Core Viewpoint - The article emphasizes the importance of establishing a stable and self-consistent valuation system for guiding investment decisions, despite the inherent subjectivity and variability in company valuations [1][2]. Group 1: Valuation Channel - In a relatively stable market, companies' valuations fluctuate within a defined "valuation channel," which varies by company quality [3][6]. - The theory suggests that buying excellent companies at a premium can yield higher returns over time compared to buying mediocre companies at a discount [3][7]. - The concept of valuation channels serves as a useful metric for assessing market sentiment and identifying discrepancies in expected valuations [8]. Group 2: Valuation Leap Triggered by Business Dynamics - Valuation channels are maintained under stable market expectations, but significant changes in business growth expectations can disrupt these channels, leading to valuation leaps [9][10]. - Valuation leaps can occur rapidly, often within months, due to substantial adjustments in market expectations rather than actual performance changes [10][12]. - Historical examples illustrate that companies previously undervalued can experience upward valuation leaps when market sentiment shifts positively [11][12]. Group 3: External Market Influences - Many valuation leaps are driven by macroeconomic factors rather than fundamental business changes, leading to significant price fluctuations in stocks [14][15]. - The article notes that during market downturns, companies with stable fundamentals can still experience drastic valuation declines due to negative market sentiment [15][17]. - The current market environment has created opportunities for identifying undervalued companies with strong growth potential amidst external pressures [18]. Group 4: Case Studies and Future Outlook - The article discusses specific case studies in the Hong Kong and U.S. biotech sectors, highlighting the potential for significant valuation recovery in undervalued companies [19][20]. - It emphasizes the importance of understanding the underlying business dynamics and market narratives that influence valuation trends [36][39]. - The article concludes that while the market may currently undervalue certain biotech companies, their long-term growth potential remains strong, suggesting future investment opportunities [42][43].

Core Viewpoint - The article emphasizes the importance of establishing a stable and self-consistent valuation system for guiding investment decisions, despite the inherent subjectivity and variability in company valuations [1][2]. Group 1: Valuation Channels - Companies' valuations fluctuate within defined "valuation channels" during stable market conditions, reflecting their inherent quality and market perceptions [3][4]. - The concept of valuation channels allows investors to compare historical stock prices against these channels, revealing market sentiment shifts and potential investment opportunities [8][9]. Group 2: Valuation Transitions Triggered by Business Dynamics - Valuation transitions can occur when there are significant changes in market expectations regarding a company's growth potential, leading to rapid valuation adjustments [9][10]. - Historical examples illustrate that companies can experience valuation jumps or drops based on internal business developments or external market conditions, often independent of actual performance changes [12][13]. Group 3: External Market Influences on Valuation - External market conditions can significantly impact company valuations, with examples showing how market sentiment can lead to drastic valuation changes, even when a company's fundamentals remain stable [14][16]. - The article discusses how macroeconomic factors and market sentiment shifts can create opportunities for identifying undervalued companies during market downturns [19][20]. Group 4: Case Studies and Future Outlook - The article reviews specific cases in the Hong Kong and U.S. biotech sectors, highlighting the potential for significant valuation recovery in companies with strong growth prospects despite recent market challenges [21][22]. - It suggests that while some sectors may appear overvalued, others, particularly those with solid fundamentals, may present attractive investment opportunities as market conditions improve [26][30].