Listen here.Sean Peche has spent 2026 doing the opposite of the crowd. While the market piles into AI, memory chips and Elon Musk's every pivot, the Ranmore founder has been selling Tesla, walking away from SpaceX and quietly buying into Adobe and Tencent instead. In this conversation with Alec Hogg, the South African-born, UK-based fund manager breaks down why Alphabet's capex bill worries him, why Britain's new Prime Minister just handed him a trade, and why getting rich slowly beats chasing the next shiny thing..Edited transcript.Alec Hogg (00:07) Well, it's been a little while since we've caught up with Sean Peche, so I couldn't have thought of a better day. We just had results last night from Alphabet and Tesla. He also lives in the UK, where, well, you think our politics is crazy. That place is all over the place at the moment. Lots of changes going on there. The former mayor of Manchester is now the Prime Minister. The Financial Times and The Economist are saying he talks a good game, but they're not so sure he's going to deliver.We'll find out from Sean whether that's going to help the UK market, and whether we should be looking there. As we know, Sean has been quite conservative when it comes to US stocks for a while now, but there's lots to catch up on.Alec Hogg (00:52) Sean is the founder and portfolio manager at Ranmore. I see on your website now, Sean, you're talking to your South African roots — it says this is how you invest in South Africa as well as the UK. There aren't too many UK companies who do that. Is this you getting a lot of support from your countrymen?Sean Peche (01:18) Yeah, Alec. We're marketing in three places — South Africa, the UK, and Switzerland, to qualified investors. We've had lots of approaches from third-party marketers who've said, "Can we market your fund in Australia? In the Middle East? In the Nordics?" We said no. I don't want to wake up at four o'clock in the morning to do presentations to Australia and spend half my life flying there.So we've focused on capacity. What we've focused on is not gathering assets — we've focused on generating returns and creating wealth for our clients. Those two places are really important to me: South Africa, where I grew up, and the UK, where my children have grown up. That's our home. So we're going to preserve our capacity for that, rather than gather assets and spend all our time marketing and less time looking at the portfolio and choosing the right companies.Alec Hogg (02:18) Now why am I not surprised? You've got this clarity of thought, which is wonderful — not gathering assets, but serving the community you already have. It'll grow naturally rather than being boosted. I like that, Sean. If you're looking at the AI market at the moment — you know James Gubb? Ex-Allan Gray. Have you had much to do with him?Sean Peche (02:44) I don't think I've met James personally, but I know of him, yes.Alec Hogg (02:52) I did an interview with him this week, after he did a really wonderful report on AI. He's a very well-known money manager here in South Africa, retired now, living in Plettenberg Bay, but investing his own money. He said, "I needed to find out about AI — how does it work, what's this AI bubble and boom about?" He wrote a report, which we republished on BizNews. We had a terrific discussion. His view was that what's happening in AI now is the biggest thing ever in investment markets. He's read Engines That Move Markets, so he knows all those stories — the telegraph, the telephone, locomotives, railways, the whole bit. I'm wondering, from your clarity of thought, how do you divorce "this is a huge change in society" from "we can only invest in things we actually understand a lot better"?Sean Peche (04:01) You know, Alec, in all those bubbles, everybody at the time says this is the biggest thing ever to happen. We don't do that, because the truth is we just don't know. It's a very fast-moving world. Every day there's something new. Look at Kimi — Moonshot AI's model. Who's Moonshot? All of a sudden they came out with faster, better models than the other guys. No one had even heard of them, and now, supposedly, it's got a sixty-billion-dollar market cap. These Chinese models — hmm.Alec Hogg (04:36) Well, Moonshot. Come on — this founder went from MIT and other places back to China. He was already being talked about as the next big thing there. So he hasn't just arrived. But anyway, your point is made.Sean Peche (04:46) Right, but my point is that all of a sudden this outsider came from nowhere and took the lead. What does that mean for CapEx spending, all of that? It can be a great story, but as I wrote in a recent