Core Insights - Zhang Jiansheng, a fund manager at Baodao Fund, has shifted his investment strategy towards Hong Kong stocks, increasing their representation in his portfolio from 3 to over 50% by Q2 2024, indicating a positive outlook on the market [1] - His investment philosophy emphasizes a bottom-up stock selection framework, focusing on competitive barriers, industry dynamics, and valuation metrics [1][2] - Zhang's approach to valuation is unique, prioritizing the implied return over a five-year horizon rather than traditional price-to-earnings ratios, which he believes provides a more rational assessment of a company's worth [2] Stock Selection Criteria - Competitive barriers are deemed essential; companies lacking these barriers, regardless of growth rates, are not considered for heavy investment [1][3] - Industry supply-demand dynamics are critical for risk management, with Zhang highlighting the domestic innovative drug sector as an example of improving investment value due to favorable conditions [2] - Cash flow value is prioritized over market sentiment, as demonstrated by a past missed opportunity in telecom operators due to an overemphasis on short-term negatives [2][3] Focus Areas and Market Trends - Zhang identifies three key sectors for investment: 3D stacking technology, cloud computing, and edge AI, anticipating significant growth driven by technological advancements [3] - The changing pricing logic in the Hong Kong stock market, influenced by increasing southbound capital, presents new opportunities for bottom-up stock selection [3] - Despite the rise in the Hang Seng Tech Index, many quality assets in the Hong Kong market remain undervalued, suggesting potential for future appreciation [3]