Core Viewpoint - The article discusses the annual letter from a private equity manager, highlighting a sense of "solitude" in the current tech-driven market, while emphasizing a conservative investment approach and a stable return on equity (ROE) of around 15% [1]. Group 1: Investment Strategy - The manager describes their investment strategy as "conservatism," focusing on a balanced industry portfolio and selling stocks during valuation bubbles while repurchasing shares during downturns [1]. Group 2: Notable Insights - The article references insights from Howard Marks regarding AI and the fear of missing out (FOMO) in investing, emphasizing the emotional challenges investors face when witnessing peers' financial success [1]. - It also mentions Hong Hao's perspective on gold prices, indicating that the recent surge to $3,000 per ounce marks a new starting point, with a shift in investment logic for gold [1]. - Additionally, the article highlights a discussion with Eli Lilly's CEO on the impact of AI on innovative drug development, showcasing the advancements in China's pharmaceutical research capabilities [1].

Core Viewpoint - The letter from the private equity manager emphasizes a conservative investment strategy that focuses on high-quality traditional industries while cautiously approaching emerging sectors, resulting in strong long-term returns despite market volatility [4][10]. Group 1: Investment Strategy - The investment approach is characterized by a "conservative practice," focusing on holding quality companies in traditional industries, which has led to substantial returns over the past decade [4]. - The fund has achieved a cumulative return of ***% and an annualized return of ***% since its inception, outperforming the CSI 300 index, which rose less than 70% during the same period [4]. - The strategy includes selling stocks during valuation bubbles and repurchasing during downturns, maintaining a balanced portfolio with a stable ROE around 15% [4][18]. Group 2: Market Insights - The letter discusses the importance of understanding disruptive forces from new technologies and business models that could impact cash flow-generating companies [6]. - It highlights the shift in asset classes, with a recent increase in internet stocks exceeding 20% of the portfolio, reflecting a strategic pivot towards undervalued sectors [10][12]. - The competitive landscape is becoming clearer, with companies focusing on dividend distribution and share buybacks, supported by a more favorable regulatory environment [12]. Group 3: Economic Context - The letter notes that China's fixed capital formation has exceeded 40% of GDP over the past 20 years, indicating a historical limit to the economy's capacity [28]. - It emphasizes the need for a long-term low-interest-rate environment to utilize stable cash flows for societal benefits, which is essential for sustaining China's low-interest and high-dividend strategies [29]. - The economic recovery is anticipated as the country transitions from a period of consolidation to growth, urging investors to reassess their asset allocations between Chinese and U.S. markets [47].