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On July 17, Ruiyuan Fund’s products disclosed the second quarter report of 2024.

Compared with the holdings at the end of the first quarter of 2024, the Ruiyuan Growth Value Mixed Fund managed by Fu Pengbo and Zhu Lin made a small adjustment in the second quarter of 2024. Giant Star Technology and Hyjia Medical entered the top ten holdings for the first time, and Maxsun Technology, Guanghui Energy, CATL and Sinocare were increased.

Ruiyuan Balanced Value Three-Year Holding, managed by Zhao Feng, another star fund manager of Ruiyuan Fund, also made a slight adjustment to its portfolio. China Pacific Insurance entered the top ten holdings for the first time, and CATL, Sinocare, Wanhua Chemical, Weiming Environmental Protection, and China Property Insurance were added to their holdings.

It is worth mentioning that both of the above fund products outperformed the benchmark in the second quarter. Tiantian Fund Network shows that in terms of quarterly growth, both fund products achieved the best quarterly returns in the past year.

"If we look at the quality of a company's earnings and its long-term potential, the current pursuit of high-dividend companies seems to have some trend implications, rather than being purely based on value." Zhao Feng pointed out that due to concerns about the uncertainty of the future, the market is currently extremely averse to risk and growth, but in the long run, companies that are truly globally competitive are very likely to be able to cope with the challenges of the future operating environment, navigate cycles and continue to create value.

"It is true that both the capital market and the Chinese economy are in a stage of 'strengthening the foundation'. A full understanding of this will help control the risk and return of investment." Fu Pengbo and Zhu Lin said that in the second half of the year, the market may face some upward driving factors, such as better-than-expected improvement in real estate data, policies of the Third Plenary Session of the 18th CPC Central Committee boosting market sentiment, and accelerated issuance of on-budget treasury and local government bonds.

Giant Star Technology and Hyjia Medical entered the top ten holdings of Fu Pengbo and Zhu Lin for the first time

As of the end of the second quarter of 2024, the net asset value of Ruiyuan Growth Value Mixed Fund was 18.686 billion yuan, a slight decrease of 127 million yuan from 18.813 billion yuan at the end of the first quarter.

In terms of specific holdings, the top ten holdings of Ruiyuan Growth Value Mixed Fund are: China Mobile (00941.HK), CATL (300750.SZ), Luxshare Precision (002475.SZ), Tencent Holdings (00700.HK), Maxsonic Technology (300751.SZ), Guanghui Energy (600256.SH), Giant Star Technology (002444.SZ), Sinocare (300298.SZ), Wanhua Chemical (600309.SH), and Hyjia Medical (06078.HK).

Compared with the end of the first quarter, the holdings of Ruiyuan Growth Value Mixed Fund in the second quarter changed little. Specifically, Giant Star Technology and Hyjia Medical entered the list of the fund's top ten holdings for the first time. In addition, Fu Pengbo and Zhu Lin also increased their holdings of Maxsun Technology, Guanghui Energy, CATL, and Sinocare in the second quarter.

In terms of reducing holdings, Ruiyuan Growth Value Mixed Fund reduced its holdings in China Mobile, Luxshare Precision, Tencent Holdings, and Wanhua Chemical. At the same time, Tongwei Co., Ltd. (600438.SH) and Oriental Yuhong (002271.SZ) withdrew from the top ten holdings.

It is worth mentioning that based on the increase in Hong Kong stock allocation in the first quarter, Ruiyuan Growth Value further increased its Hong Kong stock position to 23.63% in the second quarter, but the overall stock position fell to 87.83%.

Fu Pengbo and Zhu Lin explained in the second quarter report, "In the second quarter, Ruiyuan Growth Value Mixed Fund slightly reduced its stock asset allocation, but the position is still not low, and the overall contribution of Hong Kong stocks is relatively obvious. We have made some adjustments to our holdings. Compared with the second quarter, the net value of the top ten holdings has increased. Among them, we have increased our holdings in mechanical equipment, power equipment and energy industry stocks, reduced our holdings in telecom operators but the change is limited, and the holdings of other key companies remain almost unchanged. There are relatively more changes in holdings after the top ten holdings. We have reduced our holdings in companies with fundamental pressures and valuations and growth that are not well matched."

