In the era of high-quality development, the capital market environment has undergone significant changes, and investment paradigms also need to evolve with the times. The new "Nine National Guidelines" guide investors to place greater emphasis on long-term value investment and returns. Here, I would like to share a few insights with everyone:
Balancing to cope with market uncertainty
Over the past decade, growth has been the central theme, essentially because China's economy was in a high-speed growth phase where all industries were flourishing. In the future, as economic growth slows down, high-speed growth will become increasingly rare, and investors' demand for certainty will continue to rise. The market may place more emphasis on the "value" itself and gradually return to the aesthetic standard of "bigger is better," focusing on leading companies with outstanding competitive advantages as investment targets.
In such a market environment, a balanced style aims to provide long-term stable returns to investors by diversifying across industries, allocating companies at different stages of development, and balancing growth and value, as well as net value growth and drawdown control.
If we liken the balanced strategy to a dumbbell, one end of the dumbbell consists of stable defensive assets, which are high-quality companies with stable and sustainable cash flows, strong dividend intentions and shareholder returns, and solid net assets. The other end of the dumbbell is companies that truly benefit from global industry trends and have strong growth potential, which may be due to the AI wave or the vigorous development of emerging markets, and can bring good returns to investors over a certain period. Of course, we need to be aware that at this stage, the growth potential of the vast majority of so-called "technology" companies is questionable, and the market is concerned whether they will become investment traps with high valuations and slow growth. Avoiding "pseudo-technology" is something we need to pay particular attention to in practice.
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The overall equity market has experienced a significant correction, and there are some targets that have been mistakenly killed. Some may be due to weak sector beta, and some may be due to periodic performance fluctuations. At this time, we need to leverage our excellent stock selection capabilities to gradually layout at positions with high cost-effectiveness and strive to find companies that can truly grow in the long term.
The new "Nine National Guidelines" have a profound impact on the capital market
As an important measure in the reform of China's capital market, the new "Nine National Guidelines" play a significant role in enhancing market vitality and promoting the long-term healthy development of the capital market. Among them, strengthening market supervision and guiding long-term investment are considered more important.
In the past, the capital market speculated on shell value and small and thematic stocks, which was essentially due to the lack of a complete and strong delisting mechanism in A-shares, leading to a large number of companies without investment value gaining market value that does not match their true value due to potential expectations of being shelled. The average daily trading volume of some small stocks even exceeded some companies with a market value of tens of billions. In the future, with the in-depth promotion of the new "Nine National Guidelines," the capital market's tolerance for inferior companies will be greatly reduced, and speculation will be effectively curbed. Although there may be some fluctuations, in the long run, the phenomenon of listening to news to seek elasticity will be fundamentally reversed, and value investment will usher in a true spring.
Invest in high-quality companies with a patient capital mindset, making steady progress day by day, and long-term returns are worth looking forward to.Entering the "Autumn of Troubles" Globally
In the post-pandemic era, the instability of global politics and economy has intensified, with strategic competition among major powers becoming more fierce and the survival space for smaller nations increasingly squeezed. Economic fluctuations, resource contention, and territorial disputes; each issue could become a spark for conflict. As globalization deepens, any regional turmoil can quickly spread globally, becoming an uncertain factor affecting world stability.
In such an environment, I believe that the market's demand for investment certainty will continue to rise, especially the need to control volatility and drawdowns. Volatility is essentially a loss of energy. Under the valuation system of growth stocks, a 20-30% fluctuation or drawdown might not be significant for growth expectations above 100%. However, if growth slows down, for an expected growth of 10-20%, the value of low volatility is highlighted, while high volatility can significantly erode investment returns. In the long term, we aim to earn money from relatively certain, stable compound growth in performance, rather than from speculative volatility. This is beneficial for the steady growth of net value and the experience of investors.
On the other hand, in the current global context, embracing tangible valuable resources is another form of certainty. Take oil as an example; its price benefits from the global pricing due to the US dollar interest rate cuts, and in terms of quantity, excellent domestic listed companies, leveraging China's extreme engineering dividend, can more effectively increase efficiency and reduce costs compared to their overseas counterparts, producing excellent cash flow. Charlie Munger once said, "The best business to own is the one that when it stops growing, gushes cash!" By holding such excellent enterprises, I believe we can strive to provide investors with long-term stable returns.
In the era of high-quality development, market styles, investor structures, and the global environment have all undergone significant changes, and investment paradigms need to keep pace with the times. The difficulty of future investments is increasing, but the value created by in-depth research will be more recognized. By combining top-down macro analysis with thorough fundamental analysis, being a patient investor, and accompanying excellent enterprises in their growth, we can achieve success.