Where two of the market’s best contrarians are finding opportunity now

Please note, this interview was recorded Monday 21 September, 2026

Contrarian investing isn’t about automatically taking the other side of whatever the market believes. Sometimes the crowd is right. Sometimes the unloved stock deserves to be unloved. The trick is recognising when expectations have gone too far, then being willing to move when the opportunity does.

That came through loud and clear in my conversation with Orbis Investment Management’s Alec Cutler and Allan Gray’s Simon Mawhinney. Cutler has watched parts of the AI infrastructure trade go from neglected to fashionable and back again, while Orbis is now digging through software and biotech companies discarded as AI losers.

“We have to take what the market's puking out and filter through it and decide what we want to pick up off the floor and own", says Cutler.

Mawhinney sees a different distortion locally. Australian investors have traditionally crowded around three big areas: banks, resources and healthcare. He thinks some of the best opportunities now sit outside all three.

“I think the greatest opportunity lies in none of those three areas", says Mawhinney, before sharing where he thinks the opportunity does lie;  

"So they would be industrial companies that make things that we need, the kinds of things that society has come to rely on greatly just aren't at the forefront of everyone's everyday life, but happen in the background.”

Different hunting grounds, same principle: go where the expectations, valuations and fundamentals no longer line up.

The great capital reallocation

Cutler believes something much bigger than a normal market rotation is underway.

His argument is that developed economies have spent roughly four decades directing capital away from the foundations that keep countries functioning, including energy, food, defence and industrial capacity, and towards more discretionary parts of the economy.

Now necessity is forcing capital back down what Cutler describes as the economic “pyramid”.

“We have blackouts, food shortages, diesel shortages and defence issues. We’re going to see capital, over what should be a 10 to 15-year period, shift back towards that bottom of the pyramid.”

Some of the obvious beneficiaries have already been discovered. Orbis, for example, was heavily invested in defence companies several years ago, but Cutler said valuations subsequently rose as capital returned to the sector.

That means the search has moved to less obvious beneficiaries. Surveillance is one area Cutler highlighted, while critical energy infrastructure has been another major hunting ground.

Mawhinney sees a different distortion in Australia. Here, he believes the rise of passive investing has pulled capital away from certain companies and strategies and towards the largest parts of the index.

He doesn’t expect that structural force to disappear anytime soon, particularly given the influence of the Your Future, Your Super performance test. But that doesn’t mean the opportunity is disappearing.

“I don't think we are on the cusp of something significantly less difficult for active managers, but that's not to say that there won't be individual opportunities that ultimately crystallise and help strategies that are positioned very much differently to the market.”

In other words, being different may remain uncomfortable. That’s also what creates the opportunity.

What investors could be getting wrong about AI

Cutler thinks one of the biggest mistakes investors are making is assuming the AI build-out will resemble the internet boom.

Much of the money poured into the internet went into fibre optics and networking infrastructure that remains useful decades later. AI is different because an enormous share of investment is going into semiconductors with much shorter economic lives.

“85% of the CapEx in AI is going into chip sets. Those chip sets are obsolete after five years, not like fibre optics. And if you think about five years in the context of the trillions of dollars that's being invested, that's a consumable.”

That potentially creates recurring demand for semiconductors, memory and the manufacturing capacity behind them. Then there is the enormous amount of electricity required to run the data centres.

For Cutler, this provides a way to participate in AI without simply paying enormous valuations for the hyperscalers. If AI disappoints, he believes investments in areas such as energy can offer downside protection. If the bulls are right, the upside could be considerable.

Mawhinney is sceptical of another widely accepted AI narrative: that enormous productivity gains and workforce displacement can be considered in isolation.

“There are a lot of doomsayers suggesting that we'll move from where we are today to 10% of the workforce being out of a job. And that may be true, but then I think when you peel the onion back and you look at that second derivative, there wouldn't be a lot of social cohesion then.”

Cutler takes that argument a step further, questioning the idea that AI will necessarily be deflationary. If technology replaces huge amounts of labour, he argues, governments may ultimately absorb some of the cost of supporting those displaced workers.

For investors, Mawhinney’s broader point is simple: never analyse technological disruption in a vacuum. The second and third-order consequences matter.