piece, we don't like paying up for great stories, because you never know how the story unfolds.I used the example of comparing SpaceX to Pfizer. Great story — they launched Lipitor, hundreds of thousands, millions of people around the world dying from cardiovascular disease. Then they had Viagra. Great story. You overpaid for it — you'd have lost money since 1997. So we don't overpay for great stories. We prefer to find the good stories that people are worried about, and we can talk about those in time.If you look at the markets, it's a classic case of rampant speculation. There's an ETF — I wrote about it in last month's fact sheet, people can read it on our website — called DRAM, basically all the memory stocks. Everybody says, "Let's list an ETF, put a bunch of memory stocks in it." They did this at the beginning of April. It's $25 billion, with no track record, a fairly high fee by ETF standards. There are very successful fund managers who've spent their entire lives trying to amass that kind of asset base, and yet someone has an idea, sets up an ETF structure, and in three months it's got $25 billion.Now, surprise, surprise — it's doubled this year, but it's down about forty percent from the highs, twenty-eight percent from the highs. Halfway through that process people were saying, "There's not enough octane in this — can we have a two-times leveraged DRAM ETF?" They listed that in June. It's down forty percent. SpaceX is down forty-three percent from its high. Kioxia is down forty-two percent from its high — I'd never even heard of Kioxia until it appeared, fairly recently, with a market cap of hundreds of billions of dollars.So AI is all very well as a great story, but it's not a new story in terms of how speculation behaves. Johnny-come-latelies have to be careful — if you bought DRAM at the highs, you're down twenty-eight percent, and nobody wants to lose twenty-eight percent. We prefer the old tortoise and hare story.Get rich slowly. Warren Buffett told us to get rich slowly. That's what we do. We don't race after these shiny, shiny things.Alec Hogg (07:22) Well, SpaceX — we've got a story in our own household. My wife, Jeanette, got terribly excited about SpaceX, bought at $175. Eventually I managed to suggest to her that not everything goes up indefinitely, and she sold at $165. Now she's thanking me, because the price is $115. And that's all happened in a matter of weeks.Sean Peche (07:47) And that's with what, five percent free float? It doubles next month. So that free float — the percentage of shares in issue that are free to trade — is only increasing. There's an interesting point here: investing isn't just about spreadsheets, you have to understand psychology, because markets move on fear and greed.You often hear people talk about "correction territory" or "bear market territory." Bear market territory means down more than twenty percent from the highs. Why is that relevant? If you buy a stock and you're down two percent, you shouldn't get too jumpy — we can all cope with a two percent drawdown. Down five percent, a little frustrating. Ten percent, you're thinking, "hmm, what's going on here?" Twenty percent — the problem is you need to go up twenty-five percent just to get back to where you were. If something falls thirty-three percent, it needs to go up fifty percent to break even. The deeper it goes, the more psychologically impacted the market becomes.When stocks are going up, at the highs, everybody who bought is in the money — there's only greed at play, no one's lost money. Now some people are down forty percent on SpaceX, having bought at the highs. So when stocks are hitting new highs, there's only greed. When stocks are hitting new lows, there's only fear, because everybody who's traded since listing is down.Alec Hogg (09:27) Or who fell over themselves to get into the IPO. A point you made earlier I'd like you to expand on: narrative stocks — companies with a story. We had one reporting last night, Tesla. If there's ever been a story stock, that's the one. The numbers have been almost immune to the story for a long time.Speaking of stories — somebody, James Gubb, called SpaceX vapourware. What do you call it?Sean Peche (10:04) I think vapourware is probably being kind. The point I made in the fact sheet was that on the one day it fell fifteen percent, that was a $400 billion decline in market cap. Just that fifteen percent move. That's the market cap of Bank of America. Bank of America made $30 billion in net income. SpaceX makes about $18 billion in sales and loses money. It puts things into perspective. It's crazy stuff. And you only need one rocket to blow up on