Wait for the flowers to bloom The overall performance of A-shares this year is not optimistic. With over 5500 listed companies, the median increase in stock prices since the beginning of the year is -9.8%. Except for a few stocks that are bullish, most stocks have lost money this year, The performance of micro cap stocks is even worse. Among the 400 stocks in the micro cap sector, the median increase in stock prices since the beginning of the year is -10.8%, slightly lower than the average of A-shares. However, considering the characteristics of the small and micro cap strategy of buying low and selling high, the actual performance will be better than the overall performance of the sector, In history, there have been multiple major retracements in micro cap stocks, but upon closer inspection, these large retracements often occurred during periods of particularly high valuations. The sharp decline in 2008 was due to the super bull market of 2006-2007; The two-year pullback in 2017-2018 was due to the super bull market in 2014-2015; The sharp decline at the beginning of 2024 was due to the significant increase in the micro disk index throughout 2023, while the overall A-share market fell sharply, forming a huge scissors gap, Except for these few times, the magnitude and duration of other retractions are not significant, ranging from a few months to about two years, and can basically be repaired, Confidence comes from two aspects: Firstly, compared to oneself, the valuation is at a low level, with a current price to book ratio of 2.11 and a 5-year percentile of 29.5%, which is a relatively low level. The 10-year percentile is even lower. Wind data shows that in the past 5 years, under the condition of a price to book ratio below 2.11, the micro disk stock index has never shown negative returns in the next year. This conclusion applies to both 3-year and 10-year data, Secondly, compared to the overall market, the valuation is also at a historical low. The latest percentile of the valuation ratio between Weipan and CSI is 15%, which is at a relatively low level. The 10-year percentile is also below 20%. Historically, after this ratio falls below 20%, all Weipan stock indices will have positive returns in the next year, and the magnitude will not be low, This year, the technology sector has diverted funds, leading to a significant pullback in the micro market. It has now entered a bottom consolidation stage. Referring to history, micro market stocks are likely to be close to the bottom. Although it is uncertain whether they will emerge from the downturn cycle (as fast as one month, as slow as one year), the downward space is very limited,