Don't guess macro, focus on pricing, and conduct in-depth research to navigate through cycles.

Ping An Fund / Provided by Image

Reporter An Zhongwen, Securities Times

In a market characterized by frequent fluctuations and rapid style shifts, building a stable, replicable, and sustainably high-yield investment framework is the core challenge for every long-term fund manager.

Mo Jiao, fund manager of Ping An Anxiang Flexible Allocation Fund and nominee for Ping An JiuRui Return, reconstructs the value investment system with an engineering mindset, focusing on not predicting macroeconomics but responding to the present. Based on the first principles of DCF valuation, he has established four pillars centered on in-depth research, Kelly formula dynamic positioning, value comparison, and focusing on good companies, forming a clear logical and distinctive investment methodology.

Investment Should Return to the Company Itself

In public fund investing, Mo Jiao considers acknowledging cognitive limitations as key to risk control. He remains sober and restrained regarding macro strategies, viewing macro as akin to weather—short-term perceptible but long-term unpredictable. Relying on timing macro trends is highly challenging and unlikely to generate sustained returns. Therefore, his investment approach does not depend on macro forecasts but emphasizes responding to the current environment.

He believes the current macro features include increasing anti-globalization and geopolitical conflicts, deepening resource conflicts; followed by ongoing technological revolutions, which serve as disruptive variables. Such judgments are only used to understand the market environment background; ultimately, investment must return to the company itself.

Mo Jiao clearly defines himself as a bottom-up investor driven by in-depth research. The core goal of his portfolio is to pursue sustainable absolute returns while strictly controlling drawdowns. He has set clear long-term targets: aiming for an annualized compound return of 15% over the next decade, with maximum drawdown controlled within 25%.

He believes that, in theory, high returns can tolerate high volatility, but in actual product operations, clients enter at different times. Excessive drawdowns may cause some clients to exit at low points due to urgent cash needs, rendering long-term gains meaningless for individuals. Therefore, controlling drawdowns is not a compromise but a way to ensure long-term returns truly benefit the holders.

Mo Jiao emphasizes that he adheres to the discounted cash flow (DCF) method as the “way” of value investing. This valuation and stock selection strategy focuses on analyzing a listed company’s future cash flows. DCF valuation is suitable for industries and stocks with relatively high long-term forecasting accuracy.

Dynamic Position Adjustment to Manage Risks

The most distinctive feature of Mo Jiao’s investment system is extreme in-depth research, especially on individual stocks, which continuously creates long-term value for the portfolio. As an engineer by training, he excels at breaking down problems with an engineering mindset, aiming to narrow the company’s value from a “fuzzy range” to a “relatively precise range.”

In his research, he insists on writing dozens to hundreds of pages of in-depth notes for each key company, covering business models, competitive landscape, terminal space, and cost curves, all reconstructed and calculated through primary research without relying on external opinions.

He emphasizes that the core source of investment returns is growth potential, not valuation levels. A low P/E company may become a value trap due to lack of growth, while a high P/E company with strong growth certainty and broad space can offer genuine investment value. The purpose of deep research is to accurately assess whether a stock is worth it.

Based on this research, Mo Jiao uses the Kelly formula to dynamically adjust positions. He disagrees with the idea of “never selling a good company,” considering it outdated. For example, Coca-Cola’s long-term excellent returns stem from sustained growth exceeding expectations; when growth slows, long-term returns weaken.

His operational principle is simple and firm: when the stock price approaches the upper boundary of its value range, reduce holdings; when it falls to the lower boundary, increase positions boldly; if it breaks below the reasonable range, heavily allocate; and when it exceeds the value range, gradually reduce holdings. This contrarian approach avoids chasing highs and holding onto losers, making it easier to achieve excess returns in the optimistic pricing environment of A-shares.

Meanwhile, he completely abandons mechanical obsession with P/E and P/B ratios, focusing solely on comparing price and value. As long as the price is significantly below intrinsic value, he dares to deploy even if the valuation is high; if the price exceeds value, he resolutely does not participate, even if the valuation is low. This “value-only” approach allows the portfolio to capture growth potential while maintaining safety margins.

Mo Jiao believes that good companies have more solid competitive barriers, better governance, and more sustainable cash flows. His research results can be reused long-term, creating cognitive compounding; at the same time, high-quality companies tend to experience smaller drawdowns during risks, effectively enhancing portfolio resilience. This is also a key reason his products outperform the market significantly during market adjustments.

Pursuit of Long-term Stable Investment

In terms of capacity, Mo Jiao does not limit himself to a single sector but adopts a terminal thinking approach combined with overseas benchmarking to achieve cross-industry deep coverage.

His research logic is pragmatic: distinguish between “researchable” and “non-researchable.” In Mo Jiao’s view, the ceiling of a leading Baijiu company is difficult to answer in the short term, as many consumer demand factors are influenced by various elements, making precise predictions challenging. The simplest strategy is to focus on the margin of safety, selecting stocks based on the current price’s safety margin. For manufacturing sectors like auto parts, home appliances, and machinery, the terminal space can be more accurately estimated through quantitative measures such as market share, per-unit value, and inventory levels, anchoring long-term value with terminal thinking. This approach helps alleviate the pressure from short-term market fluctuations.

When researching overseas comparable companies, Mo Jiao pays close attention to business models, ROE levels, competitive landscape, and terminal space. He does not simply copy overseas logic but adjusts for China’s industry advantages, cost structures, and policy environment. This rigorous attitude allows him to maintain research depth comparable to industry experts when entering new sectors.

Mo Jiao emphasizes that his investment approach is designed to be suitable for family members—focusing on long-term stability and good investor experience rather than short-term explosive gains.