What a start of 2022 and the launch of our fund! Recently, we have witnessed very high short-term market volatility. The wind is blowing from all directions. There are geopolitical events (Russia – Ukraine issue and Chinese ADR delisting risk) and sporadic COVID cases in China. Our Shanghai office just got locked down yesterday, and now we are working from home. Despite all these short-term challenges, our whole team keep very high morale and push ahead even harder for our research. We are very fortunate to start deploying our capital in this downturn. This golden window helps us to pick long-term quality growth opportunities at very distressed valuation. Many are trading at 10-year low valuation.
When we look back in history, this is one of many moments of huge volatility. It is not the first time and will definitely not be the last time either. We remind our team that volatility is not risk. Huge volatility can provide long-term investors with attractive buying opportunities. When we look back on the two most recent market sell-offs, the first was during the 2018 US-China (still ongoing) and the second was during the early 2020 COVID. Both have created a subsequent strong share price rally. We need to tolerate volatility, embrace it, and take advantage of it.
Some of our thoughts on how to sail through the bear market with mental resilience:
We only have one framework: consistently execute our 10-dimension framework, by focusing on growth, moat, management, profitability, cash deployment, balance sheet strength, valuation, risks, differentiated view, and ESG. We believe quality and resilient businesses will survive during the downturn and thrive afterward
Avoid short-term noises: we only focus on long-term fundamentals, and we always separate ourselves from short-term share price movements and market noises
Work harder: we cannot swing during the bear market. We work even harder during the downturn to capture the quality and beaten-up companies, we believe this is an excellent time for us to deepen our research and be positioned for subsequent share price recovery
Slow down, read and think: let’s find our inner peace. We believe it’s important to slow down when the world is spinning too fast. Undisturbed thinking time is the most precious item in the world. Personally, I will set aside 30 to 60 minutes each day to solely think, cutting myself from my phones and computers. Once we put things into a global context by reading, we can also calm down and stay focused on long-term investment
Finding trusted partners: this event is another great lesson to partner with high-quality and patient LPs who share our long-term philosophy
Again, we want to thank the team for continuing to do an excellent job. Many thanks to our valued LPs who place their trust in our hands. We believe we will sail through this bear market with teamwork and mental resilience.
Please take good care of yourselves. This is the utmost important priority.
Best,
Min ZHOU
17-Mar-2022
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