Rebirth of the Capital Legend

“Focusing on the core themes of the market is definitely the right approach,” Zhao Qiang said. “The key is how to select the core targets. Both of you feel that the overall investment trend in the market is changing, gradually shifting from small and mid-cap concept stocks to large and mid-cap blue-chip and growth stocks. However, the market trend always lags behind the stock price reaction.”

Although the core sectors of the major consumption and infrastructure sectors, such as liquor, white goods, retail department stores, food and beverage, real estate, construction and decoration, building materials, and consumer electronics, are currently the most stable, have the most accumulated major funds, and have the most reasonable stock structure.

However, in the short to medium term...

The leading stocks in these sectors have largely reflected this year's expectations.

At the same time, the stock price has also risen significantly from its bottom.

Many stocks, such as Moutai, Wuliangye, Luzhou Laojiao, Gree Electric Appliances, Haier Electric Appliances, Midea Group, Conch Cement, Kewan Real Estate, Gemdale Group, Poly Real Estate, and a host of other leading stocks in various industries with "China" in their names, have risen by at least 50% from their bottom.

In other words, the number of investors who have accumulated profits in these leading stocks in core industries is already quite large.

In addition, overall market liquidity is limited.

Despite the continued outflow of funds from many active capital groups and major institutional funds in other main market sectors, these outflowing funds are continuously converging on the main sectors of large-scale infrastructure and large-scale consumption.

However, I think it would be quite difficult to open up even higher spaces.

Therefore, given that the overall market has consistently failed to establish a sustained upward trend, I feel that continuing to invest in leading stocks in the consumer and infrastructure sectors will not yield significant profits or generate substantial excess returns. Of course, outperforming the market is still highly probable.

But our goal is not just to outperform the market.

Therefore, there may still be difficulties in selecting specific targets!

The core themes of the market are something most investors are aware of; however, which specific stocks will perform well and which have significant upside potential still require careful analysis.

"In terms of stock selection logic..." Sun Chengyu thought for a moment and continued Zhao Qiang's words, "Generally speaking, the selection is done from top to bottom, first the main theme, then the industry, and then the specific stocks."

As for the main storyline, there's no need to elaborate.

Choosing from the two main sectors of large-scale consumption and large-scale infrastructure is definitely the safest approach.

Among the two main sectors of consumption and infrastructure, it is clear that the sectors with the most concentrated investment by major funds, the most active buying, and the clearest overall future prospects are liquor, white goods, real estate, and the real estate industry chain.

In fact, the liquor and white goods industries are also strongly linked to the recovery of the real estate market.

Among these sections.

Core leading stocks, such as Kweichow Moutai, Wuliangye, Luzhou Laojiao, Conch Cement, Gree Electric Appliances, Midea Group, Haier Electric Appliances, Kewan Real Estate, Poly Real Estate... these stocks were definitely snapped up by various funds in the market the moment the industry's fundamentals showed an expected reversal.

In other words, these leading stocks in core industries definitely attract the most attention from investors.

Since there are many people paying attention, everyone is digging deep into these stocks.

Therefore, these stocks are unlikely to experience significant expectation gaps or generate high excess returns.

Besides these industry leaders and heavyweight stocks.

Among these major industry sectors, there are actually many second- and third-tier growth stocks worth exploring.

After all, as the industry's fundamentals reverse and the overall market supply and demand continue to expand, the leading companies in the industry can take the largest slice of this increased pie by leveraging their scale advantage.

However, even these industry leaders cannot finish eating up this larger pie.

Since we can't finish it.

Therefore, the remaining portion of the pie, or market share, will naturally fall into the hands of some similar second- or third-tier companies.

Therefore, there is definitely room for in-depth exploration here.

For example, second- and third-tier liquor brands in the liquor sector, such as Jincheng Fenjiu, Gujing Gongjiu, and Yanghe Brewery, as well as second- and third-tier brands in the white goods sector, such as Robam Appliances and Supor, have all performed well, and because they have not received much attention, their expectations have not been fully priced in.

Another example is the entire real estate industry chain.

Previously, funds from "Fuxing Road" and "Huayi Capital" discovered Oriental Yuhong, as well as Huaxin Cement and Huaxin Building Materials, which have been performing strongly recently, and Taihe Shares and Jinke Shares, which have seen a surge in the real estate sector in the past two days.

There are still a lot of targets to choose from here.

Of course, I believe the most suitable stock selection strategy is based on the current fundamental shift in the overall investment style of the market.

The most explosive growth potential still lies in those stocks and industry sectors that have not previously received concentrated attention from funds and whose fundamentals have just shown signs of a turnaround.

After all, the fundamental driving force behind rising stock prices is...

It refers to the size of the expectation gap.

The greater the difference between expectations and reality for a stock, the greater the potential for its stock price to surge.

However, finding these kinds of turnaround growth stocks in the market is quite difficult. After all, we are not institutional investors with abundant funds and extensive information channels. We cannot obtain much first-hand information about companies, nor can we track changes in industry fundamentals in real time.