the launch pad — what do you think the stock's going to do? So why do you want to be exposed to that?I'm in total agreement with Cy Jacobs on Tesla — I think exactly the same as him. It's just a big story. What's interesting with Elon is he can't get the current rating from cars, because car sales are old news and European car companies trade on six or seven times earnings. So why pay a crazy multiple? So the story moved to the Cybertruck, then to AI, then to robotics, then to full self-driving — just trying to keep the story alive to keep retail investors interested.Alec Hogg (11:32) Has there ever been anyone like Elon Musk? I asked James the same question, and he said Edison — Edison invented a lot of things but didn't end up doing well either. Do you have thoughts on that?Sean Peche (11:48) He's an amazing guy, but the problem is: how many trillions of market cap? What happens if Elon has a heart attack tomorrow? Does anybody know who the CFO is? Why do you want to take that kind of specific risk? They can play that game — let others play it.Alec Hogg (12:03) Tesla's results were last night. I know it's not a stock you own, but do you even look at it?Sean Peche (12:12) I always have a look at the big companies, just look at the numbers. I haven't read the conference call transcript. It's got a $1.4 trillion market cap, two rolling years of declining earnings per share, operating income down fifteen percent, and a 0.4 percent free cash flow yield. So why would I bother reading the results?I just can't see how you make money in Tesla from here. Maybe they pull a rabbit out of the hat — Elon specialises in that — maybe something with SpaceX, trying to get the passive index funds to buy in, since the big S&P 500 passives aren't in SpaceX. I'm sure there's some corporate activity coming to try to get those investors on board. But that's not how we invest, so we're not participating. We're not out there trying to guess what other people are going to do.Alec Hogg (13:13) Cy Jacobs has been outspoken in his resistance to the Musk story, and he's been calling Tesla the best — or biggest — short for a long time. But he's recently changed his mind, saying you can't really fight the market, so he'll stay on the sidelines. That's fine. But last month in the business portfolio, Sean, we sold Tesla at what now looks like a very good price, and switched into Adobe, a company that had been hammered for a long time. I'd like your thoughts on Adobe, because it's popped up in your portfolio.Sean Peche (13:56) We have a small position in Adobe — one and a half percent. This world is a fast-moving place, it's hard to have absolute conviction about the future, which is why we don't take big positions, and we don't need to as a global fund — there are lots of opportunities out there. We like to look where other people are fearful. Warren Buffett said be greedy when others are fearful. So where are people fearful? Software. A lot of those stocks are down a lot, on the idea that AI is going to kill these businesses. I'm sure it'll hurt some, but not all of them. So we've been picking through the bones of some software companies.There's fear that AI is going to hurt them, but is it a fact? Have we seen user numbers or subscription licences decline? Revenue fall? Deferred revenue decline? No, we haven't. It might still happen. Remember, a year and a half ago Alphabet was very out of favour because everyone said AI was going to kill search. We looked and saw no evidence — you might search a little less yourself, but the insight was that AI models need to search to check what's happened since their training data, so search actually benefits. We took advantage of that, bought some Alphabet, and have since sold it — probably too early, which is normally what we do, and that's fine, because we can reinvest elsewhere.Right now there's a lot of fear in software. With Adobe: the stock is the same price as it was ten years ago, yet earnings are up fivefold since then, revenue growth actually accelerated last quarter, and they've got forty million subscribers. They invest minimally in CapEx — a very different story from Alphabet. They buy back roughly 1.7 percent of shares issued a quarter, they've got a $25 billion buyback authorised, and everybody's terrified. There are thirteen buy recommendations, six holds and six sells [figures as given], so it's out of favour, and we've got a nine percent free cash flow yield.That could change tomorrow — next quarter's results might show subscriber numbers down and revenue declining, in which case we'll probably take a loss. But if the fear abates, and people realise AI could help these