Managers adopt contrarian investment strategy

MFS Investment Management’s contrarian strategy is centered on valuation and investing in unloved stocks. The firm’s Contrarian Equity Trust, launched in Australia in 2025, aims to achieve capital appreciation while outperforming the MSCI World Value Index.

Portfolio managers Anne-Christine Farstad and Zahid Kassam seek out areas of controversy in the market with a fundamental bottom-up perspective. They focus on stocks that provide a margin of safety by looking for asymmetric risk/rewards and a focus on downside management.

Investment Approach

The fund generally holds 30-60 stocks, with larger positions in those with cheap valuations and a greater upside asymmetry versus downside. Farstad and Kassam use the MFS global research platform to identify stocks, taking an opportunistic approach to screening for value and change.

The selected stocks typically fit into one of three categories: deep value, restructurings, and controversial quality compounders. Deep value stocks have extreme asymmetric risk/reward with a focus on managing downside, while restructurings are fundamentally strong businesses forgotten due to controversy or special situations.

Controversial quality compounders are good companies that have fallen on hard times but whose problems are overstated and discounted, in MFS’ view. Kassam noted that the strategy tends to concentrate positions in stocks which are controversial quality rather than deep value, especially if there is a country-specific risk.

Index-Agnostic Approach

The team believes that an index is heaviest in a sector precisely as it peaks and lightest as it troughs, which is the opposite of how they invest. Farstad noted that their active share has generally sat in the high nineties against the world index, and they are “unapologetically, built to look nothing like the crowd”.

Farstad highlights that a successful contrarian strategy requires institutional support—specifically, a firm like MFS that can endure underperformance during downturns, maintain sufficient capital to stay committed, and provide unwavering analytical backing during periods of doubt. ‘A contrarian needs a partner that judges success over complete cycles, not just quarters, and offers the resources to sustain conviction through crises,’ she states. This alignment between strategy and institutional backing is, for her, the cornerstone of their approach.

As the market environment dictates, the pair adapt their thinking, and Farstad noted that they now own consumer staples and healthcare names for close to the first time in the strategy’s history — areas once dismissed as expensive bond proxies, now re-rated into their reach. When it comes to exiting a position, Farstad uses price targets to monitor thesis drift as a stock’s price is key to the ideas in a portfolio.

Having worked together for a decade, Farstad and Kassam’s long-term pairing is a good representation of their patient investing approach. Farstad has spent 19 years with MFS, while Kassam joined in 2015. Farstad emphasized the importance of a firm with the patience to be judged over full cycles rather than quarters, and a deep platform of global analysts and rigorous risk oversight.

The alignment of a contrarian strategy with a firm built to support it is, for Farstad, foundational. As she noted, “a contrarian needs a firm, such as MFS – with the patience to be judged over full cycles rather than quarters, the capital base to stay the course when performance lags, and a deep platform of global analysts and rigorous risk oversight that supplies conviction crisis after crisis.”

Investment Risks

All investments carry risks, and different investment strategies may carry different levels of risk. The Product Disclosure Statement and Reference Guide provide detailed risk considerations for the Contrarian Equity Trust. Investors should consider these risks before making a decision about whether to invest in this product.