The 'CIA' strategy beating the market: How one top-performing money manager spots mispriced stocks

By Barbara Kollmeyer

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 past 12 months, Mallet says 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 they became a broadly obvious play but then sold names like Sandisk (SNDK) and Japan's Kioxia (JP:285A), helping mitigate a summer selloff.

And the next AI shift? Mallet says 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 it 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 says.

Precious-metals companies are a long-term bet Mallet believes will pay off, and he plays that via top-10 holdings such as Franco-Nevada (FNV) and Wheaton Precious Metals (WPM) - gold-royalty companies that play a private-equity or financier role 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, Mallet says.

That precious-metals bet centers on the debasement trade, he says. That's the idea that investors will shift out of currencies and into precious metals or bitcoin as governments' spending and debt keep 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," Mallet says. "We're financing that with printing money in ways that are not so obvious to the average person on the street."

Mallet says the result is gold (GC00) - "the ultimate purchasing-power protector" - has climbed from around $1,500 an ounce to over $4,000 since the COVID pandemic. About 8% of his portfolio is in precious metals stock. He says 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 describes the bank as "very, very well-run."

"They got lucky from higher interest rates the last six or seven 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," Mallet says. For example, he notes, JPMorgan got "great deals" from the 2023 regional-bank 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 says.

Healthcare makes up another 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 its top holdings.

"I think [the health] 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 where I find my defensive stocks," says Mallet.

The markets

The S&P 500 SPX and Nasdaq Composite COMP are rising as trading kicks off, the yield on the 10-year Treasury BX:TMUBMUSD10Y is at 4.98%, and oil prices (CL00) (BRN00) are down 2%.

 
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 time, followed by Kevin Warsh's press conference at 2:30 p.m. Follow our live blog here.

Retail sales rose a bigger-than-expected 1.2% for August, and import prices for the month rose 0.7%, which was higher than forecast. A home-builders-index reading is due at 10 a.m.

SK Hynix (SKHY) is talking with Intel (INTC) about making memory chips in the U.S., according to a Reuters report.

J.B. Hunt Transport Services' stock (JBHT) fell in premarket trading as its chief financial officer warned of sequentially lower 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, note 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) with a rating of overweight. The analysts see AI as initially helping some companies via search, for example.

Top tickers

These were the most searched ticker symbols on MarketWatch as of 6 a.m.:

 
Ticker symbol  Security name 
NVDA           Nvidia 
TSLA           Tesla 
SPCX           SpaceX 
MU             Micron 
GME            GameStop 
AAPL           Apple 
AMD            Advanced Micro Devices 
META           Meta 
INTC           Intel 
INFY           Infosys 

Dolly Parton is memorialized - in corn fields.

-Barbara Kollmeyer

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09-16-26 0933ET

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