I remember that the agricultural fund in 2019 was very popular, especially the pig breeding in agriculture was the most sought-after.
Therefore, investing in agricultural funds may wish to analyze the pig cycle first, and there may be better choices.
The pig cycle
The pig cycle is an economic phenomenon, which generally refers to the cycle of cyclical pork price changes in which “high prices hurt people and low prices hurt farmers”. The cyclical trajectory of the “pig cycle” is generally: high meat prices – large increase in the number of sows in stock – increase in the supply of live pigs – falling meat prices – mass elimination of sows – reduction in the supply of live pigs – rising meat prices.
Due to the influence of supply and demand, the pig cycle is an investment trend with phase fluctuations and repeated cycles.
For example, high pork prices stimulate farmers’ enthusiasm and lead to an increase in supply, and the increase in supply leads to a drop in meat prices, and the drop in meat prices to a very low level hits farmers’ enthusiasm and causes supply shortages. Pig Cycle”.
At the same time, in the long-term trend, it is affected by the demographic structure, urbanization rate and consumption habits.
As well as the price cycle of pigs, the changing trend of demand and price is often negatively correlated. Especially in recent years, the impact of the epidemic has been superimposed. The trend of the epidemic and the changing trend of catering consumption affect the trend of consumption to a certain extent.
After the normalization of the epidemic in the future, the domestic economic recovery is imminent, and the reversal of the pig cycle can be expected.
2. Logic
(1) The total output value of China’s agriculture, forestry, animal husbandry and fishery industries has maintained a sustained and steady growth, especially in recent years . Since 2012, the growth trend of the total output value of my country’s agriculture, forestry, animal husbandry and fishery has been very significant. By the end of 2020, the total output value of my country’s agriculture, forestry, animal husbandry and fishery totaled 13.8 trillion yuan, an increase of 11.1% year-on-year, and the growth rate hit a new high since 2012. .
(2) Agriculture and animal husbandry occupy the majority of the industrial structure of agriculture, forestry, animal husbandry and fishery. According to the data, by the end of 2020, the total output value of agriculture in my country’s agriculture, forestry, animal husbandry and fishery totaled 7.2 trillion yuan, accounting for 55%, the total output value of animal husbandry was 4.0 trillion yuan, accounting for 31%, and the total output value of fishery and forestry They were 1.3 trillion yuan and 0.6 trillion yuan, accounting for 10% and 4%, respectively.
(3) National policy support to promote the modernization of agricultural breeding. The 14th Five-Year Plan emphasizes the importance of animal husbandry in the national economy and people’s livelihood, and will basically realize the modernization of animal husbandry by 2025. In the context of the epidemic, the state provides multiple mechanisms to maintain the stability of production and sales, reduce negative impacts, and ensure the sustainable development of animal husbandry.
(4) It is predicted that the pig cycle has a high probability of reversing in the next year. According to the statistics of the Ministry of Agriculture and Rural Affairs, since 2000, my country’s pig cycle has gone through five cycles. The law of the pig cycle: 1. The time span of the pig cycle is basically maintained at 3-4 years per round, and there is no trend of elongation. 2. Each round of the “pig cycle” basically reverses the bottom of the consumption trough in April-May after the Spring Festival. 3. The length of the “pig cycle” is often inversely proportional to the fluctuation range of pig prices. The price increase in the upward cycle is large, and the corresponding subsequent downward cycle is also short, showing the characteristics of big ups and downs.
(5) Breeding has the largest weight in the CSI Agriculture theme. From the perspective of agriculture-themed investment sub-sectors, aquaculture accounts for 32.71% (for example, Wen’s shares, Muyuan shares, etc.), agrochemical products account for 22.13%, feed accounts for 11.2%, beverages and dairy products account for 7.07%, and species Industry accounted for 6.61%, food processing accounted for 6.44%, photovoltaic equipment accounted for 5.13%, etc.
3. Choice
I think there are three strategies for investing in agricultural funds, one is to choose agricultural index funds, the second is to choose actively managed agricultural active funds; the third is to choose agricultural index enhancement funds. These three strategies, there is no absolute good or bad points, only the rational use of the individual.
1. Select the animal husbandry index fund from the gold content of the “pig cycle”.
Agriculture, as the primary industry, has a wide range. From the index point of view, the most common ones are the CSI Agricultural Index, CSI Agriculture Theme Index, CSI All Index Agriculture, Animal Husbandry and Fishery Index, CSI Animal Husbandry Index, etc. For example, Tracking the corresponding index funds include Qianhai Kaiyuan CSI Agricultural Index Enhancement A (001027), Huabao CSI All Index Agriculture, Animal Husbandry and Fishery Index Initiation A (013471), Tianhong CSI Agricultural Theme Index A (010769), Cathay Pacific China Certificate of Animal Husbandry ETF Link A (012724) and so on.
Among them, the “pig cycle” with the highest gold content should be the Cathay Pacific CSI Animal Husbandry ETF Link A. The tracked index contains animal husbandry accounting for as high as 91%, and the pig breeding in the animal husbandry industry also has the highest purity.
2. Select an active agricultural fund with both offense and defense in risk management.
For the selection of agricultural active funds, professional fund managers in risk management may do better than ordinary investors. For example, for Cathay Pacific Agricultural Stock A (001579), which is both offensive and defensive, the fund manager is Cheng Zhou, who has 14 years of experience in public fund management. , the performance is excellent, the defensive ability is strong, and the investment experience effect will be better.
At the same time, Cathay Pacific Agricultural Stock A (001579) has yielded as high as 125% from September 22, 2017 to September 22, 2022, ranking first among the 6 funds with an “active strategy” on the chart. However, from the performance of the past three years, Harvest Agricultural Industry Stock (003634) is relatively dominant. Judging from the performance of the past two years, Caitong Smart Growth Mixed A (009062) has a significant excess return, but the fund is not a long-term investment in the agricultural industry.
3. Select agricultural index enhancement funds from agricultural themed indices.
The purpose of selecting the Agricultural Index Enhancement Fund is to pursue excess returns beyond the index. For example, Qianhai Kaiyuan CSI Agricultural Index Enhancement A (001027), compared with the tracked large agricultural index, the excess return during the period is very significant, which has the effect of surpassing the index.
4. Summary
With the obvious effect of domestic pig production capacity reduction, the upgrading of modern agricultural breeding, and the drive of the food processing industry, I think the agricultural field will still have the effect of leading substitution in the next few years.
my country has the world’s largest consumer market. Consumption has always been the holy land of value investment in the past, and agricultural products, food processing, and pig breeding have gradually become an important part of the consumption field.
We all know that Dongfang Selection has been popular on Douyin this year. Among them, the live broadcasts mainly sell agricultural products. It can be seen that the investment market of Chinese agricultural products has great potential, and there is still room for further exploration.
Among agricultural products, pork is still the favorite for national meat demand. With the opening of the third child, the population will increase in the future, and the market space for the demand for live pigs will only increase.
The reversal of the pig cycle is imminent. In the current market downturn, there may be more timing advantages of “buying where no one cares”.
Disclaimer: This article is purely personal investment strategy and fund research. As an ordinary retail investor, I have limited investment ability and writing skills. If there is any inadequacy, you are welcome to correct me. There are risks in the market and investment should be cautious. For communication, it does not constitute any investment advice, and buyers are responsible for their own profits and losses.
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$ Cathay Pacific Agricultural Stock A(F001579)$ $ Cathay Pacific CSI Livestock Farming ETF Link A(F012724)$
$Qianhai Open Source CSI Agricultural Index Enhancement A(F001027)$
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