The divergence over Kweichow Moutai has grown increasingly significant over the past two years, especially this year, to the point where even the traditional heavy consumers have to acknowledge a visible reduction in the "frequency and quantity" of drinking Moutai.

Previously, the concern was merely that young people would not consume it.

This consensus expectation is reflected in the stock performance of Moutai. Since May, the stock price of Kweichow Moutai has been on a downward trend, breaking through 1300 yuan per share on September 18th, and on the 19th, it once fell to 1245.83 yuan per share during trading, marking a new low for this phase.

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However, even investors who see these conditions acknowledge that Moutai, like gold, is a scarce commodity whose inventory becomes more valuable over time.

On the evening of September 20th, Kweichow Moutai announced that the company plans to repurchase its shares through a centralized bidding transaction method, using its own funds of 3 billion to 6 billion yuan.

"Has the leadership finally come to their senses? This might be an epoch-making event. In years to come, the leaders will feel a great sense of accomplishment because of this decision."

Duan Yongping bluntly stated on social media: "For companies that one truly understands, a significant drop in price is a cause for joy."

The renowned author Zijin Chen also shared his own stock replenishment, having added two more positions in Kweichow Moutai, totaling approximately 636,000 yuan. He mentioned that his current holding in Moutai is experiencing a paper loss of about 20%.When public mutual funds released their semi-annual reports in late August, we took stock of the funds' holdings in Moutai.

Although several well-known public mutual fund managers have reduced their holdings in Moutai, according to Wind data, as of the end of the first half of 2024, institutions held a total market value of 124.198 billion yuan in Moutai, still ranking first.

And looking at the semi-annual changes in holdings, institutions slightly increased their positions by 415,300 shares in the first half of the year (index funds such as the ChiNext ETF and the CSI 300 ETF contributed more than 120 million shares).

It has to be said that being in the important position of "big brother" in the index "constituent stocks," Kweichow Moutai will continue to receive sustained support from institutional funds for a long time that is visible to the naked eye.

Looking at the top twenty active funds holding Moutai, although the main trend is to reduce holdings, the reduction is not significant, and some fund managers are adjusting the structure among multiple products they manage.

In addition, the high-end liquor companies in the core holdings of institutions, such as Wuliangye, Shanxi Fenjiu, and Luzhou Laojiao, have all achieved double-digit growth in revenue and net profit attributable to the parent company in the first half of this year, according to the just disclosed semi-annual report data.

However, the attractive numbers have not been reflected in the stock price.

According to Wind data, white liquor (申万) has been the industry with the largest institutional holding value since the mid-2017 report, until the mid-2023 report, when it was knocked off the top spot by semiconductors.

And fund managers who became famous in 2019 and 2020 for white liquor have also left a "mess" in the回调 of the past three years, with consumer funds losing more than 40% being common.

As the fund semi-annual report comes to an end, the attitudes of the top few fund managers with high "alcohol" content towards white liquor are quite different.Some people still adhere to continuously expressing their opinions, some turn elsewhere to seek performance improvement, and some simply lie flat, unresponsive to ridicule...

At the bottom of this cycle, we take a look at how fund managers with extremely high "alcohol concentration" understand white liquor through their operations, which is quite interesting.

Yi Fangda's Zhang Kun: White liquor is a place "with fish," and he has been holding Moutai heavily for 44 quarters.

The Yi Fangda Blue Chip managed by Zhang Kun is the actively managed equity fund with the largest market value in white liquor, with an industry investment market value of 14.283 billion yuan, accounting for one-third of the fund's size.

Top ten actively managed equity funds with the largest market value in white liquor (Shenwan second-level) before the second quarter of 2024.

Looking at Zhang Kun's overall holdings in white liquor, they are mainly concentrated in leading enterprises.

