Contrarian Investing in an Age of Disruption

Our next presenter is Simon Rabinheimer.

Simon has nearly 25 years experience in investment management, including 16 years with Alan Gray, where he co-managed the Alan Gray Equity Fund and the Alan Gray Balance Fund between 2008 and 2018.

And they were the largest equity fund and mutual fund in South Africa at the time.

Simon is a director of Contrarius Investment Management Limited, which he joined in 2019.

Welcome Simon.

Hi, Darren, thank you very much for having us.

Thank you to Investment Markets for hosting us.

I'm based here in Jersey in the Channel Islands.

As Darren said, I'm a director of Contreras Investment Management.

And I'm happy to take you through some of our thoughts on the markets today.

Let me share my slide.

There we go.

Contreras investing in a changing world.

So Contreras was founded in 2008 and our global equity and our global balanced funds launched in January of 2009.

So we have a track record of just over 17 years.

We're happy with how our funds have performed.

This chart shows you the performance of our equity fund, which is our flagship fund, constitutes of probably 90% of our assets under management over various time periods.

So one year, three years, five years, 10 years on the left hand side since inception.

And what you can see on the right hand side is the long-term number.

Had you invested $10,000 with us at inception,

your investment would now be worth $106,000.

This is all after fees.

And that compares to $67,000 had you put your money into a cost-free index fund or $45,000 had you given your money to the average manager.

Now, our goal is very much to focus on the long-term and to keep compounding that $106,000 number.

For our balanced fund, very similar numbers.

It's a slightly smaller fund, but our balanced fund, in addition to owning shares, like our equity fund does, our balanced fund can also invest in funds, it can invest in commodities, it can invest in cash.

The current net share exposure in our balanced fund is 64%.

But because our balanced fund invests in the same shares that our equity fund invests in, it's also delivered industry and benchmark beating returns since inception.

Importantly, how do we think about markets today?

And this slide here really lays out a framework for how we are approaching markets in 2006.

We really are focusing on three pillars.

The first pillar is to try to find the winners in AI.

Now, a lot of managers have largely ignored, a lot of value managers have largely ignored artificial intelligence.

We believe AI is not just another innovation cycle.

We think it goes much deeper.

We think it's a fundamental

reconfiguration of how knowledge work is performed.

And we think it'll have profound implications on the structure of the economy and on sort of how society functions, and it'll affect all of us.

We think digital intelligence is only the first step.

The next step, which is a lot less talked about, is physical AI.

So think robots,

think intelligent machines, think cars that can drive themselves autonomously, this is already becoming a reality in many cities in the US.

Our aim is to position our fund to capture the outsized returns that we think this transformation will generate over the coming decades.

Now, finding the winners is a lot easier said than done because things change so fast and we are seeing creative destruction at warp speed

And as such, we have to be willing to adapt and to change our minds very, very frequently and not get too wedded to individual stocks or preconceived ideas.

I will say that we used to hold a lot more of the shares in this basket than we do now.

We've narrowed our stock picks in this bucket to reflect the companies that we have the highest conviction in.

As AI-related share prices have risen to, in many cases, beyond levels that we could justify on a fundamental basis, we've taken some money off the table and we've moved it into that second pillar, which are high-quality businesses that are less likely to be disrupted by artificial intelligence.

And here you will find

a lot of consumer staples, for example, you know, liquor companies, branded product businesses, generally high quality companies with brands that have been around for many decades or even centuries in some cases.

Since we've launched contrast in 2009,

For most of our existence, actually, these shares used to trade at very, very high multiples.

But in recent years, those multiples have come right down.

Some of these companies have their challenges admittedly, but the impact of charging consumer habits, of GLP-1 drugs, et cetera, are increasingly being reflected in their share prices and their earnings.

And as I said, their multiples have come way down.

So, we are increasingly optimistic on the prospective returns of the companies in this bucket.

Now, these are some of the companies we've looked at.

You can see luxury goods businesses, etc.

Nestle, Estee Lauder, Lululemon, Nelson Coors.

We don't own all of them, but it sort of gives you an idea of where we are looking for value.

And then the third bucket is to avoid companies that may be disrupted by artificial intelligence.

And I think this bucket is actually extremely important.

We've been very, very wary of the disruptive power of artificial intelligence for probably the past two to three years.

And that's what I found instead.

I think what makes this difficult is

Especially more recently, there's been a lot of publicity about AI disruption and a lot of the more vulnerable shares have already sold off very aggressively.

Some have absolutely collapsed.

And it is obviously tempting.

to get excited about shares that are down 70-80% in a short space of time.

But I think there's a serious risk of buying a value trap in this basket here.

