Wang Rui, Director of Equity Investment Department and Fund Manager of CITIC Prudential Fund. 13 years of experience in the securities industry and 8 years of experience in fund management. Combining medium-level industry comparison and bottom-up, we will strive to tap growth stocks with the potential for “double in three years” profit growth space, balance the layout, build a gradient investment portfolio, and strive to achieve a compound return of 15% in the medium and long term .
Recently, Wang Rui, Director of the Equity Investment Department of CITIC Prudential Fund, shared a photo he recently took with a reporter from China Securities Journal in an interview: These nine big characters are written on a wall-“Take the right path and make slow money , not afraid of difficulties.”
“When I went to a listed company for research some time ago, I saw these nine big characters written on the company’s “slogan wall”. After obtaining the company’s consent, I took this photo. This word has reached my heart.” Wang Rui showed this photo to the reporter with a smile.
In the eyes of many investors, Wang Rui’s performance seems to lack a little sharpness and a little extreme. When asked this question, he said that whenever he wants to follow a hot spot or follow a theme, the investment framework he sticks to will send out a warning. When faced with the greed, temptation and fear in his heart, the investment goal he sticks to is like an anchor, helping him always see the way ahead in confusion and difficulties. “In fact, there is no distinction between good and bad investment frameworks. The important thing is that no matter what situation a fund manager encounters, he must ‘make a decision before acting’ and stick to his own investment philosophy. At the same time, investors also need to understand the investment framework of the fund manager. and product style, choose the fund product that suits you best,” Wang Rui said.
On June 1, Wang Rui, who has 17 years of experience in investment research, once again assumed the position of manager of CITIC Prudential Foresight Growth Hybrid Fund. He said that he will unswervingly select investment targets in accordance with the goal of “doubling in three years”, and at the same time build a gradient investment portfolio, hoping to strive for long-term and stable returns for investors in the turbulent equity market.
Sustained profit growth is the biggest driving force
Talking about his own investment beliefs, Wang Rui believes that in the medium and long term, only the continuous growth of profits is the biggest driving force for the rise of stock prices. “For example, if we find that although the price of company A has fluctuated in the short term, its overall enterprise value has grown steadily, while company B has some thematic investment opportunities, but its performance does not show a significant upward trend in the long run. So overall, Company A must be our important tracking target.” Wang Rui said.
“If you want not to be affected by the staged market, you need to have a clear target system, and use this as an anchor to be unwavering.” Wang Rui said that this anchor is to choose investment targets according to the goal of “doubling in three years”. At the same time, build a gradient investment portfolio. In his view, emerging markets like China are full of investment opportunities for “doubling profits in three years”.
Specific to investment research ideas, Wang Rui said that he will start from the comparison of medium and medium-sized industries, and look for individual stock opportunities from the bottom up. “First of all, I will start from the perspective of industry analysis and select an industry with relatively good space and growth rate within 2-3 years.” Wang Rui said that information such as industry growth rate will become an important reference for selecting individual stocks, but The ultimate goal is to find individual stocks from these industries that meet the requirement of “doubling profits in three years”, while minimizing macro trading operations.
On the whole, Wang Rui always strictly abides by his own “3+1” stock selection strategy: “3” refers to space, time and margin of safety. Specifically, it is based on the time dimension of about three years, the spatial dimension of double the profit, and uses a relatively conservative valuation system to predict the margin of safety for stock selection. And “1” refers to the one-vote veto operation for companies whose governance structure does not meet expectations.
In the process of portfolio management, Wang Rui strives to build a gradient investment portfolio. This combination is like a football team, with forwards, midfielders and defenders indispensable. Wang Rui said that this gradient combination has played a better role in protecting the fund. “Each stock is like a seed, which will go through different stages such as germination, growth, and harvest. What I have to do is to sow different types of seeds at different time periods, so that my portfolio can be used in different stages of the market.” The seeds’ have entered the harvest period, and strive to maximize the smoothing of portfolio fluctuations.” Wang Rui said.
In addition, balanced allocation is also one of Wang Rui’s important strategies. “In order to control the volatility of the portfolio, I generally allocate funds in 6-7 industries, and the allocation ratio of a single industry or direction generally does not exceed 20%.” It shows that at the end of the first quarter, its investment targets came from multiple industries such as new energy, semiconductors, chemical pharmaceuticals, and new materials, and the top ten major holdings accounted for only 35.49%.
Find companies with reasonable odds
“Investment is actually a constant trade-off between winning rate, odds and efficiency.” Wang Rui explained, “It is impossible for a company to meet the three requirements of winning rate, odds and efficiency at the same time. The winning rate represents the future of the company. Profitability, the odds represent the margin of safety of the stock, and the efficiency represents the time to realize the performance.” Wang Rui said that he will give priority to the two elements of winning rate and odds, appropriately sacrifice efficiency, and use the time dimension of about two to three years to develop Measure the rate of return, and try to make the winning rate and odds match the investment goal as much as possible.
Because of this concept, the value growth style is fully reflected in Wang Rui’s investment portfolio. “Because we choose to keep the winning rate and odds at a high level as much as possible while sacrificing some efficiency, I not only value the growth of the company, but also the rationality of the company’s valuation.” Wang Rui said, “We will Guided by the comparison of the expected return space, the company’s industry status and quality are necessary conditions for buying, and the expected return space that meets the requirements is a sufficient condition.”