According to the latest disclosed semi-annual report, Zhang Kun's holdings in Wuliangye, Moutai, and Yanghe Shares are very stable, with only a reduction of 20,000 shares in Luzhou Laojiao, and a significant reduction of 850,000 shares in Shanxi Fenjiu.

Zhang Kun mentioned in the semi-annual report: "As Munger said, the two principles of fishing are: first, fish where there are fish; second, remember the first principle."

Explained by his holdings, white liquor is undoubtedly a place "with fish" in Zhang Kun's view, so Zhang Kun has been holding Moutai heavily for 44 quarters.

He said, "People tend to admire complex things and disdain obvious things, thinking they are too simple. In fact, investing is not scored like the difficulty coefficient in Olympic diving competitions; the difficulty coefficient is not important."Baijiu has always been considered a simple and good industry among consumer products.

Although Zhang Kun has not publicly discussed individual stocks related to baijiu, some thoughts written in past quarterly reports are also meaningful when looking at the continuous decline of baijiu.

He said: "As the saying goes, the market is a weighing machine in the long term. What the weighing machine weighs is more about the growth of a company's free cash flow. As long as a company's free cash flow keeps growing, regardless of investors' emotions, the company's market value can break through cycles and reach new highs round by round."

For example, looking at the cash flow of Moutai in the past, it has almost always been on the rise.

As of June 30, 2024

Among them, the main reason for the significant decrease in cash flow in 2022 is the divestment of Xi Jiu shares, the reduction of the company's deposit absorption, and the increase in financial companies' deposits of non-redeemable interbank term deposits.

Moutai plans to invest 3 billion to 6 billion yuan of its own funds to repurchase shares for cancellation this time.

This year, thousands of A-share companies have launched repurchase plans, and the maximum repurchase amount of 6 billion yuan makes Guizhou Moutai the leader.

Behind Moutai's huge repurchase is the "confidence" from the company's strong cash flow.

According to Wind data, as of the mid-2024 report, there are a total of 5,351 listed companies in the entire A-share market, with only 128 companies' net profit for the first half of the year exceeding 3 billion yuan, and only 167 companies' net cash flow from operating activities for the first half of the year exceeding 3 billion yuan.Guizhou Moutai's repurchase amount this time exceeds the net profit of more than 97% of A-share companies in half a year.

In addition, Guizhou Moutai has mainly rewarded investors through dividends in the past and is a well-known dividend heavyweight in A-shares.

According to Wind data, since its listing, Guizhou Moutai has accumulated a total dividend payout of 271.441 billion yuan, and as of September 23, the dividend yield (for the past 12 months) is 3.96%.

On August 8, 2024, Guizhou Moutai announced the "2024-2026 Cash Dividend Return Plan", stating that from 2024 to 2026, the total amount of cash dividends distributed by the company each year will not be less than 75% of the net profit attributable to the parent company for that year, and原则上, dividends will be distributed twice a year.

Apart from Moutai, in 2023, Wuliangye's operating cash flow set a new high, reaching 41.742 billion, and looking back, its cash flow has almost maintained a growth trend.

As of June 30, 2024,

Zhang Kun mentioned in the latest quarterly report, "Investing correctly in a company with a single successful element, simple and easy to understand, and sustainable, compared to investing in a company with multiple competitive variables and complex and difficult to understand, even if the latter has undergone meticulous and in-depth analysis, it is difficult to say which has better returns."

The sustainable companies among them, for the liquor industry, are likely to be a definite answer, but the specific stocks are still unknown.

However, for the common perception that "liquor is liquor, and Moutai is Moutai," Moutai will still exist for a long time.

Zhang Kun started serving as a fund manager in 2012. According to Wind data, since managing the largest scale E Fund Blue Chip since September 2018, as of September 23, 2024, the tenure return is 51.88%, with an annualized return of 7.14%.He spent 7 years waiting for the opportunity to "become famous," and in the past three years, he has borne the costs of fame. Amidst criticism, he remains the simple person he was originally.

