This year, there are some special aspects to the annual contemplation of Ruizhun Asset. The PPT template does not use the usual deep and rigorous indigo color, but blends light blue and orange, giving a warm and bright feel. Ruizhun Asset Management's managing partner and research director Dong Chengfei mentioned that the "2025 economic 'feel' will improve significantly compared to 2024," and emphasized multiple times his "comparative optimism," giving us a visually intuitive feeling. "The most important reason for optimism is that the turning point in policies is very clear." "For real estate in 2025, we are relatively optimistic." "From the analysis of listed company performance data, we are also more optimistic." "Compared to 2024, we believe that the dividend trend is halfway, and looking ahead to 2025, our view might be more advanced: dividend investments have absolute returns, but not relative returns." "Currently, it is not the best time to invest in semiconductor companies, as their valuations are high and the gains are large. Therefore, we see the semiconductor industry as a game for the brave, with stock fluctuations being very large." "I have always believed that utilities are the industry with the greatest fundamental changes. New energy has brought about revolutionary changes in the industry's status, profit model, and profits." "In the Hong Kong market, we choose growth stocks, and companies must be able to achieve profitability, continuous growth, and withstand the scrutiny of international investors in terms of business models and other aspects." The "Ruixusuo" viewpoints are elaborated one by one, and Dong Chengfei continues to make judgments within "his understanding," without any ambiguity. This is also the third annual sharing of Ruizhun Asset's investment research team. We have been listening to the "Ruixusuo" for the past two years. This year's annual contemplation is a bit special because, in addition to reviewing the opportunities of 2024 and looking ahead to 2025, Dong Chengfei also deeply shared two inspiring case studies. One is about Panda Livestream, and the other is a review of the development of the internet in the United States. Dong Chengfei spent a long time narrating his entire journey of understanding, researching, and thinking about Panda Livestream. He said, "Panda Livestream's customer-centric closed-loop model has added value to the entire industry chain. The threshold for using this method is very high, but once this path is opened up, it is sustainable and free from the hardships of homogenized competition." This kind of business culture of "win-win and prosperity" established with customers, employees, partners, and even competitors, is, in Dong Chengfei's view, "very meaningful and exemplary for our society." He jokingly said that he is somewhat persistent in "offline scenarios" and "building trust" in business. And by reviewing the development of the internet in the United States to look at today's AI landscape, especially whether the stock prices of companies like NVIDIA will... I'm sorry, I have reached the maximum character limit. The remainder of the text could not be processed.After the analysis of the situation, it is believed that for a long period of time in the future, the market style will not switch frequently. Once the market stabilizes, small-cap technology growth style is expected to become mainstream.Looking at the results, in the first three quarters of 2024, the market did continue to be dominated by dividends, but after "9.24," the entire market style underwent a huge and drastic change, which is evident from the performance of various indexes. How should we look at it going forward? I always feel that dividends in the market often represent certainty. When the market is bad, everyone's risk preference is low, and the dividends received are certain. In fact, growth represents the future development potential of a company. And market styles always switch back and forth between certainty and possibility. So far, the response in the A-share market has been very intense, as has the Hong Kong stock market. I believe that for the small-cap technology growth style to continue, a group of small-cap technology stocks must deliver performance. Fortunately, in certain areas, some companies are slowly beginning to show good performance, such as some companies in the field of semiconductor digital chip design. So, we still have confidence in this area. I have always had a viewpoint: China's semiconductor industry is like a long slope of deep snow, and in the future, it should be able to nurture some large companies. Looking back on the third inventory: Dividends halfway there By the beginning of 2024, dividend investments had been profitable for three consecutive years. Therefore, at that time, we proposed the view that dividends were halfway there. Looking ahead to 2025, our view might go further: dividend investments have absolute returns but no relative returns. Behind this is our relatively optimistic outlook for the 2025 market. Because once the market is optimistic, dividend investments, due to their bond-like nature, will inevitably lag behind the growth sector in terms of returns. Thinking about 2025: