When markets obsess over the next big story such as AI, something important tends to get lost: good stocks bought at sensible prices often deliver excellent returns over time. That is particularly true when markets are volatile. We focus on understanding companies – their competitive advantages, management teams, track records, cash generation and risks – and use that to estimate what they are worth over the long term.
In fast-moving markets, new information is constantly changing; both share prices and our assessment of value. Our job is to stay adaptable, continuously reassessing that gap and focusing the portfolio on the most attractive opportunities. Here are three examples of that process in action.
Three growth stocks for AI exposure without AI valuations
There's a temptation to debate whether AI is a bubble. I think that's the wrong question. Even if some applications are hyped, building AI systems requires enormous computing power, and that demand is real. The global memory-chip industry is now far more consolidated than it used to be, with only three major players, including Samsung Electronics and SK Hynix.
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We own SK Square (Seoul: 402340), a holding company whose primary asset is a large stake in SK Hynix. Investors are paying an even lower multiple for that exposure. Historically, Korean holding companies have traded at deep discounts owing to concerns over governance. But reforms aimed at improving capital allocation and protecting minority shareholders are beginning to change that dynamic.
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Owning SK Square stocks gives us exposure to AI-driven memory demand at a depressed valuation, with the added potential for the holding-company discount to narrow as governance standards improve. In both cases, expectations embedded in the share prices remain cautious relative to the structural opportunity.
Last year, I sold Alphabet (Nasdaq: GOOG) stocks. The rise of large-language models appeared to threaten Google's core search franchise. If that risk proved permanent, intrinsic value would fall. Yet Gemini improved quickly, search-revenue growth held up, and Alphabet's vertical integration (from designing its own chips to operating its own cloud) gives it cost and performance advantages that are hard to replicate.
When we look at the group on a sum-of-the-parts basis, the core search and advertising engine seems reasonably valued. Yet investors also get YouTube, Google Cloud and the likes of Waymo, as well as AI capabilities. Those assets may not be fully reflected in the price. If AI bolsters Alphabet's ecosystem, there is upside. If enthusiasm fades, the core cash flows remain robust. That asymmetry is compelling.
Healthcare often provides fertile ground for contrarians because uncertainty is high and outcomes are complex. Genmab (Copenhagen: GMAB) is widely viewed as a single-product biotech facing a patent expiry of Darzalex, its flagship cancer treatment, later this decade. That has weighed on the shares.
But the market is overlooking a pipeline of late-stage treatments and a proven platform for developing bispecific antibodies. Crucially, the group is led by founder and scientist Dr Jan van de Winkel, whose track record of disciplined capital allocation and scientific productivity sets Genmab apart in a sector where research and development (R&D) spending often fails to generate adequate returns. If even part of Genmab's pipeline succeeds, the earnings power beyond its flagship drug could be far higher than today's share price implies.
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