Where to find value when the benchmark is working against you

It's popular to say macro doesn't matter - that good stock picking is all you need. The Antipodes team beg to differ. 

"Macro matters in the context of how those regions are priced,” says portfolio manager, Vihari Ross. “It's fine if Europe does badly, if European stocks are priced for them to do badly."

A decade ago, the US equity market made up 50% of the global benchmark. Today, it makes up nearly 70% of the global benchmark and the top 10 stocks alone account for more than a third of that index.

The natural consequence is that US stocks are priced for a lot to go right. And right now, Ross thinks there's more under the surface than the market is acknowledging - from AI-driven job losses, to geopolitical risk, to a private credit market that has become a pressure point.

This level of concentration is the starting point for how Antipodes is thinking about global equities. A recognition that dispersion is wide, and that the gap between the cheapest and most expensive parts of the market is where the real opportunity sits.

Finding value in a concentrated market

Ross makes a comparison of today's market to prior episodes of extreme concentration - Japan in the late 1980s, oil in the 1970s, tech in 2000. What’s common in all three examples is that each peak unwound in the same way. Expensive stocks fell, cheap stocks caught up, and the broader market ground higher in the process.

"You get cheap stocks catching up and you get expensive stocks falling. The market normally grinds higher," says Ross.

What's different this time is the role of passive investing, making the current skew far more pronounced. With passive flows now making up around 40% of the market, “there's nothing passive about passive allocation in the context of where we are today”, Ross remarks.

The skew shows that a decade of momentum toward US mega-cap tech has left the benchmark with a structural problem, where its largest constituents are also its most expensive.

To get a cleaner read on valuation, Antipodes looks at regions and styles relative to their own history rather than against each other. The US is sitting at the 75th percentile of its own historical valuation range. Value stocks are at the 10th percentile of theirs, and software is similarly discounted.

This asymmetry is where Antipodes is spending most of its time. “That's just the beginning of that broadening out," Ross says.

Breaking down the AI trade

Ross divides the AI stack into three layers - infrastructure, platform, and application. Infrastructure is the clear near-term winner, capturing the bulk of data centre and compute spending.

The large cloud platforms sit in the second tier, benefiting both from that infrastructure capex and from their role as the natural distribution layer for AI models.

Amazon (NASDAQ: AMZN) is one of the fund's holdings in this second layer. AWS grew at 28% in its most recent quarter, well above the 16-17% growth rate it had been running at for some time.

Ross also points out that most large enterprises, such as hospitals, industrial businesses, companies running legacy IT, have yet to move their core infrastructure to the cloud. With cloud migration still in early stages, the tailwind has a long runway.

“You've got a business that's trading at one of its lowest multiples in history when you're at this inflexion point and [its] retail business is also at an inflexion point.”

At the application layer - enterprise software and adjacent businesses - is where Ross sees the most opportunity and the most risk simultaneously.

While the broad software sell-off has created entry points, the Antipodes team view is that outcomes will diverge sharply as Agentic AI separates which businesses have durable advantages and which do not.

"There's going to be a real divergence in outcomes for some companies,” says Ross. “Which are the companies that have distribution and enterprise reach, and which are the companies that are maybe just an app with a software sticker on them?"

2 structural plays

There are, of course, other things going on in the world other than AI. Ross points out two “anti-AI plays” that are structural growth themes - physical assets and energy.

SLB (NYSE: SLB), oil services and tech company - after a decade of underinvestment in energy cleared out a lot of the sector, what's left is a smaller group of survivors well-positioned for rising capex and a shift away from US shale toward offshore projects.

What makes it more than a cyclical story, Ross explains, is a digital business growing at roughly three times the rate of the core operation, with double the margin profile.

Brookdale Senior Living (NYSE: BKD) - The business went through a brutal period during COVID. However, the forward case is simply the ageing population, and a supply of senior housing hasn't kept pace. The first wave of baby boomers is turning 80, and the peak of that cohort arrives in 10 to 15 years.

As occupancy in Brookdale's existing stock rises, the operating leverage is significant. With the cost base largely fixed, incremental revenue flows to profit. The stock is trading below replacement cost and at a discount to peers.

The case for small and mid-caps

James Rodda's argument for small and mid-caps is straightforward. "When I look at large cap global stocks, we're well outside the range. Small mid-caps is a great place to go just to get into something at a reasonable long-term valuation." The discount to large caps today is at historically wide levels.

The structural edge Rodda's team claims is industry-level research in a part of the market where broker coverage is sparse, and most managers operate as pure stock pickers. His fund tracks over a thousand companies and runs a portfolio of around 72 stocks.

Two specific ideas stand out for Rodda and the team. The first is deep-water drilling rigs, where Rodda sees a structural supply shortage forming. With US shale production plateauing, global oil supply must shift offshore.

New rigs cost $1 billion and take five years to build. The stocks are pricing in utilisation rates that Rodda believes will be too low within 12 months.

The second is corporate travel software - a niche that sits at the intersection of AI adoption and an industry that, by Rodda's account, still books 40% of its trips outside of corporate travel platforms.

Navan (NASDAQ: NAVAN) and Australian-listed Serko (ASX: SKO) are two holdings positioned as disruptors capturing that shift.

Value positioning globally 

Across both funds, North America is the largest absolute position but is meaningfully underweight relative to its near-70% benchmark share. Europe is concentrated in multinationals with global operations. Developing Asia and emerging markets sit at around 10%.

Antipodes' positioning across both funds reflects their pragmatic value view. That is, the market is not uniformly expensive, but the expensive parts are very expensive.

Managed Fund

Antipodes Global Value Fund

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Managed Fund

Antipodes Global SMID Fund

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