Zhang Kun said that in terms of investment, people should not focus on how much they know, but rather be able to clearly define what they do not know.

For holders, it might be simpler to consider whether they will need a fund manager like Zhang Kun in the next three to five years.

Jingshun Great Wall Liu Yan Chun: Negative performance in the past five years, has "given up" on white spirits for 9 years

The market value of white spirits (10.654 billion) held by Jingshun Great Wall Emerging Growth managed by Liu Yan Chun is second only to Zhang Kun, with white spirits accounting for 44.93% of the fund's net value.

In terms of performance, according to Wind data, all products managed by Liu Yan Chun this year are negative, with a scale reduction of 6.523 billion compared to the first quarter, and a total scale of 45.354 billion.

As of September 23, 2024, his representative product, Jingshun Great Wall Emerging Growth, has had a negative return in the past five years, with a loss of 8.59%, losing all the gains from 2019 and 2020.

Such performance is inseparable from Liu Yan Chun's more extreme investment style, long-term, high-position, high-concentration heavy investment in the consumer and pharmaceutical industries, and not timing the market.

Looking at the latest disclosed semi-annual report, Liu Yan Chun still did not make a large-scale adjustment, still guarding the white spirit plate, with positions concentrated in Kweichow Moutai, Wuliangye, Gujing Gongjiu, Luzhou Laojiao, and Shanxi Fenjiu.

In the first half of this year, Liu Yan Chun significantly reduced his holdings of Wuliangye by 1.614 million shares, Gujing Gongjiu by 779,000 shares, slightly reduced Moutai by 93,000 shares, and increased Shanxi Fenjiu by 462,000 shares.Regarding the holding of Luzhou Laojiao shares that have remained unchanged for 33 quarters.

Apart from the leading enterprise, the Jing Shun Great Wall Emerging Growth managed by Liu Yan Chun has significantly increased its position in Jin Shiyuan, with a 350.02% increase compared to the end of 2023, and the holding market value is 208 million.

Liu Yan Chun's holding of white liquor can be traced back to the mid-2015 report when he first started managing the Jing Shun Great Wall Emerging Growth.

At that time, the two white liquor stocks held by Liu Yan Chun were one Luzhou Laojiao and the other was Shede Winery.

By the end of 2016, Liu Yan Chun sold out Shede Winery and bought Kweichow Moutai and Gujing Gongjiu, increasing his position in Luzhou Laojiao to become one of the top ten heavy holdings.

In the following quarter, Kweichow Moutai was bought into the top ten heavy holdings, and Wuliangye also entered all his holdings.

It was from 2016 that white liquor began to occupy an important position in Liu Yan Chun's holdings, and in the second quarter of 2017, food and beverage became the top heavy industry of Jing Shun Great Wall Emerging Growth.

Since then, in addition to Luzhou Laojiao, Kweichow Moutai, Wuliangye, and Gujing Gongjiu being held continuously, Yanghe, Kouzi Jiao, and Shanxi Fenjiu have been successively bought.

And these seven stocks were held by Liu Yan Chun at the same time in the second quarter of 2019, which was also the quarter when Liu Yan Chun held the largest number of white liquor stocks.

Subsequently, in 2020, Liu Yan Chun replaced Yanghe shares with Shunxin Agriculture, and half a year later, Kouzi Jiao replaced Shunxin Agriculture.Until mid-2021, Liu Yan Chun's liquor holdings were consistently focused on Luzhou Laojiao, Kweichow Moutai, Wuliangye, Gujing Gongjiu, and Shanxi Fenjiu, but Shanxi Fenjiu was not heavily invested in. By mid-2022, Shanxi Fenjiu was added to the top ten heavily invested stocks, and by the end of 2023, Liu Yan Chun had purchased shares in Jinshiyuan. The overall market conditions in 2017, as well as in 2019 and 2020, brought Liu Yan Chun significant performance growth through liquor investments. However, looking at the last three years, the revenue-generating capability of this industry has become ineffective.