And I think the most dangerous trap actually is the type of a business that actually appears in the short term to be a beneficiary of artificial intelligence.

but which risks being disrupted sort of longer term.

And I think our challenge here is to be extremely disciplined in avoiding companies that we think face existential risks, even if they do look cheap in the rear view mirror.

So this is our top 10.

as at the 28th of February.

And you can see that those shares pretty much reflect our views in line with the framework that I've just spoken about before.

We think Tesla, EchoStar and Alsopec will be structural winners in a sort of an artificial intelligence dominated world.

Tesla EcoStar are two more controversial shares.

You won't find them in many value manager portfolios.

We think these are two of the most innovative and disruptive companies in the world.

And we think that by many years of growth ahead, in fact, we think the growth rates will accelerate going forward.

Tesla is, we think, the world leader in sort of real world artificial intelligence.

Think self-driving cars, robotics,

These will be massive markets in the future and Tesla has a very clear lead.

Tesla also has a very rapidly growing energy storage business.

I'll talk to EchoStar in a little bit more detail later on.

Alphabet has probably a or the leading large foundational, large language model, which

at the moment actually seems to complement its highly profitable search business.

It's got a fantastic business in YouTube.

It's got a rapidly growing cloud business.

And I think as a sort of cherry on the cake, it has a deeply vertically integrated chip stack.

So they literally control every single layer of the AI ecosystem.

Alongside what we believe to be these AI winners, we have more stable, you could call them fairly defensive consumer stables businesses.

Those include tobacco companies, British American Tobacco, Philip Morris.

Those include spirits companies like Diageo, which owns Guinness, owns Johnny Walker, owns Smirnoff.

We've got Pernod Record in our top 10.

Pernod Record owns Jameson's Absolute and Shivers Regal.

We've also got a business like Mondelez, which is a food and confectionery business.

Mondelez owns Cadburys, Oreos, Clif Bars.

And the multiples on these businesses are actually fairly low.

As I said, for the tobacco and spirits companies, you pay between 11 to 13 times multiples for, we think, high quality companies, which I think is very low in light of where the overall markets are currently trading.

So we think this top 10 strikes a good balance between growth and resilience, between quality and value.

And we don't think you'll find many other managers with top 10s that look like this.

It really is quite a unique mix of different factors.

So let's touch on EchoStar very briefly.

Now,

Ecostar is a very interesting company.

We first invested late 2025.

The company started as a seller of satellite dishes under the back of a pickup truck by a very entrepreneurial person called Charlie Ergen.

Ecostar went on to launching its own satellites and expanding into wireless broadband and satellite TV.

Last year, the company pivoted from being a capital intensive holder of 5G spectrum to becoming a more asset-light investor in satellite technology.

And they did that by selling off their exospectrum for Camish and some of that exospectrum in return for shares in SpaceX.

So this chart shows you where EchoStar will be upon the conclusion of all these transactions.

At the end of December, Echo Star's stake in SpaceX and its net cash was worth more than its market caps.

You can see the market cap there was $109 a share.

SpaceX plus net cash was worth $113.

And you're getting all these other businesses, which you've shown there on the right, Dish, Sling, Boost, Mobile and Hughes, you're getting those for free.

The real upside, however, is not in the businesses that you're getting for free, the real upside lies in SpaceX.

Now, SpaceX revolutionized space travel by being the first company to reuse their rockets.

Reusing their rockets has been a complete game changer.

Imagine Qantas Airlines having to scrap their plane after every flight.

In 2025, of the 165 Falcon 9 launches that SpaceX did, nearly all were done with reusable rockets.

And this is sort of at the very cutting edge of human ingenuity.

I mean, I remember being absolutely blown away when SpaceX, for the first time, caught that massive booster rocket, which is 70 meters high.

That's sort of more than 20 stories.

which had basically fallen back to Earth from space and they caught it with a pair of chart sticks.

I mean it's incredible technology and this chart shows you just how big SpaceX lead on the competition is.

Of the 616 tons,

of spacecraft mass that was launched into space in the third quarter of last year, 512 tons were done by SpaceX.

The competitors, you can see China in second place, Roscosmos, those are the Russians in third place, they're not even close.

What the next chart with this chart here shows you is just how transformative reusing rockets has been along with obviously SpaceX's other innovations.

This chart here tracks the progress over the past 60 years in terms of the cost per kilogram.

launched into space.

For many years you can see it didn't move much and then SpaceX came around more recently and completely changed the trajectory and upended the industry.

The logarithmic scale of the y-axis hides just how dramatic that decrease in cost has been.

And we haven't even sort of scratched the surface of what is possible to be done from space when you can get, you know, your cost per kilogram down to, yeah,

Elon's long-term ambition of $10 a kilogram.