companies cut costs and give them something extra to sell, you could get some nice upside. That's how we think about Adobe. Am I saying put a huge percentage of your portfolio into it? Not at all. And I should say — my compliance officer will shout at me — none of this is advice. It's just what we think, and we can change our mind tomorrow.Alec Hogg (17:20) And that's why you're an active portfolio manager — you see the facts on the table and adjust accordingly.Sean Peche (17:30) As did Cy with Tesla. You have to be flexible. The good fund managers are flexible, because the future's uncertain — all you can do is make sure the odds are on your side, get more right than wrong, and when you're right, win bigger than you lose when you're wrong. The people who go down with the ship tend to struggle. We want to play five-day test cricket here, not IPL cricket trying to slog a six off every ball.Alec Hogg (18:00) Tell me about Alphabet's numbers last night, and your read of them.Sean Peche (18:04) The first thing is the CapEx — it's off the charts, and that's plunged them into negative free cash flow. This is the second quarter in a row they haven't bought back stock because of CapEx demands. The quarter before those two, they only spent half of what they normally did on buybacks, and they actually issued shares.So you've got what looks like a very profitable business — operating income up, sales growing, all looks wonderful — but they're investing a lot. They spent $44 billion in the latest quarter. Depreciation for the last four rolling quarters is only $25 billion. CapEx is forty percent of revenue — meaning you'd need forty percent operating margins just to cover CapEx before paying staff or anything else. There's no certainty this CapEx converts into great earnings, because it's an arms race and everybody's spending.They did well on other income — their stakes in SpaceX and Anthropic — but SpaceX is down thirty percent since June, and who knows if Anthropic will even list. OpenAI has deferred its listing, I understand, while trying to sort things out.I look at this and think: thirty-three times historic earnings, with cash flow lower, a 0.4 percent free cash flow yield — why would I go there? You'll recall, Alec, one of the first things I ever wrote, back in 2018, was about Naspers and Tencent, and BizNews published it. I never thought we'd end up buying Tencent — and yet here we are.Compare Tencent — social media, search ads, games, fintech — on thirteen times earnings, with Alphabet on thirty-three times earnings. That's not far off Tencent's 2018 price, yet earnings are three times higher. It's a far better, more diversified business now, fintech's a bigger part of it, and they're far more disciplined on CapEx — positive free cash flow. So: Tencent on thirteen times, free-cash-flow generative, at roughly the same price as eight years ago with earnings three times higher — or Alphabet on thirty-three times, not free-cash-flow generative? We'll buy Tencent. So we've actually got Tencent in the portfolio now.Alec Hogg (21:01) It's so interesting talking to you — I think investment people love this. Let's unpack it a little. When you talk about free cash flow — Google, with all these fabulous businesses, isn't generating the free cash flow it used to, to buy back shares or return to shareholders. It's betting the farm, and more, on a future that isn't certain in anybody's mind. Might they be doing something like what Mark Zuckerberg did with Meta, betting on a future — the metaverse, VR — that turned out to be imperfect? Do you think there's a risk of that, or do you just feel they're overdoing the investment at this point?Sean Peche (22:07) They're certainly issuing shares — gone from buying back shares to issuing them. I was surprised Berkshire Hathaway was buying at the top. I thought, "What happened to be greedy when others are fearful? Isn't this the time to be fearful when others are greedy?" Where was Berkshire when everybody thought search was dead?Here's an interesting point: what happens if AI does start affecting search — if the fear was right, just slower to arrive? Then you've got a declining business. An important point: to value these businesses you must value them either on accounting earnings or on free cash flow. The free cash flow is negative. If you value on accounting earnings, you need to know depreciation is going up, because today's CapEx is tomorrow's depreciation. If depreciation goes up, what does that do to future earnings — especially if AI starts affecting search at the same time?These cloud businesses are quite profitable in the US, much less so in China, where it's