Original title: How to face the stock market crash? The 20-year resumption of the A-share bull stock gene, the most bullish soaring 340 times! Why do medicine and consumption dominate for so long?Look at the TOP50 strongest list
Investment Little Red Book—Issue 52
“Bill Gates raised his arms and shouted.
Recently, A-shares and Hong Kong stocks have fallen sharply, and many White Horse and Big Bull stocks have fallen. How should investors deal with it?
In investment, if you observe the time dimension of 20 years, the element of luck will be greatly reduced, and the laws and essence behind the complicated phenomena will emerge.
This issue of Securities Times. The “Investment Little Red Book” column of China Securities Brokers has re-listed all A-share stocks that have been on the market for 20 years, and counted the top 50 bull stocks with the largest increase in the past 20 years. Among them, Kweichow Moutai, Shanxi Fenjiu, Hengrui Pharmaceuticals and Gree Electric’s gains exceeded a hundred times, among which Kweichow Moutai soared nearly 340 times, which is the king of bull stocks.
What are the genes of the bull stocks? Wanhua Chemical has risen 81 times in the past 20 years and ranks 6th among the top 50 largest stocks. Just as Wang Guobin, the former chairman of East Securities Asset Management, who became famous in Wanhua Chemical Investment, once summed up: “Lucky industry, capable management, relatively reasonable valuation”.
The statistics of the Chinese reporter from the brokerage firm also show that the industry attributes of bull stocks are obvious. 13 food and beverage stocks and 9 biomedical stocks are among them, accounting for 44% of the 50 bull stocks in the past 20 years. Optional consumption such as automobiles and automobiles are regarded as major consumer sectors, and the proportion of medical biology and major consumer sectors will rise to 54%.
The data also shows that in the past two decades, Davis double-click has occurred in both medical biology and food and beverage, and the long-term stability of performance has brought about a continuous increase in valuation. Twenty years ago, the average price-earnings ratio of the medical biology and food and beverage sectors was around 15 times, and even Hengrui Pharmaceuticals was valued at only 30 times, but the current valuations of these two major sectors are both over 40 to 50 times.
On a good track, a good jockey also plays a vital role. From the perspective of 20 years of extension, the gap between the investment returns of leading stocks and non-leading stocks is huge. Wanhua Chemical and Hengrui Pharmaceutical’s growth rate is several times higher than that of other outstanding companies in the same industry.
Lucky industry: medicine, food and beverage stocks come out in large numbers
Looking at the time dimension of 20 years, medicine and food and beverage accounted for half of the top 50 stocks.
Food and beverage ranks the largest sector of bull stocks, with 13 stocks ranking in the top 50. Liquor accounted for 8 seats, Kweichow Moutai increased 340 times, Shanxi Fenjiu increased 140 times, Luzhou Laojiao increased 93 times, Wuliangye increased 64 times, Gujing Gongjiu increased 34 times, Shede Liquor increased 27 times, Jiugui Liquor It has risen 21 times, and Shuijingfang has risen 17 times.
In the food and beverage sector, companies that are well-known and do not deviate from their main business for a long time have considerable gains. For example, Yili shares have risen 47 times, Chongqing Beer has risen 38 times, Shuanghui Development has risen 23 times, Tsingtao Brewery has risen 16 times, and Chengde Lulu It has risen 13 times.
The pharmaceutical and biological sector is second only to the food and beverage sector, and is a place where many stocks have emerged. In the past 20 years, Hengrui Medicine has increased by about 120 times, Changchun High-tech has increased by 60 times, Tongce Medical has increased by 32 times, Yunnan Baiyao has increased by 30 times, Fosun Pharmaceutical has increased by 27 times, and Huadong Pharmaceutical has increased by 20 times. , Livzon Group has risen 14 times, Tiantan Biology has risen 13 times, and International Medicine has risen 12 times.
Coincidentally, Professor Jeremy Siegel from the Wharton School of Business has also counted the best-performing “survivors” among the original S&P 500 companies in the US stock market from 1950 to 2003. Surprisingly, two industries firmly occupy a dominant position: high-profile consumer brand companies and well-known large pharmaceutical companies. Among them, Philip Morris, a large tobacco company, has increased by 4,626 times in 54 years, and the pharmaceutical company Abbott Pharmaceuticals has increased by 1,281 times.
In addition to pharmaceuticals, biology and food and beverages, chemicals, home appliances, and automobiles are also sectors where bull stocks are concentrated. In the chemical sector, Wanhua Chemical rose 81 times, China Jushi rose 23 times, and Yanhu, Hengli Petrochemical and Shanghai Jahwa all rose more than 14 times. In the home appliance sector, Gree Electric rose 104 times, Haier Zhijia rose 15 times; in the automotive sector, Fuyao Glass rose 30 times, Changan Automobile rose 24 times, Yutong Bus rose 22 times, and Huayu Automobile rose 16 times.
In the military sector, Aviation Power, AVIC Xifei and AVIC Shenfei were among the top 50 stocks 20 years ago, with an increase of about 15 times. However, it is interesting that the main increase of these three companies comes from the increase in valuation. Their initial P/E ratios are only ten times, but the current dynamic P/E ratios are all over one hundred times, and the rise in stock prices is mainly driven by valuation.
Among the financial and real estate stocks, only Haitong Securities and Vanke were selected; in the mechanical equipment sector, Zoomlion increased by 18 times; in the computer sector, UFIDA and Baosight Software rose by 35 times and 22 times, respectively; in the electrical equipment sector, TBEA rose 14 times; in the electronics sector, Sanan Optoelectronics and Shengyi Technology rose 42 times and 17 times respectively.
