Investment requires both offensive and defensive capabilities to achieve long-term success through steady progress - Interview with Jin Tuo, the proposed fund manager of Huaan Prosperous Return Fund
2024-08-07
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In recent years, the market conditions of track stocks have fluctuated significantly. Some fund managers who respect the market and value valuation and cost-effectiveness not only focus on the industry's prosperity, but also value valuation and cost-effectiveness. They have not only grasped the dividends of high-prosperity development, but also maintained their returns after the market turned.
Jin Tuo of Huaan Fund is such a fund manager who is good at both offense and defense.
Anchoring industry prosperity and emphasizing offensiveness
Judging from Jintuo's past experience, before joining Huaan Fund in March 2023, he worked in Anbang Asset Management and Zhongrong Fund (now renamed Guolian Fund) as a researcher and fund manager, and began to manage active equity products independently in January 2019. In March 2023, he joined Huaan Fund and served as the manager of Huaan Zhizeng Select Fund since October 2023.
Judging from Jintuo’s past performance, the Guolian Core Growth Fund, which he managed for the longest time, began to be managed on January 22, 2019 and ended on March 8, 2023. The return during the management period was 203.98%, and its performance exceeded the market performance during the same period.
Good performance stems from Jintuo's in-depth thinking on investment. Jintuo said that its investment framework is based on the booming investment of valuation and cost-effectiveness. Anchored on the booming of the industry, it focuses on offense; it values the valuation and cost-effectiveness, and focuses on defense.
"My first job was at Anbang Insurance, and the first industry I looked at was the TMT industry. Insurance funds mainly assess absolute returns, while TMT is a growth industry. This has also influenced my subsequent investment style." When talking about his investment style, Jintuo said that he not only pursues the growth of highly prosperous industries, but also pays attention to valuation cost-effectiveness and emphasizes safety margins.
For the secondary market, investment profits come from rising stock prices. Jintuo said that the main factors affecting stock prices are economic prosperity and valuation.
From the perspective of prosperity, we mainly focus on opportunities for continued prosperity and opportunities for prosperity reversal. "The level of industry prosperity can be confirmed by conducting research on upstream and downstream industrial chains and peer companies, and targets with resonance in the industrial chain prosperity are preferred, because the winning rate will be higher." Jintuo further said that prosperity has the characteristics of the times and must keep pace with the times.
In Jintuo's view, all industries have cycles, and the key is to grasp the trend of prosperity, have no bias in industry selection, and will not exclude certain industries. Judging from the performance attribution since 2020, the performance contribution of industries such as semiconductors, new energy, computers, auto parts, coal, and pharmaceuticals ranks high.
Currently, there are more than 5,000 A-share listed companies. For fund managers like Jintuo who focus on the industry's prosperity, how can they select the right targets to build a portfolio? Jintuo said that they must first cover the breadth and then conduct in-depth exploration.
Jintuo emphasized that the significance of broad coverage is not to directly find targets that can be configured, but to find more directions worthy of attention. If it is observed that there are more targets with upward business expectations in a certain industry, and their valuations are relatively reasonable or even underestimated, it can usually be considered that the industry deserves further attention.
"I hope that at each stage, I can find several directions worthy of attention, and then sort the potential returns from the bottom up based on the odds and winning rates of individual stocks, and incorporate them into the portfolio. Judging from past portfolio holdings, under normal circumstances, three to five directions will be deployed at each stage." Jintuo further said.
Focus on valuation, cost-effectiveness and defensiveness
Judging from the trend of the net value of the funds managed by Jintuo, the overall retracement performance is relatively close to the basic market, but when structural opportunities appear in the market, the retracement recovery speed is better than the basic market. The reason is that Jintuo not only pays attention to the industry prosperity, but also attaches great importance to the valuation cost performance, which also shows its prudent investment side.