The underestimated "Fat Donglai" In 2025, the first case study we most want to share with everyone is the story of Fat Donglai. I have been researching Yonghui Supermarket for over a decade, and I noticed Fat Donglai because in June or July of last year, Fat Donglai provided assistance and restructuring to Yonghui Supermarket's store in Zhengzhou. After the store was restructured and reopened, I visited it in the first week to conduct research. I was curious to see how much they had learned from Fat Donglai. The restructuring of that store was indeed very successful. Many customers were queuing up, and there were significant changes in various aspects of the business format. After the inspection, I further studied Fat Donglai, not on the operational level but on the philosophy that Fat Donglai brought to me was very shocking. So, the first consideration for "Wisdom Thought" in 2025 is to share with everyone my understanding of Fat Donglai from my own perspective. Other supermarkets are essentially like "second landlords," albeit to varying degrees. But after Fat Donglai entered this field, it chose a different path. Fat Donglai focused on consumer experience from the start and put effort into product selection, pricing, service, after-sales, etc., all to the extreme. In Fat Donglai, many products are clearly marked with prices, and it's interesting that non-standard products like tea sell particularly well. In my opinion, through this series of measures, they have successfully gained customers' trust. In today's commercial environment filled with various false information, gaining consumers' trust is very difficult. In fact, when it comes to many things, as long as you can win the trust of customers, costs in many areas will be significantly reduced. For example, during the Spring Festival this year, when Fat Donglai dealt with the "Red Shorts Incident," I saw that every time they handled similar situations, they emphasized putting the customer at the center, rather than just saying it, they actually did it. Fat Donglai also did very well with suppliers and employees. For suppliers, Fat Donglai not only does not delay payments but also ensures that suppliers can receive payments smoothly and even cares about the welfare of suppliers' employees. In terms of employee management, Fat Donglai has adopted a unique and effective approach. On the one hand, salaries for employees are very high; on the other hand, there is a clear distinction between rewards and punishments. Such a working environment makes positions at Fat Donglai very competitive, and everyone values their position. Interestingly, most of Fat Donglai's compensation structure is non-performance-related KPIs. In most companies where KPI is the focus, Fat Donglai's basic salary accounts for only 40%, while the part related to cultural concepts and skills accounts for 60%. Yonghui Supermarket and Fat Donglai are two completely different models. I witnessed Yonghui's development from its inception to becoming China's number one supermarket, once compared to Walmart, and then gradually declining. Fat Donglai, on the other hand, its supermarket is like a tourist attraction and has carved out its own path to success in a "unique" way. I mentioned earlier that Fat Donglai assisted Yonghui last year. In fact, as early as 2022, Fat Donglai began helping poorly managed counterparts, starting by assisting some small-scale supermarkets, mainly in third- and fourth-tier cities, which many people may not be aware of. Only after assisting Yonghui, with more media coverage, did people become aware of Fat Donglai's assistance to its counterparts. When I went to research Fat Donglai, I thought it might be an extension of a business model. I thought it might be reluctant to expand beyond Xuchang, given the difficulty of national expansion, no matter what model it adopted. But its supply chain capabilities are particularly strong, which is clearly evident. Its proprietary categories are also very good. So, at the time, I thought its business model might be to create a second growth curve through the supply chain, such as empowering competitors. After all, when Yonghui's supply chain was strong, it also imagined this business model, relying on strong business operations to supply itself on the one hand and supply other supermarkets on the other. But when I went to the scene and communicated with Yonghui's people, the information I learned shocked me. Yonghui's people said that Fat Donglai completely showed them its entire supplier system without holding back, even revealing where each category was purchased from, the purchase price, etc., meaning that Yonghui could replicate it completely. For private label products, it is normal to add one or two percentage points for other supermarkets. But Fat Donglai did not hold back, revealing all the core supply chain secrets of supermarkets. In addition, at the time, Fat Donglai dispatched a huge team to assist Yonghui, and the travel of the entire assistance team was.The expenses are all borne by Pang Donglai himself.This really arouses curiosity! In our cognition, competitors are like mortal enemies. After researching a lot about the founder of Pangdonglai, I realized from his