First, keep fishing where there are fish. This determines that we pay more attention to pattern than space in industry configuration. Many emerging growth industries have huge space and rich imagination, but the industry structure is uncertain and it is difficult to find the leader in the field, or the leader's position is easily subverted by new technologies. The consumer industry represented by liquor is sticky, and the pharmaceutical industry is protected by patent cliffs. We prefer to focus our industry allocation on these lush places that can give birth to bull stocks in the long term. Do not waste strategic resources in non-strategic directions. Consumption and medicine will continue to be our most important strategic directions.
Second, insist on not fishing in places where you are prone to drowning. Many companies have perfect growth curves, but competition is fierce and they have extremely high requirements for the timeliness of research and tracking information. We chose the strategic avoidance of knowing the male and guarding the female. This determines that when choosing a company, we focus on the core rather than the margins. We are not good at investing according to the seasonal marginal changes in external factors of the company's orders or sales volume, so the portfolio lacks short-term flexibility. But we insist that the company's core competitiveness can help investors stay calm in the long term and survive short-term difficulties, and avoid expensive transaction friction costs. Do not replace strategic laziness with tactical diligence. This is also the reason why we make less and less time and style allocations in major asset classes.
Third, take out about ten positions to fish at an altitude of 5,000 meters. This is when we begin to increase our thinking on the allocation of technology stocks within the circle of competence. Our stock selection ideas for technology stocks are similar to consumption, paying more attention to their industry structure, pricing power and stickiness. Therefore, we will not allocate industries outside our own circle of competence, such as consumer electronics and new energy, but focus on the two directions of cloud-based computers and chip equipment. The valuations of these companies are indeed on the Qinghai-Tibet Plateau. However, after learning from Huawei and Mao Xuan, we believe that the status of Aksai Chin is completely different from that of southern Tibet. Although the latter has fertile water and grass, it requires labor to reach far. The former is located at the commanding heights of Northeast Asia and can wait for work.
Our main concerns for the second half of the year are high valuations and short-term over-interpretation of market sentiment. We believe that the long-term risks and short-term style switching of equity assets are outside the circle of competence that cannot be grasped, so we selectively ignore them.