Judging from the fund performance, Ruiyuan Growth Value Mixed Fund has begun to outperform the benchmark during the same period.

As of the end of the second quarter of 2024, the net asset value of Ruiyuan Growth Value Mixed A Fund shares was RMB 1.1053, and the net asset value growth rate of this type of fund shares in the second quarter of 2024 was 1.66%, and the benchmark return rate for the same period was 0.00%; the net asset value of Ruiyuan Growth Value Mixed C Fund shares was RMB 1.0823, and the net asset value growth rate of this type of fund shares in the second quarter of 2024 was 1.56%, and the benchmark return rate for the same period was 0.00%.

Tiantian Fund Network shows that in terms of quarterly growth, Ruiyuan Growth Value Mixed A Fund shares and C Fund shares have achieved the best quarterly returns in the past year.

Source: The Paper reporter based on Wind data statistics

Looking back at the second quarter, Fu Pengbo and Zhu Lin detailed in the second quarter report that in April, the Hong Kong stock market performed outstandingly, and some overseas funds flowed to Hong Kong stocks with low valuations and expected improvement in the macroeconomic environment in the high-low switching. During the same period, the sentiment of the A-share market improved and the index rebounded. Under the background of stock capital trading, the sectors showed a relatively fast rotation, and the performance of large-cap stocks was relatively good in terms of style; in terms of industry, the export industry chain performed outstandingly, among which home appliances and automobiles ranked first in terms of growth. In May, market sentiment began to decline. Although various regions have introduced a series of real estate policies, the market has shown an attitude of "wait and see" after a short-term rebound; at the industry level, traditional and dividend sectors led the gains, and overseas AI was hot, but domestic TMT sector stocks were calm. In June, domestic demand data was not good, the overseas industry faced unfriendly trade policies, market trading sentiment was low, and the stock prices of benchmark companies such as food and new energy adjusted significantly. In the past three years, funds have been crowded in the above two sectors, and the risk-return ratio has continued to decline. Recently, similar phenomena have occurred in the dividend and banking sectors.

Fu Pengbo and Zhu Lin pointed out in the second quarter report that in the second quarter, against the backdrop of weakening macro expectations and the strengthening of overseas "walls", market funds tended to allocate "safe" assets with high dividend yields and good liquidity.

"It is true that the capital market and the Chinese economy are both in a stage of 'strengthening the foundation', and fully understanding this will help control the risk and return of investment." Fu Pengbo and Zhu Lin said that as the interim reports of listed companies are gradually disclosed, they will actively look for companies with booming growth, and the screening process and standards will be more prudent, assessing the ability of the target to create future cash flow, and focusing on the odds and winning rate of stock selection. In the second half of the year, the market may face some upward driving factors, such as better-than-expected improvement in real estate data, the policies of the Third Plenary Session of the 18th CPC Central Committee encouraging market sentiment, and the accelerated issuance of on-budget national and local government bonds.

Zhao Feng's managed products significantly outperformed the benchmark

Ruiyuan Balanced Value, managed by Zhao Feng, another star fund manager of Ruiyuan Fund, has been held for three years. In the second quarter of 2024, the equity position has further dropped to 87.21%.

As of the end of the second quarter of 2024, the net asset value of Ruiyuan Balanced Value Three-Year Holding Fund was 11.915 billion yuan, a slight increase of 0.85 billion yuan from 11.830 billion yuan at the end of the first quarter.

Specifically, the top ten holdings of the Ruiyuan Balanced Value Three-Year Holding Fund are: China Mobile, Tencent Holdings, CATL, Sinocare, Wanhua Chemical, Weiming Environmental Protection (603568.SH), Siyuan Electric (002028.SZ), China Pacific Insurance (02601.HK), Meituan-W (03690.HK), and China Property Insurance (02328.HK). The top ten holdings account for 55.11% of the fund's net value.

