Long-Term Investing: Weathering Market Cycles

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The volatility of capital markets is a constant presence, with some investors chasing fleeting trends while others anchor themselves in the depths of fundamental analysisOne such individual firmly rooted in long-term perspectives is Xu Shaobo, Deputy Director of Equity Investments at Bosera Asset ManagementWith a 15-year investment career that spans both public mutual funds and Qualified Foreign Institutional Investor (QFII) capital management, Xu has navigated the dance of bull and bear markets, maintaining a steadfast commitment to long-term value investing even amidst turbulent market conditions.

As the landscape of artificial intelligence (AI) reshapes the competitive arena and advancements in hard technology circulate with increasing vigor, Xu’s investment approach remains notably steady and calculatedHe possess the ability to gaze five, ten, or even more years into the future, with an understanding of value that is deeply rooted in the core fundamentals of companies rather than mere stock price fluctuationsRecently, Xu shared his investment philosophy and perspectives on market trends during an exclusive interview with a leading Chinese financial newspaper.

Reflecting on the past, Xu's journey began in 2005. He graduated with an MBA from Tsinghua University and commenced his professional path as a researcher at China Postal Fund, focusing on industries such as steel, non-ferrous metals, and coalThis marked the beginning of a significant career in fund managementHis transition to Harvest Fund in 2008 and subsequent joining of Bosera Fund in 2015 saw him manage several public mutual fund products, further solidifying his reputation as a long-term investor.

For Xu, investing with a long-term mindset transcends the annual performance metrics typically emphasized in financial circlesHe prefers to extend the timeframe for assessing returns to a range of three to five yearsHe argues that investors must look beyond short-term market fluctuations and concentrate on the fundamental performance and long-term value of companies

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This requires deep research into targeted investments, identifying core competencies, and understanding an industry’s position rather than being swayed by market sentiment.

As a long-term investor, Xu approaches buying and selling decisions with specific criteriaHe emphasizes two factors when assessing buying opportunities: the "bottom of the industry cycle" and the "bottom of the company's fundamentals." Notably, he does not overly fixate on whether a stock's valuation is at a low point, stating, "My investment strategy aligns more with a growth-at-a-reasonable-price style rather than simply chasing undervalued stocksA stock's valuation often reflects the market’s expectations of long-term return, and those that seem undervalued can sometimes harbor underlying weaknesses or risks." Xu’s approach thus strives to balance value and growth, a philosophy that echoes through his career.

However, long-term investing does not equate to an unyielding buy-and-hold strategyXu underscores that his selling decisions are often driven by patterns within the company and its industry's cyclical behavior; typically, stock prices peak ahead of industry cyclesMoreover, if there is a significant transition in a company's management that causes concern, he will not hesitate to exit.

In the context of the recent market dynamics influenced by elements such as DeepSeek—an AI initiative—and subsequent trends in box office performance and robotics, there has been a palpable increase in risk appetite within the A-share market. “DeepSeek has enhanced investors' risk tolerance,” Xu remarked, conveying that prior to its emergence, many domestic investors held a belief that Chinese companies lagged in AI developmentThe initiative has not only bolstered confidence in domestic AI progress but has also fostered optimism about the broader economic transition in China.

Xu also highlights the significance of recent discussions surrounding private enterprises in China

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He elaborates, “Private enterprises occupy a critical position in the structure of the domestic economy, and the confidence of private entrepreneurs is pivotal for economic recoveryParticularly during this transition phase, these firms demonstrate significant efficiency in research and development, capturing a notable share of the internet and high-tech sectors.”

As for specific areas for investment in 2025, Xu identifies three promising directions: first, opportunities related to AI, primarily on the application layer and terminal equipment; second, the consumption sector benefiting from replacement cycles, particularly in home appliances, furniture, and automobiles; and thirdly, industries in the mid-to-upstream that exhibit favorable supply and demand structures, such as non-ferrous metals and machinery.

Amidst the current technological landscape, he notes that certain sectors seem to be overly crowded, especially within computer-related industries, media, and roboticsNonetheless, he maintains an optimistic outlook on investments in technology over the mid to long termPresently, the tech sector is marked by thematic investment driven predominantly by market sentimentAs orders turn into realized revenue, he anticipates that some top-tier companies’ stock prices may continue to reach new heights, showcasing substantial investment potential.

Furthermore, Xu posits that AI applications are likely to catalyze significant growth within the consumer electronics sectorFor instance, if major electronic manufacturers successfully launch AI-equipped products by 2025, it could ignite a wave of product upgrades among consumers.

In the consumption realm, the current subsidy policies impacting household goods, home furnishings, and automobiles are having a substantial effect on stimulating demand, making these sectors ripe for investmentRegarding the liquor industry, despite some debates regarding shifting consumer preferences among younger generations, Xu believes that liquor, especially baijiu, retains a vital role within Chinese culture and social contexts, making it unlikely to be displaced

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