Peregrine Capital had an exceptional year, despite the unpredictability of global and local markets. CEO and Portfolio Manager Jacques Conradie shared his insights with MoneyMarketing on what contributed to their success.

“The beauty of this job,” Conradie says, “is that you hardly ever know what a year is going to bring at the start. Almost every year, unexpected events occur, and they provide opportunities. Our job is to keep our eyes open and look for those opportunities.”

Reflecting on Peregrine Capital’s exceptional year, he highlighted two major themes: the South African market and the global AI-driven tech boom. “We did quite well out of South Africa, realising before the election that valuations were very attractive. The sentiment was extremely negative – people were worried about loadshedding and political uncertainty. But when negativity is already priced into the market, opportunities arise.”

Peregrine Capital strategically positioned itself ahead of the South African elections, anticipating potential upside regardless of the outcome. “Even if the election had gone badly, we still saw upside because valuations were so low,” Conradie explains. “Fortunately, the election played out well, and we now have the Government of National Unity (GNU).”

The market implications of AI

Discussing the broader investment landscape, he notes, “The way AI is playing out reminds me of past technological revolutions. When the internet emerged, it gave rise to companies like Amazon. When mobile took off, it propelled Facebook and Apple.”

Conradie believes AI’s momentum will continue. “AI will keep skyrocketing. Our job is to ensure we don’t overpay for these investments and monitor how new entrants impact the market. However, in general, this benefits the companies we own.” On a broader scale, he sees AI as a key battleground for global superpowers. “The AI arms race between the US and China will define the next 20 years. The Trump administration understands this and is highly pro-US tech companies. While previous administrations imposed regulatory pressures, Trump will likely support major tech firms, which is a positive for our portfolio holdings.”

Discussing the rapid advancements in AI, Conradie highlighted the impact of emerging players like DeepSeek on the industry. “What DeepSeek has done is remarkable. They’ve demonstrated that a smaller company with a smart team can release a model almost on par with the largest AI firms, despite having significantly fewer resources and a much smaller budget,” he explains.

The rise of such companies could have implications for tech giants like Nvidia. “For a business like NVidia that makes AI chips, this could be a short-term negative if people decide to use more efficient models that lower demand for high-end hardware. However, this development is quite positive for most AI-driven companies,” says Conradie.

He remains optimistic about AI’s trajectory. “Even with new competition, AI remains a game-changer. Companies like Meta, one of our major holdings, use AI extensively for ad targeting and content recommendations. If they can reduce costs while maintaining efficiency, that’s a significant advantage.”

South African market outlook

Conradie expresses cautious optimism about the South African market. “Investors must always balance the outlook with stock prices. The outlook was uncertain a year ago, but share prices were low, often presenting a good investment opportunity. Now, while the economic outlook is slightly better, valuations for retailers and banks have risen significantly, making them less attractive than a year ago.”

He points to economic factors that could shape the market in the coming months. “Interest rate cuts will help, and the economy received a boost with a recent R43bn of two-pot withdrawals from pension funds. However, that tailwind will fade, so we need to see whether economic momentum continues. Loadshedding has improved, but economic growth hasn’t picked up as much as some had hoped. We remain watchful.”

US-South Africa relations

Geopolitical developments, including US-South Africa relations and potential trade disruptions, are on Conradie’s radar. “The US’s stance on South Africa is something to monitor. It’s never good to have the world’s largest economy scrutinising your country. Our government should prioritise resolving any tensions to avoid prolonged uncertainty.”

Investment agility

Peregrine Capital prides itself on pivoting quickly when market conditions change. “One of our biggest strengths is that we can adapt fast. We have a small, agile team of 13 analysts, and if there’s a major market event, we immediately convene, debate the impact on our portfolio, and reposition accordingly,” Conradie explains. “For example, when DeepSeek entered the market, we had an early-morning strategy session to assess how this would impact the AI value chain. We did the same when Covid-19 hit. Our ability to move quickly is core to our investment philosophy.”

Keeping the competitive edge

The company recently expanded its team, reinforcing its competitive position. “We’re always on the lookout for top talent to enhance our research capabilities. The ability to make fast, informed decisions is critical, and having the right people in place ensures we maintain our edge,” says Conradie. As global markets continue to evolve, he remains committed to flexibility and strategic positioning. “We’re not stuck to any opinions – we hold strong views but remain extremely adaptable. If the data changes, we adjust accordingly. That’s how we stay ahead.”

MoneyMarketing article