philosophy that he has a very complete logic. For example, he positioned Pangdonglai as not just a business, but as a school; He also expressed his desire to spread his ideas on different occasions, because these ideas are good; He mentioned that the purpose of the company is to help more people achieve success, just like a school, hoping to make more people understand the meaning of life; He believes that growing and strengthening the company is secondary, the important thing is to do what you love. His philosophy is very unique and not universally applicable. So from this perspective, it is clear why Pangdonglai does not open stores for expansion. Pangdonglai's view on competition is also different from most people. Pangdonglai believes that one should have a mature attitude towards competitors, and if others surpass oneself, it is taking responsibility on one's behalf, and one should be thankful. It is this unique way of thinking and framework that leads to Pangdonglai's KPI setting for employee management. Today, the reason I want to share this story with everyone is not from a business perspective, but because I feel that the philosophy behind Pangdonglai is quite rare and unique in the current business context. Many people say that Chinese business culture is very "complex", and this "complexity" is not only reflected in the business field, but also in all aspects of society. But when I look at Pangdonglai's philosophy, what they emphasize most is freedom, love, happiness, and fulfillment. These philosophies and values are particularly interesting, with social significance and value beyond just business models. Thinking about 2025: Will AI take a break in the midfield? Currently, we are just posing this question, and we do not have an answer. This is a question that many people discuss. People who follow the A-share market have been bearish on the US stock market for more than a year or two. The market value of the "FAANG" in the Nasdaq market is astonishing, with the "FAANG" companies accounting for almost half of the market, reaching a level of 15 to 18 trillion US dollars, which even exceeds the entire market value of the A-share market (of course, these companies have good quality, leading in growth and profits among other companies). In fact, AI is a key factor driving the growth of these companies' market value. Without AI, I believe that these companies would find it difficult to achieve such high valuations. So our starting point is to review the development process of the Internet and see what investment insights it can bring to us. Of course, everyone's insights may be different, we aim to objectively present and systematically organize relevant content for everyone to see, while also presenting our own thoughts. This also does not mean that our views are definitive, as AI is still in its early stages of development compared to the Internet. For example, some venture capitalists liken OpenAI to the early America Online (AOL). In terms of development, AI is still in a relatively early stage. Looking back at the development process of the Internet, it can be roughly divided into three stages. Before 2000 was the early stage; from 2000 to 2003, although the Nasdaq index showed a sideways trend (affected by economic problems in 2007-2008), looking at the stock price performance of some internet companies, from the high point in January 2000 to the end of 2003, these three years were a period of adjustment, which also coincided with the 9/11 event, leading to the burst of many bubble companies; after 2003, the Internet gradually matured, leading to the emergence of mobile Internet. Looking at the market performance, we have the early stage, adjustment period, and new stage after technological upgrades. For us, it is natural to be concerned about one question: will AI take a halftime break like the development of the Internet? Let's look at the situation around 2000. From the perspective of penetration rate, at that time the Internet penetration rate in the United States was close to 30% - 40% (reaching 43% at the end of the year), which was in the mid-early stage. In terms of business models, it was also in the early stage. The development of the Internet and the AI industry have many similarities, such as having companies like those that "sell shovels", such as Cisco back then. Before 2000, the star companies that the market was bullish on were America Online (providing Internet access services) and Cisco (providing hardware support), and comparing to today, it's like OpenAI and NVIDIA. At the time, Cisco was highly sought after, with a market cap reaching nearly $550 billion on March 27, 1999 (in terms of market position), as comparable to NVIDIA's $3 trillion market value today. Today, Cisco's market capitalization is only over half of its peak value, although its stock price is near historical highs, due to popular stock buybacks in the U.S., the number of shares outstanding has decreased by nearly half. Looking at profit situations, in 2001 Cisco's profit growth turned negative, even though previously it could earn tens of billions. But after that, the company continued to have good profits, with over $10 billion in profits in 2024, making it a very