In the few public exchanges he has had in the past, Liu Yan Chun has consistently expressed his confidence in the liquor industry, saying, "The investment value of leading liquor companies is relatively clear."

Liu Yan Chun's most recent public appearance was at the mid-year exchange meeting in June 2023, where he stated, "I believe that China's industrial upgrading will definitely succeed. The rapid development of emerging industries will drive a rapid increase in residents' income, and our country will certainly become one of the world's largest consumer markets. At the same time, the consumption upgrade of our country's residents will continue to return to the liquor industry."

In his view, the liquor industry is one of differentiated competition with a relatively orderly competitive landscape, where price wars are relatively ineffective, and inventory can continue to appreciate in value. Therefore, the input-output level of the liquor industry is very high, with good stability, strong continuous growth in profitability and cash flow, and the ability to continuously and rapidly create value for shareholders, making it worthy of focused investment.

In an interview in 2018, when discussing his investment logic, Liu Yan Chun also emphasized a key word: "compound interest." In his investments, Liu Yan Chun tends to choose industries and companies that can provide "compound interest."

"The type of investment I most admire is finding an industry that can sustain compound interest over a long period, and within it, finding a company that has a clear development plan, can make continuous and effective investments, and generate continuous high returns. This is the compound interest in company operations, and such companies are excellent investment targets."Looking at his longest-held Luzhou Laojiao, the operating income is a beautiful curve of sustained growth, but it should be noted that since 2021, its revenue growth rate has been slowing down continuously.

As of June 30, 2024

According to the latest interim report disclosed by Luzhou Laojiao, the company achieved a revenue of 16.905 billion yuan in the first half of the year, a year-on-year increase of 15.84%; the net profit attributable to the shareholders of the listed company was 8.028 billion yuan, a year-on-year increase of 13.22%.

In the middle of 2021, when Baijiu began to decline, Liu Yan Chun said indifferently, "The Baijiu industry itself has cyclical attributes, and it is understandable that valuations bear pressure during the continuous tightening of credit."

In Liu Yan Chun's view, apart from the macro background, there is no problem with the operation of the main enterprises in the Baijiu industry. The competitiveness of advantaged enterprises will be further enhanced, and the predictability of growth will be further improved.

However, the reality is slightly different from what Liu Yan Chun thought. In the past three years, the main enterprises in the Baijiu industry have operated well, but enterprises such as Wuliangye and Luzhou Laojiao have seen a slight slowdown in revenue growth.

Moreover, the stock price has not been able to continue to grow.

But until now, Liu Yan Chun remains optimistic about the investment value of Baijiu.

Jingshun Great Wall Emerging Growth has less than a year to go before Liu Yan Chun has managed for ten years. According to Wind data, during his more than 9 years in office, as of September 23, the total return on duty was 77.09%, and the annualized return on duty was 6.22%.

Only counting the complete years managed by Liu Yan Chun, only in 2017, 2019, and 2020 did he achieve high returns of 56.28%, 72.18%, and 85.97%, respectively, while all other years were losses, and these returns almost all came from the "taking medicine and drinking" market.For early investors, with the help of compound interest, the fund's returns over the past decade have not yet doubled, but they have indeed achieved certain gains.

However, for those who started buying large amounts of Jing Shun Great Wall Quality Growth since 2019, they can hardly feel the power of compound interest and can only feel the "heartbeat" of the roller coaster.

Hu Xinwei, who has made some efforts and has been rewarded, and Jiao Wei, who has turned to dividend assets,

In addition to Yifangda Winery and Jing Shun Great Wall, Huitianfu is also a loyal supporter of white wine.

According to Wind data, Hu Xinwei's Huitianfu Consumer Industry holds 5.985 billion yuan in white wine, accounting for 48.63% of the fund's net value.

In terms of performance, although Hu Xinwei's proportion of white wine is higher than Liu Yan Chun's, the overall performance is better than Liu Yan Chun's.

