Finding opportunities that will reward investors in most environments - Angles & Perspectives Q4 2025

Finding opportunities that will reward investors in most environments

A key question for investors, after three years of strong global equity performance, is whether markets will continue to power ahead in 2026, or if we are likely to see a correction instead. With disparate outcomes possible, sitting on the sidelines or in cash is not a viable option, and the challenge for investors is to construct portfolios that can deliver appropriate client outcomes regardless of what transpires in 2026.

The PSG Asset Management way
At PSG Asset Management, we believe that the best investment opportunities are generally found in uncrowded areas that have been neglected by the rest of the market. These out-of-favour areas generally offer fertile hunting grounds for mispriced investment opportunities. However, in order to achieve long-term investment success, such a mispriced asset needs to possess an inherent quality that the market is overlooking. This can be due to a variety of factors, including the following examples:

• an excessive focus on short-term issues that have been resolved or are being addressed
  potential risks that are fully incorporated into the share price
• a change in industry supply-demand dynamics
• a change in management/improved capital allocation policy
• a simple high-level market narrative that is not supported by facts, etc.

We firmly believe that the price paid for an asset is a key determinant of both the returns generated from that asset over time, and the risk associated with investing in that asset. Out-of-favour quality assets trading at depressed valuations have a lower risk of permanent capital loss. Thus, our approach tilts the odds of earning exceptional returns over the long term in our clients’ favour.

We pride ourselves on our independent and in-depth research, which helps us to find these opportunities wherever they may reside. As a bottom-up research-driven house, our investment decisions are driven by the attractiveness of the individual investments, not by their weight in an index. We are not beholden to a strategic asset allocation framework either – each asset needs to be included in the portfolio on its own merits. This also means that our portfolios can often look different to those of most of our competitors, offering our clients valuable diversification benefits as part of a blended portfolio.

In a highly concentrated environment like the current one, this diversification becomes invaluable.

Out-of-favour stocks can deliver returns that rival those of the market darlings
While the artificial intelligence (AI) rally has undoubtedly captured the public imagination, what is less well telegraphed is that other select stocks have delivered returns that outshine even those of the AI leaders. From January 2023 to December 2025 (a period that captures the full extent of the AI frenzy), Mag7 shares delivered an incredible price return of 329%. Over the same period, Babcock International plc delivered 393% in US dollars, while AngloGold Ashanti rose 347%.

In 2025, the Mag7 gained a relatively muted 23% in US dollars, while we held numerous shares that increased between 100% and 355% in dollars. In the grips of fear of missing out (FOMO), investors often forget that alternatives that are out of the limelight can frequently outperform market darlings, especially over the medium term. Our investment process excels at finding opportunities such as these.

Case studies of our process in action
The case studies that follow are aimed at demonstrating our investment process in action.

Look beyond the obvious areas to secure future returns
Markets are currently providing investors with a unique challenge. After several years of excellent stock market returns, there are significant concerns about whether current trends can continue, especially given very high valuations for the popular AI-focused stocks, high levels of index concentration, and a challenging geopolitical situation. In such an environment, investors would do well to consider investments outside the popular winners of the recent past, diversifying their portfolios into investment positions that can perform in many different market environments.