Davis double-click behind bull stocks
In the past 20 years, China’s macro economy has undergone a series of major changes: China formally joined the WTO in December 2001, and China has become the “world factory”; in 2003, China’s economy and industrial structure changed from light to heavy. A leap forward; the property market surge that began in 2005; in 2009, China’s automobile production and sales surpassed the United States; in 2010, China’s GDP surpassed Japan for the first time, and China’s manufacturing output accounted for 19.8% of the world’s total, keeping the United States as a “manufacturing industry” The title of “The First Power” is in my arms…
Looking back, the past 20 years have been magnificent and great, and there have been two rounds of bulls and bears during the A-share period. The “Five Golden Flowers”, which are dominated by financial, real estate, coal, steel, and non-ferrous sectors, have also experienced strong rises. From 2013 to the first half of 2015, small and medium-sized market capitalization stocks that use M&A extensions as a catalyst have also risen. , But only medicines, food and beverages, etc. have the opportunity to cross the two rounds of bulls and bears.
The answer may already be doomed. As the management master Michael Porter said in the book “Competitive Advantage”, in any industry, the rules of competition are reflected in five types of competitiveness: the threat of new entrants, the threat of substitute products or services, and the buyer The bargaining power of suppliers, the bargaining power of suppliers, and the competition among existing competitors.
“In the five relatively mildly competitive industries, such as the pharmaceutical industry, soft drinks and database publishing, many competitors have obtained considerable returns. However, in industries that face one or several competitive pressures, such as rubber and steel With video games, although everyone works hard, few companies can win a higher rate of return.”
Michael Porter analyzed that the profitability of the industry does not lie in the product function, nor does it lie in whether the product can reflect the development of high-tech, but in the overall industry structure. Some seemingly ordinary industries are very profitable, and some seem to be very profitable. Bright, high-tech industries are not profitable.
Professor Jeremy Siegel also believes that the two sectors that performed best in the economy in the past half century (1950-2003) are the health care and consumer goods sectors, and their annual returns reached 13.76%. Compared with 13.36%, the revolution in communication methods has made consumers’ preferences destined to be dominated by the global media. Consumers, especially those in the high-income class, buy very similar things. The high-end shopping malls in Beijing, New Delhi and St. Petersburg are also surprisingly the same. The reputation and trust that brand manufacturers rely on are highly respected in developing countries. There is no reason to believe that this trend will not continue.
From the perspective of financial data, the pharmaceutical and food and beverage sectors have maintained high profitability for a long time. For example, in the liquor sector, due to the absence of the threat of new entrants, the industry structure is stable, none of the 18 listed companies lose money, and the vast majority of companies have maintained good profitability for a long time. Statistics show that since 2001, the average ROE of Kweichow Moutai has been 30%, and the average ROE of Shanxi Fenjiu and Luzhou Laojiao has also been above 20%.
Long-term sustained profitability has also brought a systematic improvement in the valuation of the food and beverage sector. For example, Kweichow Moutai had only a net profit of 328 million yuan in 2001, but in 2020 the company’s net profit reached 46.9 billion yuan, and the profit has increased by 140 times in the past 20 years; Kweichow Moutai’s initial P/E ratio is only 20 times, and the current dynamic P/E ratio is 40. Times.
In fact, the food and beverage sector was not sought after by the capital market 20 years ago. Their average price-to-earnings ratio was about 14 to 5 times, which was far lower than the average valuation level of the chemical, mechanical equipment, and computer sectors.
However, it is impossible for the capital market to ignore a sector with strong profitability for a long time. The long-term and sustained profitability of food and beverages has finally led to a systematic increase in valuation. The current median price-earnings ratio of the food and beverage sector is near 40 times.
Competent management
Competent management has widened the gap between companies in the “lucky industry”. From the perspective of 20 years, the gap between leading stocks and non-leading stocks in the same sector is huge.
In the chemical sector, Wanhua Chemical is far ahead, with an increase of 81 times in 20 years. In Wanhua Chemical, a small story has been widely circulated. In 1998, a set of equipment made a profit of 12 million yuan for the company. According to the new incentive method, the total bonus of the scientific research team was as high as 920,000 yuan. The total salary is only 2 million yuan. The company leader finally made a final decision: “Award! The cash will be issued as soon as it is retrieved from the bank!”
The engineer who led the team got 210,000 yuan. When he took the bonus home, his lover was terrified, “Where did you get so much money, don’t you have anything to do?” After finding out the whole story, the lover joked: ” In the future, you can work overtime every day, and I will take care of everything at home!” Inspiring talents with heavy rewards and protecting innovation with systems have made Wanhua famous in the industry and attracted a large number of outstanding talents.
Similarly, Hengrui Medicine has risen by nearly 112 times in the past 20 years, far away from the generic drug companies in the same sector.
In the 2020 annual report, Hengrui Medicine disclosed that in 2020, the company has invested a total of 4.989 billion yuan in R&D funds, an increase of 28.04% over the previous year, and R&D investment accounted for 17.99% of sales revenue, providing strong support for the company’s innovation and development.
Analysts said that even compared with international giants, Hengrui Medicine’s R&D intensity (R&D as a percentage of revenue) is not inferior. The top 10 pharmaceutical companies with the most R&D investment in the world have an average R&D intensity of 19%, which is only slightly ahead of Hengrui Pharmaceuticals. Among them, Pfizer’s R&D intensity is 16%, GlaxoSmithKline 13.5%, and Sanovi 16.7%, all of which are below Hengrui. Hengrui Pharmaceuticals is very cautious about profit release in its financial statements. It fully expense R&D investment instead of capitalizing R&D investment. The gold content of its profit and scientific and technological strength can also be seen.
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