mark。 Thiel shared in the book the Investment habits of Buffett and Soros that in the long run, stable investment performance not only comes from accurate judgment of future market rises or falls, but also depends on whether investors have established a complete investment system or system. Good investment performance comes not only from correct views and expectations, but also from the comprehensive influence of many factors, such as investment cognition, asset allocation, portfolio construction, position management, trading strategy, tracking control, error correction mechanism and so on. I understand it as a "correct thinking framework", and then further find the investment method that suits you.

The thinking framework of "extraordinary thinking"

Northbound funds, known as "smart money", have always been the weather vane of the market. since the opening of the dry port in 2014, by the end of August, the cumulative inflow of northbound funds has reached more than 100 billion. People have to pay attention to such a large amount of capital. But is it really smart money? How much money did it make in the Chinese market? How can ordinary investors get the same level of return as northward funds? Let's take a look at two sets of data:

From the perspective of market value, northbound funds have accumulated inflows of 1.116 trillion yuan since the opening of the Land Stock Channel on November 17, 2014. at present, the total market value of the latest A-shares reached 1.9607 trillion yuan, an increase of 844.7 billion yuan.

From the perspective of investment return, the China Securities Interchange A-share Strategy Index, which reflects the ability of foreign investors to select stocks and the overall performance of northward funds holding stocks, has far exceeded the partial stock mixed fund index and the CSI 300 index since its establishment:

The investment method of "finding another way"

With the gradual opening of China's financial reform, foreign investment has been paid more and more attention by domestic investors, and the investment methods and concepts of A-shares have been constantly updated and iterated, including value investment, growth investment, trend investment and theme investment. some reverse investment, some long-term holding, some band operation. No matter which method, if the framework is correct and effective, as long as you strictly make investment decisions under this framework and strictly implement it, then your long-term investment performance will be the same. Since northward capital is called "smart money", which really represents the level of foreign investment in China, how can we use the characteristics of northward capital to refine the investment method of "smart money"?

The first advantage of strategy: leader configuration strategy

Since 2017, the concept of leader has been widely put forward in the Chinese market. Starting from October 2016, the absolute undervaluation began to fade out of the historical stage, ushering in the core assets, white horse stocks, which have had a very excellent performance since 2017.

For example, the sales of public offering funds are very hot this year, with consumer leaders, technology leaders, medicine leaders, and even brokerage leaders. All kinds of high-quality tracks are repeatedly mentioned, in fact, they all represent the same meaning. However, after comparing the heavy positions of domestic funds with those of foreign investors represented by northward funds, it is found that the differences in shareholding are also from the leading point of view, starting from the first quarterly report in 2017. until this year's China News, listing the differences of the top 50 companies, you will find that the number of stocks with differences is maintained at 333.39. This difference actually represents the allocation value of foreign investment style itself to mainland investors.

First of all, take a look, the difference is so big, will the performance be good? If we select all 43 major stock investment funds that have won the Taurus Award in 2020, it represents the most stable and outstanding public offering fund products in the past few years. The absolute return or risk-adjusted return of CSI A-share strategy index is higher than that of Taurus Fund. combined with the previous comparison with the CSI 300 index, it further illustrates the investability of the product.

The second advantage of the strategy is to favor industries in which China has a comparative advantage in the world.

For public offering funds, in many cases, industry preference is part of the largest excess return to the whole portfolio, such as household appliances, food and beverage, medical biology, many funds are over-allocated.

First of all, China is an infrastructure power, around major infrastructure, there are three industries that have been over-allocated by overseas investors for a long time: 1, building materials, such as Anhui Conch Cement; 2, industrial machinery, such as Sany heavy Industry; 3, transportation, such as Shanghai airport. It may be the long-term high-end companies of overseas investors, such as the non-transportability of cement, that no company in the world can directly replace, and such companies are actually in the overweight portfolio for a long time.

Secondly, let's look at the low-end part, the most prominent is the electronic stocks. Electronics may be the industry with the greatest difference between domestic and foreign investors in their industry choices, because Chinese people look at their products and logically they are more domestic substitutes. but for overseas investors, there are many high-end manufacturing companies that can choose and replace them, such as Samsung, NVIDIA Corp and Taiwan Semiconductor Manufacturing Co Ltd. So to a certain extent, it has a low configuration for the electronic plate. But this situation may change in the future with the improvement of domestic technology and international competitive advantage.

Cyclical plates, both upstream cyclical products and large financial cycles are continuously low-equipped. There are two reasons, the first is financial instability, and the second is the premium level of AH.

The distribution of listed companies in China determines that when building different combinations, this combination will have a natural bias. Take the three hottest sectors: the consumer sector, the technology sector and the pharmaceutical sector, to list all the listed companies in China. Whether in A-shares in Hong Kong or overseas, 68.34% of consumer companies are listed in A-shares. Such companies contribute 81% of the market capitalization of all consumer sectors, indicating that most of the head companies in the consumer sector are actually listed in A-shares.

Let's take a look at the technology sector. at present, 77.61% of the technology companies are listed on A shares, but they only contribute more than 40% of the market capitalization, indicating that a large number of leading technology companies are still listed in Hong Kong stocks and overseas.

The pharmaceutical sector is relatively balanced, a large number of companies are listed in A shares, the number and market capitalization relatively match.

If you look for such a combination of China's advantages among A-share listed companies, you will find that it will naturally be biased towards consumption and medicine.

The third advantage of the strategy: pay more attention to the balance between growth and stability

From the perspective of individual stocks, after a large number of studies, if we use a financial index to measure the preference of foreign investors for companies, then it should be ROE, accurately speaking, the stability and predictability of ROE. Here you can build an indicator to describe the predictability of a company's finances. That is, the non-linearity of ROE in the past three years, that is, radians, we all know that the more linear the annual index, the easier it is to deduce the third one according to the first two values. If the Radian increases, the financial unpredictability will be enhanced. If the ROE levels for 2017-2019 are calculated in terms of northbound funds, fund heavy positions and major broad-base indices, the results are telling.

If this indicator is used in the heavy stocks of northbound funds and funds, as well as in the Shanghai 50, Shanghai and Shenzhen 300 and gem indices, the larger the absolute number, the greater its Radian.

The value of foreign heavy position stocks is only about 12%, the value of public offering fund heavy position stocks is close to 24%, the Shanghai Stock Exchange 50 is close to 40%, Shanghai and Shenzhen 300 is close to 50%, and the value of gem has reached 60%. If you take a further look at all the ROE values, you will find that there are 50 companies with a three-year ROE, none of them is negative, and every company pays dividends.