strong company overall. Nevertheless, (according to the chart above) once halftime break happens, it will be very tough, it's best not to take a break. After the break, everyone will be classified as traditional industries in the American market, and the valuation level will drop to over 10 times (although profits continue to grow, but the market value restoration is far away). Comparing Cisco and NVIDIA, the two have many similarities in terms of industry position and innovation ecology. Essentially, I believe that the two companies' business models are almost identical. They both play the role of "selling shovels", Secondly, their revenue is tied to traffic, their business logic is targeted at large B customers, and they have technological attributes, long-term looking at a deflation model. This means that unit traffic prices are plummeting, and if unit prices do not fall, the market cannot support the explosion of thousands of demands. They are involved in a race between technology and demand. For example, although the next-generation chip from NVIDIA has a high price, it has stronger performance, making it cost-effective for customers; this is also the logic of Cisco, upgrading and replacing products like switches and routers. However, once it reaches a certain point of development, it will face troubles, just as Cisco's experience shows, it's just hard to predict when it will reach that point.90%2020 2025 20252024The family company accounts for one third of the total number of companies in the market, and is also mainly a large company. If we add the profits of 40 banks, its profit will account for 90% of the total market profit.We exclude bank profits because banks are special, and the remaining data can better represent the profit situation of entities outside the banking sector. Before we did this data analysis, we always thought that there would be continuous negative growth in 2024, with photovoltaic companies facing huge losses. From the data, the economic situation in 2021 was very good, with rapid growth in company performance; economic growth continued to decline in 2022 and 2023, along with enterprise growth. However, from the data for the first three quarters of 2024, compared to the first three quarters of 2023, there was a year-on-year increase, although the increase was small, less than 1%. Considering some provisions for 2024, I adjusted it to negative growth in the annualized processing. Of course, the final result will be reviewed again after the annual report is released. The general sentiment towards the economy in 2024 is negative, affecting investor and company confidence. However, the data quietly tells us that the economic decline is actually converging, with positive growth in the first three quarters of 2024 compared to the same period in 2023. The emphasis on the concept of "sentiment" is due to a better sentiment from investors compared to before September last year when comparing data. Therefore, I believe that if the economy improves slightly in 2025, there is a high probability that the performance of listed companies will show positive growth. Rising risk appetite needs no further elaboration, as those in the market understand that it is no longer a simple matter of growth. Based on our views on the macro economy, performance, and risk appetite, we are leaning towards a positive outlook for the capital markets in 2025. We also have some thoughts on certain industries. We have been discussing the semiconductor industry for the past few years. Currently, it seems that it is not the best time to layout semiconductor companies due to high valuations and large price increases. Therefore, we view the semiconductor industry as a risky game with significant stock fluctuations. In the investment environment, we have a positive outlook on materials and design, as their prospects are definitely on the rise, while equipment prospects are declining. It is difficult to judge the manufacturing segment due to oversupply. Relatively, we are more optimistic about the consumer end, as Chinese companies excel in this area. In the field of data centers, I have always been saying that the leading companies benefiting from it have not gone public. We also have a heavy position in public utilities, although the market has deep suspicions about these companies. Currently, stock prices are essentially back to 2022 levels, but industries in 2022 were mostly heavily loss-making, and they ended up profitable, with stock prices now just returning to their starting points. China added 277GW of new photovoltaic installations in 2024, along with 79GW of wind power, meeting about 5.5% of China's electricity demand growth. I think China's new energy revolution is indeed happening. In the past two years, we correctly predicted the trend in coal prices. In 2022, we clearly stated that we were not optimistic about energy prices, believing that energy prices would not remain high indefinitely. Indeed, coal prices have been weakening over the last two years. However, the issue is that power generation companies have not been in a good commercial model, somewhat resembling airline stocks, with too many influencing factors such as electricity prices, coal