more competitive. There's an interesting mood swing I'm noticing — people have historically said China is uninvestable, and I've said on your platform that in many cases America is more uninvestable than China. If you look at what Xi Jinping was saying the other day about moving towards open source, framing it as a resource the world can use, maybe there's an opportunity to switch from US technology to Asian technology.Alec Hogg (24:02) So we might be on the same page when it comes to Prosus, perhaps.Sean Peche (24:05) That's an interesting point, because think about it — they've had all this money in the IT world to spend on the next new, shiny thing, and how many have they got right? Not much. Where are their AI chips? Think about the big calls, and that's the point with technology — Cathie Wood, supposedly a technology expert, sold her Nvidia shares. That's how hard and fast-moving the sector is: even the so-called experts, right in the weeds of it, aren't picking the winners consistently. So what chance do the rest of us have? The future's uncertain — don't pay too much for it.That's why we're not paying too much. We've got a better business in something like Tencent. Do we want to go via Prosus? In South Africa you can't go directly into Tencent, but as a global fund, we can. We don't want extra layers of cost, or extra money going to loss-making businesses. We'd rather stay pure and go directly.Alec Hogg (25:24) Sean, I promised in the intro we'd talk about the UK, where you're based. Your thoughts on the new Prime Minister, and does it give you any confidence to invest in UK stocks?Sean Peche (25:38) Andy Burnham — it's all happened rather quickly, a bloodless coup, I suppose. We don't know yet. I'm glad Rachel Reeves is out. I think there's been a lot of damage done to the UK economy in recent years. Our inheritance tax rate here is forty percent, our capital gains tax rate is twenty-four percent. In South Africa it's twenty-five percent inheritance tax, and capital gains is lower — so you're quite lucky over there. You don't want to die here in the UK.They changed the rules so that non-domiciled residents got caught in the net, so they all left. Fewer very wealthy people eating at restaurants, staying in hotels, buying houses — you lose that multiplier effect. It hasn't been friendly to wealthy people, and the world's competitive — those people have gone to Italy, Mauritius, Spain and similar places.I hope Burnham will be more friendly to that, and to certain businesses. This morning they're changing, or reducing, business rates for the hospitality sector, which I think is a good move. So I'm more hopeful than I was. I think Keir Starmer was a good person, but not a great leader — he didn't have a clear plan beyond trying to take more from a certain part of the population. So we're giving Burnham the benefit of the doubt, but it's fast-moving.A few months ago everyone feared Nigel Farage would be our next Prime Minister. Now it looks like he could get beaten by someone called Count Binface in a local election. If that happens, he's not an MP and the Reform Party could fall apart — which I don't think would be a bad thing at all.It's amazing how the future turns out differently from what you expect. A year ago, Zelensky was getting a hard time in the White House and everyone thought Russia had the upper hand. Now half of Russia's refineries are on fire, the place is falling apart, and China's saying it will only pay domestic gas prices. So Russia doesn't have the upper hand, and Ukraine does.The future often turns out different from what you expect, so the key is not to pay too much for those expectations, because if you're wrong, it's a problem. The good thing about stocks is that fear and uncertainty create opportunities. This month we sold out of a top-ten holding entirely — EasyJet. We were buying it before the Israel-Iran war, carried on buying through it, and now the price is roughly double what it was at the depths of the war, with a couple of private equity companies bidding for it.It might go through, it might not — we've taken our money off the table and are reinvesting it. The point is, when you invest top-down and avoid the UK because you don't like the politics, that creates opportunities for people like us to hunt through and find companies being unjustifiably sold down. Then EasyJet gets bid for by private equity, and there's a nice uplift to the fund from a forty percent premium. So there's always opportunity — don't get too negative out there.Alec Hogg (29:51) Sean Peche, founder and portfolio manager at Ranmore. I'm Alec Hogg, from BizNews.Sean Peche (29:57) Thanks, Alec.