Offices, chips and the investments they like now

So where is the money actually going? For Mawhinney, one of the more surprising answers is office property.

The consensus view that working from home and AI will permanently impair demand for offices is one he struggles with. Allan Gray has consequently allocated significant capital to the sector over the past three to six months.

“I feel that a lot of people think we won't need office space in 10, 15 years time. And I struggle to see that scenario unfold. 

The thing I think is likely to pan out is that office valuations will improve over the next 10 or so years and occupancy will not fall and that these could be good investments.”

Replacement costs, development yields and a limited future supply pipeline all form part of the thesis. As Mawhinney neatly puts it: 

“We feel in office, the boom gates are down and the lights are flashing and we just need the train to arrive and that could take some time, but the setup's quite good.”

Elsewhere, he sees opportunities among industrial businesses providing essential goods and services, packaging companies, aluminium, selected financials and insurers, and healthcare names including Ramsay Health Care (ASX: RHC).

Cutler’s portfolio is moving more quickly. Samsung Electronics (KRX: 005930) and Taiwan Semiconductor Manufacturing Company (TWSE: 2330) remain two of Orbis’ largest positions, with the team rebuilding semiconductor exposure after valuations became more attractive.

But the hunt is already moving elsewhere. Software companies have been dumped as perceived AI casualties, leaving Orbis screening between 100 and 150 names for businesses possessing proprietary data or other barriers AI cannot easily replicate. 

Biotechnology is another emerging opportunity, with Cutler arguing AI is more likely to become a tool for drug development than make biotech companies obsolete.

It is a good example of what he sees as a classic value market.

“What we're looking at in the hunting ground we have now is different from six months ago, different from a year ago, different from two years ago. And it's really classic value cycle that we are selling gas turbine manufacturers into biotechs and software names.”

The end of US exceptionalism?

Perhaps Cutler’s biggest contrarian call, however, has nothing to do with AI. It is US exceptionalism.

The US has deserved its exceptional status in many respects, Cutler argues. The problem is that global investors may have become too accustomed to assuming that exceptionalism can only work in one direction.

“I think we could see a shift from US being exceptionally great to US being exceptionally poor to be a massive, massive shift.”

The implications could be amplified by the sheer amount of global capital already invested there. Cutler pointed to pension plans with 70% or 80% of their assets in the US, meaning even a reassessment rather than wholesale abandonment could generate enormous capital flows.

The potential catalyst is America’s fiscal position. Cutler argues persistent deficits, rapidly increasing government debt and rising interest costs are ultimately unsustainable. He also believes overseas investors may become increasingly reluctant to keep financing the US.

How does that eventually get resolved? None of Cutler’s possibilities are particularly pleasant.

One is financial repression, where inflation helps erode the real value of debt while governments effectively push institutions towards holding more government bonds at artificially low yields.

That outlook also helps explain his answer to my final question.

The 10-year trade

I finished by giving both investors a constraint: make one investment today, don’t touch it for 10 years, and choose something that most professional investors wouldn’t regard as an obvious long-term winner.

Mawhinney briefly contemplated a barrel of oil. Then he landed on something decidedly less exciting: Amcor (ASX: AMC).

“Everyone in the world is touched by Amcor in a nice kind of way every day. And it's hard to see how that company will go out of business in the next 10 years and how it couldn't make a reasonable return on its operating footprint and invested capital.”

Mawhinney believes acquisitions have helped Amcor assemble some of the best packaging assets globally, while its technological capabilities and R&D provide further support for the long-term thesis.

Cutler didn’t need long to think about his answer: Gold.

“We’ll hold gold for the next 10 years. I’m fairly certain of that because I don’t see governments developing any sort of fiscal prudence, and gold is the ultimate hard currency. So I think we’re very likely to see another wave of appreciation for gold. Not necessarily just appreciation in the gold price, but greater appreciation of what gold brings you.”

And it isn’t only gold. Cutler believes oil, forests, copper and other hard assets should become increasingly attractive relative to fiat currencies.

Amcor and gold could hardly be more different. But perhaps that’s fitting. Neither is an obvious answer. And for these two, that’s rather the point.

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Allan Gray Australia Balanced Fund

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Orbis Global Real Return Fund

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