The South African portfolio that beat the S&P 500 with an 18.7% yearly return

Vestact’s model portfolio achieved an average annual return of 18.6%, significantly higher than the S&P 500’s average of 12.8% per year.

Vestact CEO Paul Theron explained that they achieved this performance by buying all the Magnificent 7 stocks 10 years ago, before they became magnificent.

The Magnificent 7 are seven of the largest, most influential, and high-growth technology companies in the world.

The group includes Apple, Microsoft, Amazon, Alphabet (Google), Meta Platforms (Facebook), Tesla, and Nvidia.

These shares have been a prominent part of the S&P 500’s strong performance over the last decade, and those who held them have shown good returns.

In his annual newsletter, Theron said that despite a wobbly end to December 2025, their model portfolio was up 19.7% for the year.

“I would have preferred something above 20%, but it was still a healthy win versus the S&P 500, which only went up 16.4% over the same period,” he said.

Their longer-term performance track record is even better. Vestact’s 10-year average is 18.6%, compared to the S&P 500’s average of 12.8% per year.

“That level of sustained outperformance of the index is remarkable, and we are very proud of the achievement,” Theron said.

He explained that they achieved this strong performance by owning the Magnificent 7 stocks over the last decade.

“We held them in concentrated portfolios. We helped our clients accumulate high-quality stocks and stay invested for the long run,” he said.

“We talked them out of products sold by rival firms that are designed to shield you from downturns, but have a habit of shielding you from upturns too.”

Theron stated that 2025 was not an easy year for them due to the significant uncertainty and political turmoil.

“We held on through geopolitical turmoil, uncertainty about inflation and interest rates, and the drama caused by President Trump’s ‘liberation day’ tariffs,” he said.

He mentioned two shares which they believed in and which performed well for them and their clients over the last year – Google and Eli Lilly.

“Google rose 65.8% for 2025 after investors woke up to the fact that it has the best AI tools and unlimited content to train its models,” he said.

“Eli Lilly had a super final third of the year. That was just as well, because we have been pushing everyone to buy them.”

Theron is positive about 2026

Theron is positive about 2026. However, he added that nobody really knows what will happen next.

“The average forecast from the professionals is usually a 10% gain per year, but, in fact, average returns are extremely rare. Volatility is quite normal,” he said.

Vestact believed that AI tools would dramatically improve human productivity and pump up corporate profit margins.

Those providers with economies of scale and the ability to finance large data centres will lead the way.

“This won’t be a winner-takes-all scenario. There will be space for multiple service providers,” Theron said.

He expects consumer spending to remain strong and for global travel to continue booming.

“We are also very keen on robotaxis. Waymo rides cost 31% more than rides with a human driver, yet demand keeps growing,” he said.

He is also bullish on weight-loss drug manufacturers like Novo Nordisk, which manufactures Wegovy and Ozempic, and Eli Lilly, which is behind Zepbound and Mounjaro.

“Companies that make GLP-1 drugs are compelling investments because they service huge markets, sell products that require ongoing usage, and enjoy very high margins,” he said.

“Eli Lilly has the best potential for drug platform expansion, which gives it a very wide moat.”