Compared with Zhang Kun and Liu Yan Chun's focus on leading liquor companies, Hu Xinwei has a larger position in white wine. According to the latest disclosed mid-year report for 2024, Hu Xinwei holds a total of 10 white wine stocks, of which eight are heavily positioned and two are small positions.

According to the latest disclosed mid-year report statistics, in the second quarter, Hu Xinwei slightly reduced his holdings of Kweichow Moutai by 160,000 shares, and once again significantly reduced his holdings of Wuliangye by 1.31 million shares and Shanxi Fenxi by 1.46 million shares.

Although Hu Xinwei increased his holdings of Laobaigan and Jinshiyuan in the second quarter, compared to the end of 2023, both stocks have been significantly reduced.

However, both Luzhou Laojiao and Yingjia Gongjiu have significantly increased their holdings.Gold Seal Liquor and Zhen Liquor Li Du, which were allocated in small positions, have both seen reductions compared to the end of 2023, while Shede Liquor Industry, which was still held at the end of 2023, was completely sold off in the first half of this year.

Hu Xinwei stated in the mid-year report that many consumer companies have already had a high attractiveness in terms of static valuation and dividend yield, with the value bottom gradually becoming apparent.

Focusing on the medium and long term, after maintaining a relatively stable portfolio structure, the allocation to the food and beverage industry was appropriately reduced.

Hu Xinwei categorized Baijiu within his "power plant" type of enterprises, which have mature profit models, strong brand advantages, and can continuously and stably expand, achieving stable growth on the basis of high capital returns.

The excellent business model is Hu Xinwei's greatest confidence in Baijiu enterprises, and the brand effect also provides a good enhancement for Baijiu enterprises.

"The competition in Baijiu is different from other industries, relying more on brands and management teams, especially for high-end Baijiu. This kind of industry is still relatively rare in China.

Consumers may really be buying this brand, not its practical functions. To some extent, this is similar to luxury goods. So Baijiu is still a good industry."

According to Wind data, the Silver Hua Wealthy Life managed by Jiao Wei from Yinhua Fund, which was still in the top five of the actively managed equity funds holding Baijiu at the end of 2023, had already dropped out of the top ten by the second quarter of this year.

Looking at the holdings, Jiao Wei significantly reduced his stake in the Baijiu industry in the second quarter, and increased his holdings in high dividend assets such as white goods and electric power.

In fact, as early as the third quarter of 2023, Jiao Wei began to actively increase his holdings in high dividend assets such as China Mobile and China Shenhua.Baijiu has always been an industry that Jiao Wei heavily invested in. Since joining Yinhua Fund in 2018 and up to the end of 2023, he has maintained a position of around 40%.

However, this year, the proportion of public utilities and home appliances in the fund's net value has risen sharply.

Such changes in the portfolio have also been reflected in his performance. His representative product, Yinhua Wealth Theme, ended two consecutive years of negative returns as of September 23, with a year-to-date return of 1.18%.

Looking through Jiao Wei's past regular reports, it can be seen that in 2019, Jiao Wei was still a seasoned value investor who believed in the circle of competence and emphasized the margin of safety.

But during the market-wide rise from 2019 to 2020, he began to believe that "outstanding companies are rare, and relatively high prices can and should be accepted, and he would not waver in his firm long-term holding of high-quality companies."

However, as the baijiu industry continued to decline, in 2021, Jiao Wei reflected on the importance of valuation and marginal changes and no longer rigidly adhered to the belief of "never selling good companies." At the same time, to salvage his performance, he ventured into industries he was not good at, such as military, semiconductors, and others.

However, blindly participating in things he did not understand ultimately led to a heavy price.

While the baijiu companies fell, the military semiconductor stocks that were bought at the end of 2021 plummeted in the first quarter of 2022.

Correspondingly, Jiao Wei's performance plummeted.

