Revenge of the Plumbers, Carpenters, Tile Layers and Welders. And a Red Flag Alert Update
While everybody is looking here, there's a case to be made that there has never been a better time to look there...
The "here," of course, is artificial intelligence ("AI"), Wall Street's newest sex symbol, which is little more than a black hole of speculation.
If I had to put a bet on who will be the winner from the current crop of "pioneers," I'd say either Microsoft (MSFT) or Alphabet's (GOOGL) Google.
I give Microsoft the edge in part because of its investment in OpenAI, which gives it access to the emerging companies OpenAI is investing in. (That's one reason I added it to the Empire Real Wealth portfolio back in February.)
But let's be real here...
If we've learned anything with technology, it's that first-mover advantage, while a plus, guarantees nothing.
That's especially true with something like AI, which is moving so quickly. