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Zhong Geng Qiu Dongrong's latest point of view: talking about banking, real estate, Internet and other directions

Recently, the semi-annual report of the fund has been disclosed intensively, and the positions and views of many bosses have surfaced. As a value investor, it is necessary to learn properly when the market fluctuates, among which the ideas of the bosses are a good reference.

Recently, Qiu Dongrong of Zhong Geng Fund expressed some of his views on the current and follow-up markets in a roadshow, focusing on the investment concept of "low risk, low valuation and high expected return". Expressed his views on energy and resources, bank real estate, Hong Kong stock Internet and other sectors. Although the general direction is different from the disclosure of the China News, there is still a lot of depth in the expression. Zhenxing Research Institute has made some arrangement for you to study and reference.

The following are the main points of Yau Tung-wing:

1. Liquidity will be relatively loose in general.

The market was relatively volatile in the second quarter and rebounded significantly after a sharp fall in April. The basic macro background can be summarized as the pressure on China's steady growth and the global anti-inflationary pressure represented by the United States, while superimposing the impact of the domestic epidemic and the impact of the war between Russia and Ukraine on inflation. but it is mainly the first two macro factors that play a decisive role.

After the rebound in April, especially in May, stable growth policies, sustained liquidity easing policies, and a series of fiscal policies, including industrial policies related to automobile industry and real estate infrastructure, and industrial policies represented by the Internet, are simultaneously supporting the whole market, but the Fed's sharp interest rate hike will bring great pressure on the future recession of economic fundamentals.

Judging from the current steady growth and changes in the epidemic, we tend to think that economic growth will improve in the second half of the year, especially with the support of fiscal, monetary and industrial policies, and the delayed effect may begin to appear in the second half of the year, but there may be uncertainty in strength and rhythm, as well as uncertainty in industrial distribution and differentiation.

Overall inflationary pressures are likely to ease and liquidity will be looser in general.

two。 There are more energy and resources plates.

Compared with the first quarter, the second quarter only made some adjustments in structure and weight, which are reflected in the following aspects:

The first is our favorite energy and resources companies over the past year, especially traditional energy and resources companies, including coal, oil, natural gas, industrial metals, mineral resources and so on. The core of allocation lies in, first, insufficient supply, second, rigid demand and sustained growth, and third, such companies are very cheap in valuation, strong in cash flow creation, low in capital expenditure, and good in shareholder return and capital return.

The energy price gap inside and outside the country widened in the second quarter, which is a relatively important change; in addition, from the second half of last year to this year, there is a big difference between China's coal-based energy structure and the overseas energy structure dominated by oil and natural gas. These energy prices are high, but due to the endowment of domestic rich coal, as well as the NDRC's price control and supply promotion, the internal and external energy price gap is widening, especially the strictly regulated thermal coal. In addition, overseas natural gas-based power generation costs are rising sharply, although domestic coal is also rising, but the increase is much smaller, so the gap between internal and external energy prices is widening, resulting in higher plate value.

When it comes to investment, we hope to get a return on cheaper assets or resources. If enterprises can gain the advantage of energy costs and earn the money of energy price differences, even if energy costs rise sharply, even if 10-30% of the enterprises in the market are losing money, the profitability of these enterprises with advantages can actually be protected. There is still Alpha, so we have more layout in this area, especially coal chemical industry and electrolytic aluminum.

3. Be bullish on industrial metals, but not steel and cement

For industrial metals, including oil, our view is also relatively positive, the characteristics of industrial metals are "three low".

First, demand is relatively low, in the case of the epidemic and poor economic conditions, the low point of demand is relatively obvious, but the subsequent rebound in demand is worth looking forward to; second, inventory is very low, in the case of low price and poor demand, these products, including electrolytic aluminum, copper and even oil, have been destined; third, the idle capacity on the supply side is very low, but the capacity utilization rate is very high.

So we will see a strange phenomenon, that is, when the capacity utilization rate is high, the inventory is very low, and the demand is relatively poor, which also means that once the demand picks up, because there is no inventory, no spare capacity and no marginal capacity, so the flexibility in the future is very great.

I didn't put steel and cement in because the demand for steel and cement is uncertain in the medium to long term. We are very confident about the growth in demand for industrial metals such as aluminum and copper, because the growth of these industrial metals is not so dependent on China's real estate and infrastructure construction, but on new growth points. such as the new energy vehicle industry, the automobile industry, and the photovoltaic industry.

4. Prefer urban commercial banks and agricultural commercial banks in developed areas

The core point of our buying bank stocks is to buy city commercial banks and agricultural commercial banks in the best areas in the past three years, mainly agricultural commercial banks in southern Jiangsu.

