Market Environment Analysis & 'Only Pursue High-Value Opportunities' Value Investment Framework

• U.S. major indices showed mild upward trends over the nearly 60 trading days from September 23 to December 16, 2025: S&P 500 rose 1.45% cumulatively, Nasdaq +0.97%, Dow Jones +3.95%, Russell 2000 +2.27%. The 20/50-day moving averages were flat with a slight upward bias, indicating a pattern of range-bound volatility within a structural uptrend [0].
• Recent industry rotation was led by consumer cyclicals and tech sectors; traditionally stable financial and securities sectors continued their slight upward trend; energy, basic materials, and defensive sectors were in correction, indicating that capital prefers high-growth and prosperity-related targets [0].

This ‘mild growth + divergence’ pattern provides two signals for the ‘Only Pursue High-Value Opportunities’ value investment framework: first, high-quality companies have the opportunity to attract long-term capital amid volatility; second, avoid risks brought by short-term rotation and low-quality ‘inertia’ targets.

1. Focus on “Ultra-High Margin” Companies (Good Companies) Instead of General Targets
   • Through industry prosperity and moat assessment (such as high R&D barriers, network effects, brand, high-efficiency asset turnover), confirm that the enterprise has sustained “pricing power”, so that each allocation is a “high-value deal”.
   • Combine with performance sustainability: select companies with ROIC consistently higher than WACC and stable positive free cash flow to ensure that “waiting for value regression” has substantial financial support.

2. Screen “Waiting Opportunities” Based on Valuation Safety Margin
   • Amid market volatility, maintain bottom-up valuation models based on DCF or EV/FCF, compare the discount between current stock prices and reasonable value; only “place an order” when the valuation is below the safety margin.
   • At the same time, observe industry prosperity and cycle stages; prioritize entry in the early stage of prosperity recovery or over-negative sentiment stage, and avoid taking positions at high levels of “short-term bubbles”.

3. Build a “Wait + Patience” Asset Allocation Mechanism
   • Like Didi drivers waiting for big orders, set higher entry thresholds (such as stock pools, quantitative scoring) and stricter position limits to reduce frequent trading.
   • Adopt the “phased position building + high-confidence position increasing” strategy; wait for price confirmation and performance realization to ensure each position increase is based on a new round of value logic.

4. Optimize Position Rhythm and Risk Control
   • Set reasonable re-evaluation nodes (e.g., quarterly) and clear “exit trigger conditions” (deteriorating performance, severe valuation deviation, worse fundamental structure) to avoid “blind waiting” turning into “sunk costs”.
   • Concentrate positions on 3~5 large-cap high-quality companies that best meet the standards, supplemented by a small amount of hedging or cyclical assets, simulating how Didi drivers control work intensity and wait for the best “high-return big orders”.

5. Continuously Monitor Macro Trends and Capital Flows
   • Combine current index volatility, industry capital flows, and policy focus to judge “waiting materials”: for example, when there is high-frequency rotation to tech and consumer cyclical sectors in the short term, confirm whether they are peaking or wait for capital to flow back to reasonably valued value stocks.
   • Keep a certain amount of cash/cash equivalents, equivalent to Didi drivers maintaining energy and resources during the “waiting for optimal big orders” period, so as to quickly allocate when encountering real “high-value” opportunities.

• Establish a “high-quality company scoring model” (core competitiveness, sustainable growth, financial health, governance and capital return) as the entry screening logic.
• Monthly review of market volatility and position performance, strictly align with the “Only Pursue High-Value Opportunities” discipline, and gradually improve the average quality and certainty of positions.
• Combine market capital preferences (currently leaning toward consumer cyclicals and tech) to select high-quality companies that can continue to diverge during prosperity recovery; proactively increase positions during short-term industry corrections.

If you want to go deeper, Jinling AI can provide more detailed industry benchmarking, A-share/US stock high-quality company screening, and multi-factor model analysis in the “in-depth investment research mode” to help continuously optimize the execution path of the “Only Pursue High-Value Opportunities” strategy.

[0] Broker API Data: Overview of U.S. Major Indices and Industry Performance as of December 16, 2025