As fears of artificial intelligence disrupting business models led to a sell-off in software stocks, David Paradice, founder of Paradice Investment Management, saw a prime opportunity. Paradice Investment Management is a $20 billion boutique asset manager that invests across various asset classes, known for its long-term, high-conviction strategies. Mr Paradice encourages his portfolio managers to act decisively when others are panicking. “When everybody is doing it tough, it’s good to get amongst it,” he remarked during a recent US business trip.
Paradice believes the “SaaSpocalypse” largely overlooked AI’s overwhelmingly positive impact on productivity. The firm’s house view suggests AI will accelerate product velocity, enhance customer experience, and boost revenue and margins for companies embracing the technology. Amid the market carnage, Paradice Investment strategically acquired shares in accounting software giant Xero and employment platform Seek, both experiencing significant drops. Mr Paradice’s optimistic AI outlook is partly informed by an “accidental” meeting with US Treasury Secretary Scott Bessent, who highlighted the US’s substantial annual investment in AI to improve productivity and address the national deficit.
The firm is also positioning its funds for other long-term trends. Paradice Investment has increased exposure to uranium stocks, such as Bannerman Energy and NexGen Energy, anticipating nuclear energy’s crucial role in powering AI data centres. Conversely, the firm remains bearish on major banks due to concerns over net interest margins from Reserve Bank of Australia rate rises, instead favouring insurers like Insurance Australia Group and QBE for their valuations and growth outlook. Despite recent market volatility impacting some funds, Paradice’s flagship Australian Small Cap Fund has delivered a 15.5 per cent return before fees since its 2000 inception, consistently outperforming its benchmark. The firm itself is utilising AI internally, reshaping its business operations.