The reason lies in its very simple business model, very simple balance sheet structure, and very simple and traditional conservative deposit and loan business, which is based on the manufacturing industry. it is based on the locally developed, low-risk manufacturing industry as its core foundation.

In addition, the region has a good economy, industry and industrial structure, and these deposits and loans are mainly manufacturing enterprises as the core source of assets, which is different from most traditional banks. At the same time, the management governance structure of these enterprises is good, corporate governance is promising, bottom-up management and profitability is also very prominent.

In this case, I think its alpha may be very strong and, most importantly, the valuation is cheap.

5. Believe that the demand for real estate is real.

Our bank buys small banks, real estate buys large real estate, this kind of company will not have any major problems, the overall risk is relatively low. On the supply side, we believe that there is always a market, especially in the core areas of first-and second-tier cities, where demand is real.

In fact, the problems of those private enterprises that are in trouble now do not arise in the recession, but in the boom period. in the process of the continuous rise of the market, unrestrained leverage, high prices for land, and the expectation that the market will continue to rise, leading to over-investment and excessive capital expenditure, resulting in a series of problems, so those companies with the most serious expansion fail the fastest.

At present, all the companies we buy have an important feature, that is, they still have the ability to acquire land and expand in a recession, which shows that these companies have less risk, and at the same time, they can come up with better assets and prices at this time. It shows that he has higher profitability and expected rate of return.

The core logic of this has three points: first, these enterprises themselves have advantages, alpha and low risk; second, it is feasible to think about this issue in terms of supply-side logic; and third, demand is recovering and rebounding. We have a positive view on this point, but we are also aware that this kind of positive is risky.

6. More optimistic about the Internet than new energy vehicles

Among growth stocks, we are most optimistic about the Internet rather than new energy vehicles for several reasons:

First, the core reason is the supply side. We believe that the most important factor determining the return on capital is not demand, but supply, and the competitive pattern determined by the supply structure. To put it more bluntly, it can be said that monopoly, or some degree of monopoly, is the core factor in determining whether you can make money or not.

According to this standard, the reason why we like the Internet is not that it can grow explosively, but that a clear competitive pattern has gradually begun to take shape after the integration and adjustment of the industry. In particular, the monopoly power of the best companies in the industry, that is, the most real monopoly power in the market, has been formed.

Its pricing power and profitability are very clear and can be evaluated, but by this standard to evaluate new energy vehicles or its industry chain, it may be difficult to meet this standard.

Second, demand. We have always treated the Internet as a consumer stock because we believe that basically all the elements of new consumption, including products, brands, channels, consumers, and even promotions, cannot bypass Internet companies. If we have confidence in future consumption, or in China's future development, then we will have confidence in the growth potential of the Internet sector.

Third, valuation and pricing. Even though the entire Internet company has rebounded a lot since March, if we look at it again, the current valuation pricing and implied rate of return are still high enough to be acceptable to undervalued investment strategies.

In terms of specific industry segments, whether it is short video or takeout consumer services, we think the core point is a clear pattern-operational hard capital investment and long-term capital have significantly decreased, and cash flow has significantly improved. Most of these companies have the opportunity to achieve a rebound in operating cash flow this year, which is a very good thing.

7. The performance-to-price ratio of Hong Kong stocks is very high, and the allocation is close to the 50% upper limit.

The performance and rebound of the Hong Kong stock market as a whole lags behind that of A shares, and the difference in its valuation and pricing has been further widened.

This includes not only traditional industries such as energy resources, oil, coal and electrolytic aluminum, but also valuable industries such as banking and real estate, as well as Internet, medicine and technology growth stocks that we are more interested in. From the value investment perspective of low valuation, we think that Hong Kong stocks are very attractive.

At the transaction level, the poor performance of Hong Kong stocks has something to do with the outflow of foreign capital, but now domestic policy is turning and the worst is over.

More importantly, overseas factors, including restrictions on American and even global companies investing in Chinese companies since the Trump era, also include the so-called political correct constraints of ESG, as well as the impact of differences in accounting systems. This factor may also be fully digested and reflected incisively and vividly on the outflow of the transaction.

Eventually, capital will flow to places with the best fundamentals, the highest prices and expected returns, and the smartest money will come in, and this change may be happening, so we have a very positive view of the market. American asset management companies, represented by Qiaoshui, are increasing the amount and proportion of Chinese assets, especially Hong Kong stocks.

On the whole, Qiu Dongrong's views are shown in his position, or more knowledge and deeds are consistent with words and deeds, those who are interested might as well review it.

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