Recently, two words have become popular: specialized, special and new and little giant.
In fact, this is not a new word, but now it has raised its strategic position and is more important than before.
First, the basic concept
Ten years ago, the Report on China's Industrial Development and Industrial Policy (2011) first proposed that China would promote mergers and acquisitions during the 12th Five-Year Plan period to promote the healthy development of small and medium-sized enterprises. The key to this stage is to improve the external environment for the development of small and medium-sized enterprises, speed up the construction of the service system, establish a long-term mechanism to reduce the burden, and vigorously promote the development of small and medium-sized enterprises in professionalism, fine management, characteristics and innovation.
In 2018, for the first time, the policy goal proposed to train professional, specialized, and new "little giants" to improve their innovation capabilities, expand international markets, improve management levels, and promote intelligent transformation. Since then, the Ministry of Industry and Information Technology has announced three batches of specialized and updated "little giants" from 2019 to 2021.
This year, the policy focus has shifted to strengthening scientific and technological innovation and the resilience of the industrial chain, strengthening basic research, promoting applied research, accelerating the solution of the "stuck neck" problem, and developing specialized small and medium-sized enterprises. Among these three batches of small giants, there are 319 companies listed on the A-share market, of which 91 are listed on the main board (accounting for 28.).25%), 134 (42%) were listed on the GEM, and 94 (29.) were listed on the Science and Technology Innovation Board5％）。The specific list can be viewed through the professional special area of various ** software.
2. Understand the development logic of Little Giant
First of all, we need to combine the characteristics of the industry and have an in-depth understanding of the main business of these enterprises. For those little giants that have been around for 10 or 20 years, we need to be vigilant. While they may occupy a key position in a certain area, it is possible that the company itself is not profitable and has relatively limited room for growth. Conversely, smaller giants that have been around for a shorter period of time may show better growth potential.
In addition, the principle of "performance is king, cash is king" is particularly important in small giant enterprises. Since the scale of operation of these enterprises is usually not large, they must have a certain performance support, otherwise the business risk of the enterprise will increase significantly. When choosing a target, we should look at the performance of the past three years. At the same time, we should also pay attention to cash flow. In the long run, companies with ample net operating cash flow are worth investing in.
Third, the industry runway
The small giants on the industry runway are mainly distributed in special machinery, basic chemicals, medical equipment, auto parts, biomedicine and other fields, but the investment value of these industries in the field of integrated circuits and other fields is not the same. Machinery and chemicals are undoubtedly very important industries for the development of the industry as a whole, but for investors, these industries are usually heavily asseted and have a relatively low return on investment. Therefore, investors need to choose some industries with relatively light assets in order to better grasp investment opportunities and achieve higher investment returns.