of the Hong Kong stock standard.

However, for the Hong Kong stock market, Zhan Jia believes that the current deterministic inflection point of technology stocks in the Hong Kong stock market has not yet appeared, and in the early stage of the fund layout, it will be more cautious for the giant Macs of Hong Kong stocks that are partial to science and technology, and should currently look for enterprises with comparative advantages relative to the A-share market, including companies with innovative tracks such as national tide consumption and biotechnology.

Editor-in-Charge: Wang Jie

Proofreader: Luan Meng