"If we're talking about a turnaround, the steel and coal sectors should fit the bill, right?" Old Qian in the group pondered for a moment, and thought Sun Chengyu's words made a lot of sense. He continued, "After continuous supply-side reforms and capacity clearing, the steel and coal sectors now seem to be experiencing further concentration of capacity, while the industries are recovering and supply and demand are reversing."

Especially the coal sector.

After experiencing a continuous collapse and decline in coal prices over the past two years.

With the introduction of a series of regulatory measures by the National Development and Reform Commission, the control and profit concessions for thermal power, and the further development of the economy, the demand for energy in the whole society will continue to increase in the future.

Currently, this is due to the vast majority of investors.

Affected by the continuous collapse and decline in coal prices in previous years, the outlook for the entire coal sector is very pessimistic, and expectations are quite low.

This creates a good expectation difference.

In addition, the industry has undergone capacity clearing and concentration following supply-side reforms.

As the industry recovers and demand increases, and the supply-demand relationship reverses, first- and second-tier companies in the coal industry should gain a larger share of the market.

From extreme pessimism to subsequent sustained optimism.

At the same time, with the continuous improvement of performance, I think there will be good medium- to long-term investment opportunities here.

Looking at the stocks in the entire coal sector, Shenhua Coal Industry is currently trading below book value, which means it is undervalued.

Other second-tier coal giants, such as Jincheng Coal Industry and Yanzhou Coal Industry, also have their stock prices still at historically low levels.

These stocks should all offer high value for money.

I remember institutional investors often using the term "Davis Double Play" in market analysis. This means that the valuation repair itself, coupled with the industry fundamentals reversal and the resulting growth in scale and performance after changes in market supply and demand, will lead to a simultaneous surge in both performance and valuation.

If, in the future, the earnings of these stocks can double or triple within three years.

Then, add to that a doubling of the valuation.

Then there would be four or five times the space.

"If we add the continuously increasing dividend-paying ability, the expected rate of return will be even more considerable. So, in a way... it's not less profitable than constantly engaging in short-term speculation." "Shenhua Coal Industry stock is really good." Sun Chengyu, hearing Lao Qian mention the steel and coal sectors currently overlooked by most investors, agreed with his analysis. After a moment's thought, he continued, "It feels like it's worth positioning ourselves in advance, waiting for the right opportunity. Everything is cyclical. After extreme pessimism, as long as the industry doesn't disappear and there are no definite substitutes in the future, then a cyclical reversal is inevitable. The overall supply and demand changes in the market, coupled with the changes in capacity concentration after capacity clearing, are definitely a long-term positive for a core leader in the coal industry like Shenhua Coal Industry."

“Old Qian’s logic is indeed sound,” Zhao Qiang said. “However, judging from the current market reaction, it is clear that the expectation of a fundamental reversal in the steel and coal sectors, as well as the reversal of the supply and demand relationship, has not yet been widely accepted, and there are no obvious signs of major funds accumulating positions and controlling the market.”

Sun Chengyu smiled and said, "That's not surprising. Generally speaking, during the downturn of a cycle, when everyone is extremely pessimistic, investors, both inside and outside the market, tend to be quite slow to react. However, once the earnings report comes out and the certainty of a reversal appears, the stock price will rise very quickly."

It's highly likely that adjustments that would normally take six months or a year can be fixed in just one or two weeks.

I think that, currently, Shenhua Coal Industry stock...

Buying near the net asset value, coupled with dividends, means that even if the supply and demand relationship in the coal industry takes time to reverse, the downside potential is basically capped, and the maximum loss will not be much. As for making a profit... once the industry reverses, the supply and demand relationship reverses, expectations improve, and after the capacity is cleared, the huge capacity accumulation and improvement capabilities will make the upside potential of Shenhua Coal Industry far greater than the downside adjustment potential.

In other words, from a speculative perspective.

This stock is currently highly speculative, and the potential for future profits is very high.

Of course, the market capitalization of this stock is indeed too large. Even if the overall expectations for the coal sector shift to resemble those for the current liquor, white goods, and real estate sectors, its performance will likely be similar to that of Kweichow Moutai: slow but stable growth.

“Since Brother Sun thinks this stock has good speculative and investment attributes,” Zhao Qiang said, “I’ll transfer some of my holdings there to take a look. Sigh… I never thought that one day I would start buying these heavyweight stocks, changing my trading strategy and learning from the big institutions in the market.”

Hearing Zhao Qiang's words, Lao Qian in the group laughed and said, "Go with the flow! The market style has shifted like this, the trend is like this, what can we do? Going against the trend is a thankless task. Just like the 'Nifty Fifty' rally in the US stock market decades ago, if you don't embrace the trend and keep going against it to buy stocks in other non-core trend sectors, it's hard to get much investment return or a high rate of return in those years. Since the current investment trend in the market has shifted towards mid- and large-cap stocks, and the Shanghai Composite Index and A50 Index have far outperformed the Shenzhen Component Index and ChiNext Index, then we have to follow it no matter what."

In fact, although we have shifted our trading strategy to adopt the style of institutional investment in the market.

