Asset management giant Causeway Capital Management's CEO Sarah Ketterer says investors should look beyond the biggest winners of the AI boom and bet on overlooked stocks.
Ketterer said in an interview in Dallas on Tuesday that "the interesting thing about AI is which companies the market considers AI losers." Causeway manages approximately $76 billion in assets, and all of its funds employ a combination of fundamental and quantitative methods.
Ketterer stated that the valuations of the biggest winners in the AI boom are currently "fully reflected," while the "perceived losers" are viewed by the market as companies unable to keep up with the technology.
She said one company worth betting on is Tencent Holdings (00700), the Chinese company that owns the popular messaging app WeChat. Ketterer described Tencent as "China's de facto operating system."
She said WeChat "is everything to Chinese people," adding that "it's not just a social network—it's shopping, it's banking, it's everything."
She said investors are now viewing Tencent the way they once viewed Meta Platforms (META.US)—before the Facebook parent transformed into an AI giant. Tencent possesses the same resources to achieve such a transformation.
She said the criterion for distinguishing winners from losers is "companies that have enormous financial strength and can further expand that strength in the capital markets."
Elsewhere in Causeway's portfolio, Ketterer said she is bullish on German industrial and technology conglomerate Siemens AG. She noted that the industrial sector is "littered with casualties right now."
Outside the United States, Ketterer sees undervalued companies trading at just half the valuation multiples of their U.S. counterparts. She said European countries need to invest in infrastructure, and companies like Siemens will benefit from that.
She pointed out that "as earnings improve and free cash flow is returned to shareholders, this stock is very likely to be re-rated upward."
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