T. Rowe Price manager looks for trouble to find his global value bets
T.Rowe Price manager Sebastien Mallet is betting on more than technology for his five-star fund.
One secret to global value manager Sebastien Mallet's success? Look for trouble.
Since launching the Morningstar five-star rated T. Rowe Price Global Value Equity Fund PRIGX in 2012, Mallet has leaned on his "CIA framework" - controversy, insight and asymmetric risk-reward - to pick between 80 and 100 companies.
"I look for a stock that has problems. Where our analyst tells me the problem is temporary - that's insight," the portfolio manager told MarketWatch in a Tuesday interview. The asymmetric leg involves modeling a bear and bull case, to determine how much he could lose if he's wrong and how much he could make if he's right.
His $313.1 million fund has outperformed its MSCI World Index benchmark over one-, three- and five-year periods.
Up 38% in the last 12 months, Mallet said he's nearing his best-ever one-year performance. Exposure to technology stocks such as Intel (INTC) and Advanced Micro Devices (AMD) - companies needed for artificial-intelligence computing power - and precious metals and financial companies have been drivers.
The fund has also gotten the timing right on big AI plays. Roughly a year ago, his global tech team told him the next shift would be memory-intensive running of large language models. He bought memory stocks before it became obvious to the market, but then sold names like Sandisk (SNDK) and Japan's Kioxia (JP:285A), helping mitigate a summer selloff.
As for the next AI shift? Mallet said his team of analysts told him the world is heading in the direction of agents talking to agents all autonomously, and several times the current average computing power will be needed to make that happen.
"So we need a lot more powerful chips, a lot more memory. So that's why we still own Intel and AMD, where we're convinced we will need a lot more CPU in the future," he said.
Precious metals companies are a long-term bet Mallet believes will pay off, and he plays that via top-ten holdings such as Franco-Nevada $(FNV)$ and Wheaton Precious Metals (WPM) - gold royalty companies that act as private equity or financiers for the industry. One of Franco-Nevada's main Panama mines was shut down by the previous government, but is now in the process of being restarted, he said.
That precious-metals bet centers on the debasement trade, he said. That's the idea that investors will shift out of currencies and into precious metals or bitcoin as governments' spending and debt keeps rising.
"COVID was a turning point. We shut down the economy, we paid people to stay at home. Since then, we've had massive fiscal deficits," he said. "We're financing that with printing money in ways that are not so obvious to the average person on the street."
Mallet said the result is gold (GC00) - "the ultimate purchasing power protector" - has climbed from around $1,500 an ounce to over $4,000 since COVID. About 8% of his portfolio is in precious metals stocks, and he said he bought more this year.
The fund's biggest sector is financials, with No. 3 stock JPMorgan Chase (JPM) in it from the start. Mallet described the bank as "very, very well run."
"They got lucky from higher interest rates the last 6 or 7 years. Higher interest rates are like oxygen for the financial sector. They can invest at much higher returns, and they have been very smart capital allocators," he said. For example, he noted JPMorgan got "great deals" from the 2023 regional banking collapse as well as the global financial crisis.
"I trust them to be very well run going forward at the 20% return on equity, and it's not cheap anymore, but I trust them to navigate anything that comes their way better than most," he said.
Healthcare makes up another big chunk of the fund, which owns a number of managed-care companies and drug distributors in the U.S. and drug companies in Europe. Biopharma group Gilead Sciences (GILD) and AstraZeneca (AZN) are among his top holdings.
"I think this sector is mispriced and it's helpful in the portfolio construct to have a portfolio that's defensive and will help in a bear market, and that's [healthcare] where I find my defensive stocks," said Mallet.
The markets
U.S. stock futures (ES00) (YM00) (NQ00) are rising after two days of losses for the S&P 500 SPX. The yield on the 10-year Treasury BX:TMUBMUSD10Y is just under 5% and oil prices (CL00) (BRN00) are dropping.
Key asset performance Last 5d 1m YTD 1y S&P 500 7585.73 -1.14% -1.38% 10.81% 14.82% Nasdaq Composite 25,981.57 -1.66% -1.17% 11.79% 16.33% 10-year Treasury 4.995 15.10 34.50 82.30 91.00 Gold 4375.8 -1.61% -4.47% 1.01% 18.44% Oil 104.04 7.62% 23.27% 81.22% 62.64% Data: MarketWatch. Treasury yields change expressed in basis points
The buzz
The Federal Reserve will announce a decision on interest rates at 2 p.m. Eastern, followed by Chair Kevin Warsh's press conference at 2:30 p.m.
Retail sales and import prices are due at 8:30 a.m., followed by a home-builders index at 10 a.m.
SK Hynix (SKHY)is talking to Intel (INTC) about making memory chips in the U.S., according to a Reuters report.
J.B. Hunt Transport Services' $(JBHT)$ stock fell in premarket trading as its chief financial officer warned of sequentially falling earnings.
Canada could become the first associate EU member.
Federal employees paid $9.5 billion not to work in 2025 under DOGE effort.
The chart
Consumers continue to spend more on services and experiences, noted Morgan Stanley analysts who are bullish on travel. That optimism is partly explained by their chart showing online penetration of global travel bookings at 70%, leaving $700 billion of bookings offline. "The remaining offline opportunity is meaningful enough to support continued above-market growth, with the greatest runway concentrated in less penetrated international markets," said analysts led by Matthew Cost, who just started coverage of online travel stocks, initiating Booking Holdings (BKNG) at overweight. They see AI as initially helping some companies via search, for example.
Top tickers
These were the top-searched tickers on MarketWatch as of 6 a.m.:
Ticker Security name NVDA Nvidia TSLA Tesla SPCX SpaceX MU Micron GME GameStop AAPL Apple AMD Advanced Micro Devices META Meta INTC Intel INFY Infosys
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