Zhang Kun's latest quarterly report: "Market conditions" in his eyes are different from what most people think

The third quarter report of 2024 was the first collective "review" of public offerings after the A-share market "rebounded" on September 24.

Public fund managers will present a complete picture from perspectives to portfolios, from industries to individual stocks.

One of the leading fund managers at E Fund, Zhang Kun, also released his latest quarterly report on October 25.

Indeed, his views on the market, opportunities, and hot industries differ from many investors (including fund managers from other companies).

Outperforming Performance Benchmarks

In the third quarter, Zhang Kun's managed funds (excluding E Fund Asia Select Fund) generally significantly outperformed the performance benchmarks.

Taking his flagship fund "E Fund Blue Chip Selection" as an example, the net asset value growth rate of the fund during the reporting period was 15.11%, while the benchmark's return rate was 11.97% during the same period, outperforming by 3.14 percentage points.

Driven by strong performance, Zhang Kun's entrusted scale once again approached the 70 billion mark, reaching 69 billion yuan.

Although the 4 funds he manages are in a net redemption state, Zhang Kun's performance growth "offsets" the shrinkage of shares.

New Policies Expected to Stabilize the Economy

In previous rounds of quarterly reports, Zhang Kun emphasized more on the undervaluation of value. This quarter, he is noticeably more optimistic.

In the quarterly report, Zhang Kun believes that a series of policies introduced at the end of September are expected to stabilize the economy, break the market's continuous pessimistic expectations for the economy, and break the expectations of continuous downward revisions in corporate profits.

Specifically, in terms of policy, Zhang Kun pays particular attention to macroeconomic policies and real estate policies.

Regarding macroeconomic policies, he believes that the important meeting in September proposed: facing difficulties, firming confidence, effectively enhancing the sense of responsibility and urgency in doing economic work. Seizing key points, taking proactive actions, effectively implementing existing policies, and intensifying the introduction of incremental policies. In terms of monetary policy, lowering the reserve requirement ratio, implementing substantial interest rate cuts are worth paying attention to.

In terms of real estate, he mentioned that from January to August this year, China's new commercial housing sales area decreased by 18.0% year-on-year, the sales value of new commercial housing decreased by 23.6% year-on-year, and the national real estate development investment decreased by 10.2% year-on-year, based on historical data.

He also mentioned the series of policies introduced by relevant parties to promote the stabilization of the real estate market and control the increase in new commercial housing construction and optimize the existing stock. His emphasis on these aspects is quite significant.

Looking at Leading Companies from a Different Perspective

Zhang Kun also mentioned: Traditionally, investors tend to use "growth thinking" and "marginal changes" to view leading companies in the technology or consumer industries. Once there is a slowdown or decline in profit growth, anxiety and panic emotions are reflexively generated.

In fact, considering that these companies usually have a valuation premium in the past, i.e., expected excess growth, this reaction is somewhat reasonable.

At the same time, when looking at dividend-paying companies, investors tend to use "value thinking" and "absolute value" to consider these companies, taking into account the historical valuation discount of these companies, and investors usually can accept cyclical profit fluctuations.

However, after experiencing more than three years of reverse stock price changes, Zhang Kun found that the dividend yield levels of some consumer leading companies are already at the forefront of the entire market, exceeding a considerable number of dividend index component companies In this case, investors will have more dimensions to compare when analyzing these companies, such as comparing the ability to generate free cash flow, the financial position, and the management's willingness to distribute dividends with the components of the dividend index. In these dimensions, he believes that these consumer leaders are even higher than many dividend-paying companies.

Shareholder Returns Still Substantial

Zhang Kun also mentioned that considering shareholder returns - buybacks and dividends, the current levels of shareholder returns for some technology and consumer leaders are very high, both in absolute and relative terms.

He is also pleased to see that the governance level of more and more companies continues to improve, expressing a more determined commitment to continuously return value to shareholders.

If the stock price remains stable in the future, he believes that it may even be possible to see some leading companies halve their total shares 8 to 10 years later, which means that long-term shareholders can double their ownership percentage without spending extra money.

Although the stock price has risen at the end of the quarter, shareholder returns are still near historical highs, considering the low 30-year government bond yield, the difference between the two is undoubtedly at a high level.

"Market Master" with Ultra-Low Pricing

Zhang Kun believes that a series of policies introduced at the end of September are expected to stabilize the economy, break the market's continuous pessimistic expectations for the economy, and also break the expectations of continuous profit downgrades for companies.

Regarding long-term development prospects, it has been discussed many times in previous periodic reports, so it will not be repeated here.

In short, as long as one believes that the living standards of the people will be better in 10 years, technology and consumer leading companies will emerge from the current phase of growth difficulties and re-enter a growth period. In the current environment, the market master has rarely quoted a price, allowing investors to buy shares of excellent companies at a cheap price.

Heavy Holdings of Alibaba in the Third Quarter

Although liquor stocks have risen, and the funds managed by Zhang Kun have also risen, it may not sound like much.

But looking at the holdings, he relies not only on liquor stocks.

The four funds he manages maintained a relatively stable stock position in the third quarter and made adjustments to the structure. In the E Fund Optimal Selection Fund, E Fund Blue Chip Selection Fund, E Fund High-Quality Enterprise Three-Year Holding Fund, optimizations were made in industries such as technology and consumer; in the E Fund Asia Selection Fund, optimizations were made in industries such as technology and finance.

Although the weight of Hong Kong stocks has relatively decreased in the E Fund Blue Chip Selection Fund and the E Fund High-Quality Enterprise Three-Year Holding Fund, this should be the result of structural adjustments, and he has not reduced his attention. Because looking at the heavy holdings, significant changes come from Hong Kong stocks.

Taking the E Fund Blue Chip Selection Fund as an example, Alibaba-W and YUM CHINA entered the top ten heavy holdings, while Hong Kong Exchanges and Clearing, and Belle International exited.

The difference is that compared to the mid-year report of this fund, YUM CHINA was previously ranked 12th in the mid-year holding list, and Zhang Kun did not increase his position in the third quarter, it entered solely based on the rise.

As for Alibaba-W, Zhang Kun really bought it as a heavy holding in the three quarters of this year, there was not a single share in the mid-year report. Moreover, it quickly became the second largest heavy holding.

In addition, Shanxi Fenjiu has also been significantly increased holdings.

Increasing holdings in Korean stocks amid decline

Data shows that the E Fund Asia Select Fund has further increased its holdings in Korean stocks.

Looking at the top holdings, SK Hynix Inc. has replaced Asmae to become one of the top ten holdings of the E Fund Asia Select Fund.

SK Hynix Inc. is a South Korean company mainly engaged in the production and sale of semiconductor memory.

This stock was ranked 16th in the mid-term report, but after a significant increase in holdings, it became one of the top ten holdings.

Similarly, Samsung, which was heavily held before, also "buys more as it falls" in the third quarter.

This may be one of the reasons why the E Fund Asia Select Fund is the only fund under management that has underperformed the benchmark