Speaking of this, Wang Rui cited a case that satisfies both odds and efficiency—the photovoltaic industry. “In the long run, the photovoltaic industry may still be a direction with a high winning rate. Its profit growth rate is very fast. Many high-quality companies are expected to achieve a relatively large increase in profit in the next three years, and their valuations are mostly low. Only It is about 10 times. Therefore, this industry is very attractive both in terms of winning rate and odds, but there are big differences among people on when the efficiency of this industry will be realized.” Wang Rui said, “ But from a mid- to long-term perspective, I think the time for the performance of the photovoltaic industry will become clearer, and there are a large number of stocks with both winning and odds to tap in this industry.”
Also because of this choice, Wang Rui said that he sometimes misses some booming industries, because according to the investment philosophy of taking into account both winning and odds, these booming industries seem a bit too expensive. Every time he encounters the temptation brought by a booming industry, for Wang Rui, it is a re-examination of his self-investment framework. Facts have proved that although the investment portfolio is not outstanding in terms of performance sharpness because it missed many booming industries, in the long run, Wang Rui’s products may have truly achieved stable and long-term growth. Take the CITIC Prudential Innovation Growth Hybrid A under his management as an example. According to Choice data, as of May 12, the product’s return rate of more than four years after its establishment was 193.46%, with an annualized rate of return of 28.56%, ranking 13/2074 in its category.
Focus on AI and new energy fields
Wang Rui said that from a macro perspective, the current market pricing contains a relatively reasonable return on investment. “With the 10-year U.S. bond rate peaking, the Fed’s interest rate hike cycle coming to an end, and a series of precise and powerful domestic monetary policies gradually introduced, market liquidity has become more abundant.” Wang Rui said, “In terms of fundamentals, with the The economy stabilized and picked up in the first quarter, GDP growth exceeded expectations and recovery, infrastructure and manufacturing investment may be one of the main drivers of economic growth.”
In Wang Rui’s view, the current overall valuation of A shares is still in the mid- to long-term low range, and the equity market has great potential. Wang Rui said that most of the attention in the market is currently on the field of artificial intelligence. He also believes that artificial intelligence technology will bring about great changes in human production and lifestyle, and will maintain sufficient research and close follow-up. However, except for the hotspot sectors, other sectors are generally priced at relatively low prices for a long time after undergoing rapid adjustments, such as new energy, military industry, new materials, and pharmaceuticals, which deserve long-term attention.
Regarding the new energy industry, Wang Rui mentioned the two subdivisions of new energy vehicles and solar storage. In terms of new energy vehicles, Wang Rui said, “This field may still have room to double in the next three years. Relevant data show that the current global penetration rate of new energy vehicles is less than 15%, and markets such as Europe and the United States will continue to grow in the next 2-3 years. Rapid development is expected. With the increasing number of new energy vehicles in the world, new investment opportunities will be born in markets such as charging piles and battery recycling. In addition, continuous innovation of new technologies will also bring more The opportunity of ‘from zero to one’, new technologies represented by sodium batteries and 4680 large cylinders are expected to achieve ‘zero to one’ breakthroughs this year and next year.”
In terms of photovoltaic storage, Wang Rui believes that the industry has a very broad space, and in the future, attention can be paid to the development of new technologies and new energy power generation and consumption. “We predict that the industry’s installed capacity will exceed 1,400GW in 2030, which is 5-6 times that of 2022. In addition, with the increase in installed capacity, more opportunities will emerge in areas related to consumption, including energy storage, power grid transformation, and hydrogen energy. .” Wang Rui said.
In terms of military industry, Wang Rui predicts that military spending will continue to grow rapidly in the future, and various incentive policies will also promote the continuous release of industry profits. “In 2023, my country’s defense expenditure budget will increase by 7.2% year-on-year, and the proportion of my country’s defense expenditure in GDP still has a large growth space compared with the world‘s major economies. As the world enters a period of high growth in defense expenditure from 2023, my country’s modern weapons and equipment R & D and production It will also accelerate, and it is expected that the growth rate of defense spending in the future may gradually expand in line with global trends.” Wang Rui said, “In addition, with the advancement of the reform of state-owned enterprises, the coverage of equity incentives for military central enterprises continues to expand, and the intensity of professional integration continues to strengthen. The market has received good positive feedback.”
In terms of medicine, Wang Rui mentioned the investment opportunities in the innovative medicine and traditional Chinese medicine sectors. “In terms of innovative drugs, judging from the current situation of medical insurance negotiations, a simple renewal rule will be added to medical insurance negotiations in 2022, and the success rate will hit a record high of 82.3%. With the support of medical insurance policies, domestic innovative drugs are worth looking forward to.” Wang Rui said , In terms of traditional Chinese medicine, as the development of traditional Chinese medicine rises to a national strategy, the industry is expected to usher in a “Davis double-click”. In addition, the “Special Provisions on the Administration of Registration of Traditional Chinese Medicine” will be implemented on July 1, which means that the rules for the development of new Chinese medicines will become clearer and clearer.
In terms of new materials, Wang Rui said that technological iteration and domestic substitution are the two driving forces for the new materials industry in the future. “This includes aviation, aerospace, semiconductors, military industries, etc., all of which have demand for new materials. The combination of demand and domestic substitution will create a lot of investment opportunities for individual stocks.” Wang Rui said.
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