In terms of increasing holdings, Ruiyuan Balanced Value Three-Year Holding slightly increased its holdings in CATL, Sanno Biologics, Wanhua Chemical, Weiming Environmental Protection, and China Property Insurance in the second quarter. In addition, China Pacific Insurance entered the fund's top ten holdings for the first time. It is worth mentioning that when the reporter of The Paper reviewed all the holdings data disclosed by the fund in the past, he found that after Zhao Feng first bought China Pacific Insurance at the end of 2020, he sold all his holdings and has not held them since then.

In terms of reduction, Zhao Feng significantly reduced his holdings in Siyuan Electric and Meituan-W in the second quarter, with reduction ratios of 49.28% and 20.93% respectively. China Resources Beer (00291.HK), which was originally the eighth largest holding, has withdrawn from the top ten holdings.

Zhao Feng said in the second quarter report, "In the second quarter, we continued to adjust our holdings structure, reducing holdings of targets with slowing growth, high valuations, and weak free cash flow, and also reducing holdings of resource companies with high market expectations and large stock price increases, and increasing holdings of targets with low valuations, excellent free cash flow, and stable business prospects."

Judging from the fund performance, Ruiyuan Balanced Value Three-Year Holding Mixed Fund significantly outperformed the benchmark in the second quarter.

As of the end of the second quarter of 2024, the net value of Ruiyuan Balanced Value Three-Year Holding Mixed A Fund shares was 1.1949 yuan, and the net value growth rate of this type of fund shares in the second quarter of 2024 was 4.12%, and the benchmark return rate for the same period was 0.69%; the net value of Ruiyuan Balanced Value Three-Year Holding Mixed C Fund shares was 1.1795 yuan, and the net value growth rate of this type of fund shares in the second quarter of 2024 was 4.06%, and the benchmark return rate for the same period was 0.69%.

Source: The Paper reporter based on Wind data statistics

Looking back at the second quarter, Zhao Feng believes that there are not only obvious style differences in the market, but also huge differentiation in industry performance. As for the reasons behind this phenomenon, Zhao Feng wrote in the second quarter report that, first, the macroeconomic performance is still relatively mild, and there has not been the strong rebound that everyone hopes for. In particular, fixed asset investment and total retail sales are still weak, indicating that the overall social expectations are relatively cautious, and investors are risk-averse, and their holdings are shifting to targets with strong income and profit stability, low valuations, and high dividend levels; second, growth has slowed down, and the valuation structure has been further adjusted. Although the share prices and valuations of growth stocks have experienced a sharp correction in the past few years, the growth rate of corporate profits has also declined significantly, and some companies have poor free cash flow levels and low dividend ability. Under the current trend of focusing more on safety and cash returns, valuations continue to be under pressure.

"The rise in risk aversion in the market in the second quarter has further differentiated stock price performance. As stock prices rise, the implied returns of large state-owned banks, energy companies such as electricity, coal, and oil, and telecom operators have continued to decline. Investors seem to have paid less attention to the business models of related companies and the stability of their profits, and have paid great attention to short-term cash returns." Zhao Feng pointed out that if we combine the company's profit quality and long-term space, the current pursuit of high-dividend companies seems to have some trend implications, rather than being entirely based on value.

Zhao Feng said that, on the contrary, some real industry-leading blue-chip companies, along with their sluggish stock prices, have dividend yields close to or higher than the risk-free rate (if we regard the current bank wealth management and long-term government bond rates as two reference indicators of the risk-free rate). Considering the growth potential and excellent business models of some of these companies, their implied long-term return levels may already be significantly higher than some high-dividend companies currently sought after by the market.

"Due to concerns about the uncertainty of the future, the market is currently extremely averse to risk and growth, but in the long run, companies that are truly globally competitive are very likely to be able to cope with the challenges of the future operating environment, navigate cycles and continue to create value," said Zhao Feng.