However, in terms of actual investment thinking and strategies, we are fundamentally different from them, and what we're doing isn't really investment; frankly, our underlying thinking is still speculative.

“Old Qian is right.” Sun Chengyu nodded and said, “We should concentrate where we can make money. For us investors, there’s a term in the market called ‘caught in the middle,’ which probably describes us perfectly.”

Old Qian chuckled again and said, "To be precise, we're called 'trend investors'."

After thinking for a moment, Zhao Qiang replied, "That's quite fitting."

As the three members of the group continued their conversation and conducted in-depth analysis of market trends...

The market is now in the final fifteen minutes of trading.

As the market entered the final fifteen minutes of trading, the previously sluggish trading volume began to gradually pick up again.

As intraday trading volume increases, intraday price movements are also accelerating.

At the same time, the real-time price fluctuations of major sectors, popular stocks, and industry leaders in the market are also accelerating.

Of course, despite the increasing volume, trading is becoming more intense.

However, the overall market sentiment, trend, and the direction of the market movement of core themes and non-hot themes have not changed significantly.

The two core themes of the market are large-scale consumption and large-scale infrastructure.

It still attracts most of the market's active buying and remains the leading sector in the overall market.

Among them, the real estate, construction and decoration, and building materials sectors have consistently maintained their leading position. In fact, at this juncture, Oriental Yuhong, a popular leading stock that has attracted much attention from investors, has surged today after a long period of fluctuation, reaching a new high for the year.

Another stock that has attracted much attention is Beijiang Jiaojian, a leading stock in the major infrastructure sector.

After a brief surge in trading volume in the afternoon, the stock price remains firmly locked at the daily limit, with the buy orders at the limit still exceeding 20 lots, showing no signs of breaking the limit.

However, the main theme of the new energy industry chain gradually weakened starting in the afternoon.

The stock of Shuguang Co., Ltd., which also received much attention today and to some extent influenced the afternoon market trend, continued to fluctuate downwards, and there was a strong trend of accelerating its decline.

This stock, after its price surged and then plummeted...

It then fell all the way down.

It has now fallen by nearly 4%, and has dropped by about 15% in total during the day, burying all the funds that bought at the limit up and those that bought at high levels.

Moreover, based on the stock's intraday price movement...

There's a high probability this stock will open significantly lower tomorrow.

A large number of intraday short-term funds will be liquidated and exit the market tomorrow.

Besides the sluggish performance of Shuguang Shares, other stocks in the main new energy industry chain, such as Tinci Materials, Power Source, Ganfeng Lithium, and Tianqi Lithium, were also significantly affected, failing to stabilize the market and experiencing a continuous downward trend.

Meanwhile, the consumer electronics sector, which was originally related to and moved in sync with the new energy industry chain, is also involved.

Driven by the main consumer sector, it actually rebounded somewhat in the final trading session.

Stocks such as Changying Precision, Goertek, OFILM, Lens Technology, and Lixun Precision all saw gains in the final trading session.

Among them, Lixun Precision's stock performance was particularly strong.

Not only did it rise steadily throughout the day, but it also stood out and gained 5% despite the overall consumer electronics and Apple concept stocks not rising much.

As for the other less popular main storylines...

The sectors that lean towards the technology theme include film and television media, internet software, internet applications, electronic information, and semiconductors.

There are also a number of less popular sectors that lean towards the primary industry, such as animal husbandry, agriculture, fisheries, and aquaculture.

Whether it's industry leaders or concept stocks, the performance remains poor. In the final trading session, not only is there no active buying to support the market, but the major funds that were originally lurking in the market are also continuing to sell their shares, fleeing these two main sectors and concentrating on the consumer and infrastructure sectors.

Besides these main storylines.

Other major sectors include finance, power, petrochemicals, and pharmaceuticals.

This indicates that while there is concentrated attention from major funds, there is also no sustained selling pressure from major funds. The market has maintained a sideways consolidation with low trading volume, and no clear trend is visible at the moment.

However, due to the divergence in the main trend of the market and the difference in the trend of large and small caps.

This led to the performance of the overall market index...

The Shanghai Composite Index, CSI 300 Index, and A50 Index all outperformed the Shenzhen Component Index, ChiNext Index, and CSI 500 Index. Surprisingly, at 2:50 PM, as the market trading session began, the Shanghai Composite Index and A50 Index gradually turned positive, aided by the continued strong performance of leading stocks in the consumer and infrastructure sectors, which attracted significant buying interest.

Of course, this is at the point when the Shanghai Composite Index turned positive.

The ChiNext Index and the CSI 500 Index both saw declines exceeding 1%.

Furthermore, among the nearly 2500 stocks in the entire market, the number of declining stocks still accounts for more than 1800. In other words, the number of declining stocks has not improved significantly despite the successful rebound of the Shanghai Composite Index. The large number of retail investors concentrated in small and medium-sized stocks and concept stocks means that most accounts are still losing money in today's relatively obvious polarized market trend.

Therefore, the Shanghai Composite Index eventually turned positive.

Instead of applause from numerous retail investors gathered on major online stock investment platforms, it was met with a barrage of complaints and criticisms. (End of Chapter)