In Jintuo's view, the valuation system applicable to listed companies is not static, but the result of comprehensive evaluation based on the industry life cycle, business model, competitive landscape and corporate competitiveness of listed companies. Common valuation systems include DCF valuation, PEG valuation, PB, dividend rate, etc. Different companies may have different applicable valuation systems, and the valuation system must match the company.
Jintuo said that generally speaking, the valuation system of the same company is relatively stable most of the time, but it will also change over time. At this time, it is necessary to re-examine the changes in the underlying factors of this valuation system, because changes in this valuation system often herald a big market trend or a big risk. This low-frequency but particularly important change needs special attention.
Take the computer industry as an example. Around 2012, most A-share computer companies were IT contractors who only earned a little head fee. This business model can only be valued using the PE method or PEG. Starting from the second half of 2014, with the rise of the "Internet +" concept, the business model of the computer industry has undergone tremendous changes, at least in terms of the expectations of the capital market at the time. Specifically, a business activity can be simply divided into three flows: information flow, cash flow, and logistics. At that time, the underlying logic of most "Internet +" stories can be attributed to the use of information flow to get involved in cash flow, from earning head fees to earning traffic share. With the huge changes in the business model, the corresponding valuation system has also undergone tremendous changes. The market's valuation system for the computer industry has shifted from PE valuation to market value valuation. This is the valuation logic behind that round of "Internet +" market.
In addition, Jintuo believes that when the valuation system is stable, valuation also has macro characteristics, that is, different macro environments correspond to different valuation factor performances. For example, in the past two years, macro uncertainty has increased significantly, and the market has attached more importance to performance certainty. Companies with high profit certainty have also continued to enjoy valuation premiums.
Layout in three directions, both offensive and defensive
Since the beginning of this year, the market has been experiencing a differentiated trend. The low-valuation and high-dividend sectors have continued to rise, while the traditional consumer sector has encountered volatile adjustments. How will the market perform next?
Jintuo said that the structural market is expected to continue. Although there is still uncertainty about the pace of economic recovery, from a valuation perspective, the current A-share market has sufficient valuation protection, and as macroeconomic certainty gradually increases, the market will be more optimistic in the future.
From the perspective of configuration ideas, Jintuo said it will take into account both growth and stability, and currently focuses on the following three directions.
First, the electronics sector. Jintuo said that from the survey of the industrial chain, the trend of semiconductor sales recovery has been transmitted to the domestic industrial chain. At the same time, the establishment of the third phase of the National Big Fund has injected confidence into the sustainability of capital expenditures in the semiconductor industry, and is optimistic about the beneficiaries of semiconductor self-control. In addition, 2024 will be the first year for the implementation of end-side AI, and the iPhone is expected to usher in a replacement cycle with both volume and price increases. The sustainability of the consumer electronics market is worth looking forward to.
The second is the large aircraft industry chain. Jintuo said that the large aircraft industry chain is a rare and certain growth direction. At present, the C919 aircraft has more than 1,000 orders on hand, and is about to start a rapid growth period from 1 to N. From the supply chain, the current suppliers are mainly international. Under the background of independent control, whether it is metal materials, composite materials, or electromechanical systems, avionics systems and even engines, domestic manufacturers have huge development opportunities.
Regarding the banking sector, Jintuo said that in terms of dividend rate, the dividend rate of the banking sector is second only to the coal industry, and in terms of dividend rate, the dividend rate of coal is about 60%, while the dividend rate of banks is only about 30%. As the credit growth rate slows down in the future, the bank's dividend rate still has a lot of room for improvement, which means that the dividend rate still has potential room for improvement. From the perspective of the valuation system, due to concerns about asset quality issues, the banking sector has been continuously devalued by the market over the past decade. Currently, the valuation of dividend assets is the lowest in both horizontal and vertical comparisons. Jintuo said that in the context of government debt reduction and real estate inventory reduction, the valuation space of bank stocks is expected to gradually open up.
In addition to the above three directions, Jintuo said that it will continue to pay attention to and track other industry directions, waiting for new opportunities to come.