So we think it opens up a world of opportunity for SpaceX.

SpaceX also has a very interesting business called Starlink, which has deployed almost 10,000 low Earth orbit satellites.

created a satellite constellation which provides affordable, seamless, high-speed internet to every corner of the world, irrespective of how remote you are.

And you can see here that the customer growth there is absolutely parabolic.

And in fact, I've got several colleagues and friends who are our customers and

To have high speed broadband anywhere in the world is pretty incredible.

At the moment you need a Starlink antenna, you get quite a nice sort of portable laptop sized one that you take with you.

But increasingly Starlink is beginning to partner with existing center providers to provide remote high speed internet access directly to your phone.

So for example, in the US, Starlink and T-Mobile already have a partnership whereby for an extra fee, T-Mobile clients can gain access to Starlink's data directly to their phone without the extra antenna.

And my guess is that direct-to-phone will be Starlink's most exciting long-term growth opportunity.

Now, EchoStar bought its stake in SpaceX for an effective valuation that valued SpaceX at $400 billion.

At the end of December last year, SpaceX was valued at $800 billion and the XAI merger between SpaceX and XAI implied valuation on SpaceX of a trillion dollars.

And there are talks that SpaceX might list this year, and we think the valuation could be substantially higher than the trillion dollar valuation that the business was valued at toward the end of last year.

So we are very optimistic, maybe sort of in summary, despite

a market that has run hard and is perhaps more fully priced now than it was in the past.

We are still finding very good investment opportunities.

Our portfolio composition hopefully protects us from falling victim to change, onto disruption and to obsolescence, whilst at the same time benefiting from growth and from the adoption of new technologies.

So, Darren, I'm happy to hand it back over to you.

I will exit my slideshow.

Thanks, Simon.

There was some fantastic and very interesting statistics there on those slides.

I have noticed from your fact sheets that you have over 70% of your fund invested in the US.

A lot of people have recently said that the US is expensive.

Can you maybe touch on that and explain why you are apparently overweight in the US?

Yeah, yeah, no, of course.

So it's popular to bash the US, so I'll defend it.

I guess the US is where the earnings growth has been strongest.

And I think here the more recent weakness in the dollar will actually help.

US companies continue to gain market share ex-China.

So we look at the lion's share of large profit pools of disruptive businesses that will thrive in the future.

We think those are largely American.

Just think artificial intelligence, cloud compute, robotics, autonomous driving, e-commerce, social media, etc.

These are all largely American companies.

In the US, we think management teams are more aggressive than elsewhere in pursuing shareholder value, so you get more innovation.

We like property rights, shareholder rights, the rule of law, market transparency.

Those are all things that are very important to us.

In addition, the liquidity is better than elsewhere.

I'm not saying the market's cheap, but the averages, I think, hide the tremendous disparity

that is below the surface.

Because it's such a large and diverse market, we'll almost always find things that are cheap, even if the market as a whole is more expensive.

So we've actually reduced our U.S. exposure more recently.

It's now just below 70%.

So it's 68% as at the end of fair.

And that is, I think for the MSCI World Index, it's over at 74 or 75%.

So we're actually slightly underweight the US at this stage.

Okay, thank you, Simon.

And if I look at your top 10 positions, you seem to have an unusual mixture of growth and value stocks.

We probably saw a little bit of that in your top 10.

So, you know, are you a growth manager or are you a value manager or are you something else?

We get asked that a lot.

We do have a very eclectic mix of companies in our portfolio.

I mean, there are times where

classic value stocks are in favor or when growth stocks are in favor or when quality stocks are in favor or out of favor, we're inherently attracted to sectors that are out of favor.

So there'll be times where our portfolio skews towards value or skewed towards growth or actually skewed towards quality.

It's important to us to be able to make money in all environments.

If pushed, we would say that we are value investors, but we wouldn't want to paint ourselves into a corner.

So I think a more accurate description is probably valuation conscious contrarian investors.

So if you look at our sort of our performance attribution since inception, and you look at what's contributed to our long term performance, you'll find some growth companies like Tesla or Meta in there.

You'll also find value companies like Signetunus or

tech resources for example or you'll find a consumer staple like Carlsberg those are all shares that have been in our top 10 contributors to the final performance since inception so we think it's important to be inquisitive to look everywhere in all sectors and all categories across all factors and to have an open mind and to then go where the opportunities are.

That feels like a little bit of a contrarian approach Simon.

I hope so.

I hope so.

That's what it says on the box.

We hope that's certainly what we, uh, you know, we need to live up to our, to our name.

Excellent.

Thank you very much for your time today, Simon.

That was very insightful.

Oh, fantastic.

Great.

Thank you very much, Darren.

It was always great to speak to you.