prices, generation hours, wind, sunlight, policies, etc., and the criticized practice of impairment provisions every fourth quarter. We are positive about the underlying logic of power generation companies. We believe that under the new energy revolution, power companies will have more influence in the industry and will dominate the coal power game. In the past, the coal power industry earned more than one cent for each unit of power generated, but power generation companies only received two cents per unit, with many considering it unsustainable. In 2022, coal companies made 0.15 yuan per unit, while power generation companies lost six to seven cents per unit, and profits were taken by the coal companies. Now, all integrated power generation methods are able to earn 0.1 yuan per unit, with wind power making 0.15 yuan per unit, and photovoltaic, nuclear, and hydro power able to earn more than one cent per unit, but their ROE and ROIC will not be too high, possibly around 8% to 9%, while coal power made 0.02 yuan per unit in the first half of the year. New methods of power generation will reduce dependency on coal. From this perspective, I believe that power generation companies' profits may still compete with coal companies. I have always believed that public utilities are the sector with the greatest fundamental changes. I used to joke that I had never invested in power generation companies in the past 20 years, but I think the industrial position, profit model, and profit brought about by new energy have brought revolutionary changes to this industry, although the market still does not fully acknowledge it. Our views on consumer industries are conflicting. While consumer industries have been struggling in the past two years, at the beginning of 2023, we wrote an article "The Challenges of Consumerism" covering every aspect of consumerism. At that time, we felt that the overall environment for consumerism would not be optimistic for some time to come. Two to three years have passed, and the situation has been largely as expected, with valuations in the consumer industry continuing to decline. However, the business model in the consumer industry is very good, with some outstanding companies, which is why there remains a group of investors who have strong faith in the consumer industry. On a personal level, I can only describe my view on the consumer industry in 2025 as "conflicted." Without significant policy measures, I think the consumer industry may still be constrained by long-standing factors and find it difficult to get out of its predicament. The key variable here is policy, much like the stock market last year. Therefore, my view on the consumer industry is very conflicted. From a valuation perspective and compared to historical data, it is likely not expensive; the key is the future expectations. I believe there is opportunity in consumer industries, but it will require a strong external force to change expectations about its future prospects. Finally, let's talk about the growth stocks in the Hong Kong stock market. In the past two years, we have only dared to invest in value stocks in the Hong Kong market. We used two indices for analysis. One is the dividend index of the Hong Kong stock connect. After reaching its peak in early 2021, the trend of the dividend index has been relatively stable. The other is the growth stock index represented by the Hang Seng Tech Index. We chose the Hang Seng Tech Index as a representative because many growth stocks in Hong Kong have seen declines of up to 90%, especially smaller market capitalization companies, with significant drops. For the past two years, many have preferred to invest in value stocks in Hong Kong. Starting in 2024, A-shares.The growth style of the market is slowly emerging.If the funds of growth stocks slowly dominate the market, some of the funds will overflow into the Hong Kong stock market. We are also selecting some growth stocks in the Hong Kong market now. Due to various reasons such as poor liquidity in the Hong Kong market in 2024, we dare not buy growth stocks at all. But this year, we will buy some small-cap growth stocks that we have repeatedly demonstrated in the Hong Kong market, especially high-quality growth stocks in the Hong Kong stock market. Countless facts prove that thematic investment should never be done in the Hong Kong market. Therefore, when choosing growth stocks in the Hong Kong market, companies must be able to achieve profitability, continuous growth, and withstand the selection of international investors in terms of business models and other aspects. Investors' requirements for high-quality growth stocks in the Hong Kong stock market are more stringent than those for growth stocks in A-shares. Once the right stock is selected for investment in Hong Kong stocks, the increase is also amazing. When falling, it may decline for several years in a row without looking back, but when rising, the continuity is also strong, and there is no need to worry about future trends. Overall, I think there will still be opportunities for high-quality growth stocks in the Hong Kong stock market in 2025. This article is reprinted from the "Smart Investor" official account, GMTEight Editor: Li Fo.