Later, Jiao Wei continued to reflect that he should not invest in sub-industries he was not proficient in, and since then, he basically decided to completely withdraw from industries with strong speculative attributes.As time rolled into 2023, Jiao Wei, still heavily invested in baijiu, observed market trends and adjusted his overly high expectations for "great companies."

At the start of 2024, Jiao Wei began to significantly reduce his holdings in baijiu, stating that the main reason was that some baijiu products have "extremely low replacement frequencies, while brand value and brand barriers are extremely high." However, "the methods of rapid growth may all cause damage to the long-term expansion capabilities and brand value strength of baijiu enterprises."

From this statement, it can be seen that Jiao Wei has concerns about the brand value of baijiu enterprises.

In the subsequent second-quarter report, although Jiao Wei expressed his optimism for baijiu enterprises, he also frankly stated that the business model of baijiu enterprises faces great challenges.

"We are at the threshold of a new major economic transformation. The successful business models represented by high-end baijiu, which are part of the consumption upgrade industry, are facing external and internal challenges at the same time. To some extent, the higher the gross margin and pricing power in the past, the more susceptible they are to impact and questioning under the new economic model. Against this backdrop, it is possible that valuation adjustments will precede earnings themselves."

For this industry, it is better to reduce holdings first.

After nearly three years of being battered by the baijiu industry, Jiao Wei also summarized his own mistakes in baijiu:

"First, baijiu's valuation and fundamentals peaked simultaneously at the beginning of 2021, and I did not choose to reduce holdings when the valuation was too high.

Second, I mistakenly thought that the pattern of baijiu continued the traditional approach of three years ago, where leading enterprises pulled up prices, and second-tier high-end enterprises profited during the expansion cycle."Little did they know that the past three years have fundamentally impacted the industry's structure and trends, with second-tier high-end companies becoming more vulnerable to the downward attack of top-tier enterprises during the industry consolidation period.

In the 2023 third-quarter report of adding positions in dividend assets, Jiao Wei candidly stated, "The beautiful growth aspirations that seemed so promising now appear to be often phase-specific. The ultimate dividend return is the destination of investment."

Today's Jiao Wei has begun to value dividends. However, after nearly three years of increases in dividend assets, some companies have reached a level of group buying reminiscent of the 2020 liquor industry, and it is unclear how they will proceed in the future.

In conclusion,

In August 2016, shortly after Smart Investors was established, we visited a private fund manager who was once a star of public funds, particularly outstanding in 2006 and 2007.

At that time, his private fund size was in the tens of billions. We discussed Moutai. He said that this was the highest point for Moutai.

He gave many reasons, but what was memorable was that Moutai was around 300 yuan at the time.

We haven't communicated much since then, and it seems he has missed out on Moutai.

This year, while talking with a private fund manager who has achieved positive returns for three consecutive years, he once made a lot of money by heavily investing in Moutai, but now he is merely "adding a bit when it drops below 1600."

There is also a portfolio manager we highly recognize, whose performance has almost never contributed to Moutai.For the same industry and the same company, we will actually find that the reasons why each investment manager makes choices are not entirely the same.

It is difficult to say who is right or wrong. Because sometimes, some decisions that are within one's circle of competence may not necessarily lead to good results. Everything is probabilistic, with many accidental elements.

Moutai is a good observation target. It reflects the size and solidity of some circles of competence, as well as some investment personalities related to resilience and whether one practices what they preach. Of course, there are also the attributes and preferences of funds, such as Duan Yongping buying Moutai, not as a growth target, but as a kind of financial management, which must be more calm.

Even if there is a lot of disagreement now, as mentioned earlier, as the "big brother" of important index "constituent stocks", Guizhou Moutai will still receive continuous support from institutional funds for a long time that is visible to the naked eye.

After the big rise yesterday (September 24), I glanced at it, and Zhang Kun's main fund's net value rose by more than 5% in one day.