[Quantitative Investing Mini-Introduction] Meeting Minutes of Industrial Bank’s Quantitative Investment Seminar: History, Current Status, and Future of Quantitative Investing

Let me first briefly introduce myself. I joined Qianhai Kaiyuan Fund Management Co., Ltd. at the end of 2015 upon returning to China. Prior to that, I entered the industry in 2000 and have since dedicated my entire career to quantitative investing. My longest tenure was with Lehman Brothers’ Quantitative Investment Division, where I joined as the second team member and remained for nearly ten years. Whenever mentioning Lehman Brothers, I must clarify—this was pre-bankruptcy Lehman Brothers. After its collapse, our division spun off to form a new independent company. Thus, whether at Lehman Brothers or at the newly established firm, I spent nearly a decade within its quantitative investment division. Before and after that period, I managed various quantitative strategies across different investment banks and hedge funds. Upon returning to China at the end of 2015, I founded Qianhai Kaiyuan’s Quantitative Investment Department. A brief clarification regarding my current role: as noted earlier to the event organizer, I am no longer formally affiliated with Qianhai Kaiyuan; instead, I serve as Managing Director of First Qianhai Financial Limited—a Hong Kong-based affiliate. 1. Quantitative Equity 1.1 History of Overseas Quantitative Equity Let’s begin with quantitative equity. Let’s review the history of quantitative equity. When did quantitative equity begin overseas? How did it begin? Initially, it wasn’t an industry term but rather an academic one. We broadly agree that quantitative investing originated in 1900. Louis Bachelier, a French mathematician, wrote his doctoral dissertation titled “The Theory of Speculation.” Essentially, this paper addressed how we make forecasts about the future. If today we could correctly forecast a price, the decision would be straightforward: we’d know precisely when to buy and when to sell. With 100% accuracy (though impossible in practice), one would profit perpetually. After 1900, in the 1930s, Columbia Business School professors Benjamin Graham and David Dodd published their seminal book, “Security Analysis.” What was the context behind writing this book? What era was the 1930s? It followed the 1929 stock market crash. Regarding Benjamin Graham—if unfamiliar with him, you’re certainly familiar with his most famous student: Warren Buffett. His purpose in writing this book was to teach investors that stock trading shouldn’t be impulsive—buying or selling on a whim—but rather grounded in rigorous research into a company’s fundamentals, enabling informed decisions on whether to buy or sell a given stock. From then until 1952, Harry Markowitz developed Modern Portfolio Theory (MPT), for which he received the Nobel Prize in Economics in 1990. For quantitative equity, Modern Portfolio Theory forms the foundational framework—guiding how to construct optimal portfolios while explicitly accounting for risk.

U.S. Stock Tracking – June 5, 2020

June 26: Opened down -1.12%, declined steadily to -4.09%, fluctuated amid correction, closed at -2.97% below the moving average, turnover rate 5.28%, market capitalization slightly above enterprise value, held by 15 institutions (3% ownership), one analyst recommends buying; chasing highs carries risk—caution advised. NAVB (Navidea Biopharmaceuticals, Inc.) A biopharmaceutical company founded in 1983 and renamed in January 2012, headquartered in Dublin, Ohio. Navidea focuses on developing and commercializing precision immuno-diagnostic and immuno-therapeutic agents. The company operates two main programs: diagnostic agents and therapeutic development. It has developed the Manocept platform, designed to target CD206 mannose receptors expressed on activated macrophages. This CD206-targeted platform supports multiple diagnostic modalities—including single-photon emission computed tomography (SPECT), positron emission tomography (PET), imaging and localized gamma scanning, as well as intraoperative and/or optical fluorescence detection—and serves as a delivery system for therapeutic compounds targeting macrophage-mediated and immune/inflammatory diseases. Navidea offers NAV4694, a fluorine-18-labeled PET imaging agent used for imaging and assessing patients exhibiting signs or symptoms of Alzheimer’s disease and mild cognitive impairment. The company also develops diagnostic agents including Technetium Tc 99m Tilmanocept and other diagnostic applications based on its Manocept platform, alongside various therapeutic development initiatives. Navidea collaborates with IMV Inc. on preclinical therapeutic research to explore potential synergistic effects of its platform-based immunotherapies. Total revenue has declined year-on-year over recent years; however, Q1 2020 revenue rose year-on-year, while net losses widened. Cash on hand declined year-on-year and remains tight; non-current deferred revenue remains stable. The stock hit a low of $0.63 on April 16, 2020, and surged 4.45% on June 23. June 26: Opened up 2.25%, fell to -4.26%, experienced multiple oscillations—upward, downward, upward again—and closed 0.5% above the moving average; turnover rate 1.55%; market capitalization slightly above enterprise value; held by 28 institutions (7.02% ownership); no analyst recommendations; chasing highs carries risk; trading volume is low—caution advised. LXU (LSB Industries, Inc.) A U.S.-based manufacturer and seller of chemical products, founded in 1968 and headquartered in Oklahoma City, Oklahoma. The company supplies nitrogen-based fertilizers—including aqua ammonia, fertilizer-grade ammonium nitrate (HDAN), and urea ammonium nitrate solutions—as well as fertilizer blends for corn and other crops, and NPK fertilizer blends. It also provides high-purity and commercial-grade ammonia, high-purity ammonium nitrate, sulfuric acid, mixed nitrating acids, carbon dioxide, and diesel exhaust fluid; concentrated, mixed, and conventional nitric acid for diverse applications (including semiconductors); polyurethane intermediates; and chemicals for pulp & paper, alum, water treatment, metal and vanadium processing. Its products further support power plant emission reduction, refrigeration, metalworking, exhaust additives, horticultural/greenhouse applications, cold storage, and industrial-grade ammonium nitrate, ammonium nitrate solutions, and HDAN solutions for mining, open-pit mining, quarrying, and construction. Total revenue has declined year-on-year over the past two years; Q1 2020 net income deepened into loss territory, though cash on hand remains sufficient. The stock peaked at $4.37 on January 17, 2020, and bottomed at $1.04 on May 19.

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