Two major changes in 2021: the Mao index has become the Ning index, the traditional cycle return, and Kaifeng Investment Chen Chao: perpetual n and growth g

Kaifeng Investment Chen Chao: The market seems to have undergone major changes in 2021, the Mao index has become the Ning index, the hugging group of the past four years seems to have disintegrated, and the new hugging group seems to be forming. This change is often called a style change, and the change is the biggest change in the market. The changes in the market are never achieved overnight, long and short, let's try to use 2021 as a dividing line, through the changes in the grass snake gray line in the market, share some of my superficial views on the market.

Perpetuality of n and growth of g, from the consumption of mao index changes to the manufacturing nin index. The consumer assets represented by liquor, with the brand moat established for many years, provide a guarantee for perpetuity n, and the market's expectation of price increases for some consumer goods also provides enterprises with the expectation of growth that can outperform inflation. Even in 2021, when some consumer stocks have performed mediocrely, the value of the brand, the ability to raise prices, the expectation of sustainability and excellent cash flow performance still exist in the investment value of consumer leaders, which must be recognized in investment. The manufacturing industry represented by the Ningde era began to change quietly in 2019: in the traditional industry, a number of Chinese manufacturing companies have got rid of a single cost advantage and have a stronger brand recognition in the global market. Thanks to the Chinese government's strong control of the epidemic, Chinese manufacturing enterprises have once again seized the moment of crisis and turned crisis into opportunity. In fact, in the past 5 years, the manufacturing leaders in many segments have repeatedly grasped the crisis moments of the industry supply chain and successfully entered the core supplier list.

Objectively speaking, these changes come in part from the cyclical upward movement of the manufacturing industry itself. And if we carefully study one by one, we will find that the complete layout of the whole industrial chain of China's manufacturing industry, the abundant engineer dividend and China's huge test field effect have jointly created an unparalleled leap in the manufacturing level and response speed of Chinese manufacturing. The capacity of Chinese manufacturing is still spiraling upwards, and the emerging segments of China's manufacturing industry are spreading to both ends of the smile curve. Chinese manufacturing companies have become the cradle of growth, in which we will be able to find the expansion of g, the continuation of n and the steady level of cash flow.

There is nothing new under the sun, and the development of the emerging manufacturing industry represented by the power battery industry chain will not get rid of the development law of traditional manufacturing, but standing on the shoulders of China's traditional manufacturing experience and characteristics, the perfect acceleration replicates the advantages of Chinese manufacturing. From an investment perspective, consumption or manufacturing is not a fundamental choice, but a pricing choice, which is really an exciting era.

I see the question of whether the large-cap blue-chip or the mid-cap growth is more of a result. This outcome is determined by a combination of the fundamentals and pricing levels we discussed above. Because of my personal upbringing, I am more inclined to explain the style problem from the middle and micro levels. Compared to top-down macroscopic judgments, bottom-up, mid-micro inductive deduction provides me with better certainty. In Kaifeng, we have more dimensions – top-down macro, medium and micro from listed companies, higher frequency information changes from commodity teams, and structural perspectives from quantitative teams. When the four points of view are united, whether it is a large-cap blue chip or a small and mid-cap, we can always put the most full position in the pool with the highest certainty.

The second biggest change between 2020 and 2021 is the return of the traditional cycle. Although the market experienced the ultimate deduction from August to September and then made a sharp adjustment before the holiday, we still believe that different segments of the cyclical industry are facing changes in the short, medium and long periods. The changes in the short and medium term come from the mismatch between supply and demand, and more importantly, the huge price elasticity and resilience brought by the supply side, and some sectors may have broken the ceiling of traditional pricing, which may be brought about by the resilience of demand, or by the rematch of supply and demand structure and policies. We want to carefully assess the expectations of returns from all assets without prejudice, which is called the "everything cycle".

In the era of large asset management, it is not only reflected in the scale of participation but also in the structure of participation. We are entering the era of big asset management, which has also added more room for growth for the industry. But at the same time, we must also be aware that supply and demand are expanding in tandem. The market has found many reasons for the pre-holiday decline, more from the supply side of the asset management industry. Such a change requires investors and trustees to grow together, extend the cycle for a long time, and seek a satisfactory risk-adjusted return.

Biography:

Chen Chao Kaifeng Investment Stock Investment Manager

He holds a bachelor's degree in finance and a master's degree in accounting from Wuhan University

Deeply ploughed the manufacturing industry for ten years, fully understand the smile curve of China's manufacturing. He once worked in the equity investment department of Ping An Pension Insurance and served as the leader of the high-end manufacturing team.

This article originated from the Financial Circle Network