Inside Allan Gray’s Big Bets: Why AB InBev, British American Tobacco, and Disney Made the Cut

Duncan Artus, Chief Investment Officer at Allan Gray, recently gave investors a peek under the hood at the firm’s latest investment update. What emerged was a clear message: they’re not in it for the hype.

Allan Gray’s strategy? Think slow-cooked stew over microwave meals. Their approach is deeply focused on the fundamentals of individual companies—what’s called bottom-up investing. This means they build portfolios by carefully analyzing the health and prospects of each business, rather than chasing market trends or reacting to short-term political news.

And while many investors rode the euphoric “Government of National Unity” rally in South Africa’s bond and equity markets in late 2024, Allan Gray stayed grounded. Artus made it clear: feel-good sentiment without matching economic performance doesn’t sway them.

Nowhere is this more evident than in the three companies Allan Gray is currently backing in a big way: AB InBev, British American Tobacco, and Disney. Let’s take a closer look at why these seemingly traditional names still have powerful growth stories in 2025.

Brewing a Comeback: AB InBev

Allan Gray’s top local pick is beer behemoth AB InBev, which famously acquired SABMiller to become the world’s largest brewer. While beer has had a bumpy few years—thanks to the rise of spirits, ready-to-drink cocktails, and a cultural shift in drinking habits—it’s finding its groove again.

Artus pointed out that beer is regaining market share through innovation. Flavored options, lighter beers, and alcohol-free variants are pulling consumers back in. And guess who’s leading the charge? AB InBev, with eight of the world’s top ten beer brands, including Corona—the global bestseller that’s been growing at a remarkable 10% annually for eight straight years.

Corona’s premium pricing gives it a major profitability edge, and its global popularity shows no signs of slowing. But it’s not just about what’s in the bottle. AB InBev’s “Beyond Beer” portfolio, featuring hard seltzers and ciders like Flying Fish, is seeing fast-paced growth, especially in South Africa.

With non-alcoholic beers catching on in developed markets (Spain now sees 12% of beer sales from alcohol-free versions), AB InBev is well-positioned to benefit from changing tastes without sacrificing market share.

Sourced: Daily Investor

Sourced: Daily Investor

Lighting Up a Quiet Revolution: British American Tobacco

Second on Allan Gray’s list is British American Tobacco (BAT)—a company that, like AB InBev, is navigating a shifting landscape with surprising agility.

Cigarettes may be in decline, but nicotine pouches are emerging as the next big thing. BAT’s VELO brand is at the forefront of this transformation, offering smokers a cleaner, combustion-free alternative. While it’s playing catch-up to Philip Morris’s dominant ZYN brand in the US, VELO is thriving in Europe, where it holds market shares north of 60% in countries like the UK and Norway, and over 80% in Denmark and Switzerland.

But perhaps the most compelling reason for Allan Gray’s confidence in BAT is the market’s apparent mispricing. While Philip Morris trades at 20 times its earnings, BAT sits at just 9 times—despite having similar (or even stronger) fundamentals in some areas. That kind of undervaluation, Artus believes, sets the stage for serious long-term upside.

Sourced: Daily Investor

Sourced: Daily Investor

The Magic Behind the Mouse: Disney

When it comes to Allan Gray’s offshore bets, there’s one clear standout: Disney. While the company has had its share of headline-grabbing troubles—especially around its streaming platform—Artus believes the market has missed the bigger picture.

Disney’s strength lies in its ability to extract value across multiple business arms. A single movie like Moana 2 doesn’t just hit cinemas. It drives streaming traffic on Disney+, feeds into cruise ship experiences, and becomes an immersive theme park attraction.

And while Disney’s streaming business has only recently turned profitable, Artus is optimistic. Compared to Netflix’s $520 billion valuation, Disney’s $200 billion market cap looks light—especially considering the value of Disney+ if it even reaches half of Netflix’s margins.

But it’s Disney’s theme parks and cruise ships that are the real economic engine. These experiences account for 60% of the company’s total revenue and are nearly impossible to replicate. Disney has six global resorts, a seventh on the way, and six highly lucrative cruise liners. Replicating this ecosystem would cost a staggering $70 billion, yet Disney plans to expand it further with a $60 billion investment over the next decade.

Sourced: Daily Investor

Sourced: Daily Investor

To put it simply: Disney isn’t just a media company. It’s the world’s largest leisure empire.

Staying the Course While Others Swerve

At the heart of Allan Gray’s strategy is a willingness to go against the grain. They’re not interested in chasing market fads or surfing temporary rallies. Instead, they build durable portfolios by betting on companies with long-term potential—even if that means underperforming slightly when everyone else is riding a wave of hype.

Whether it’s AB InBev finding new life in flavored and non-alcoholic beer, BAT dominating Europe’s smokeless nicotine market, or Disney converting its stories into experiences across the globe, these investments reflect a deep commitment to value, resilience, and disciplined strategy.

What This Means for Investors

Allan Gray’s top picks in 2025 aren’t flashy. They’re not riding AI booms or hyped-up IPOs. But they are companies with strong fundamentals, undervalued potential, and a track record of weathering economic ups and downs.

If you’re an investor looking to learn from one of South Africa’s most respected asset managers, the lesson is simple: Ignore the noise. Focus on the substance. And build a portfolio that can stand the test of time.

{Source: Daily Investor}

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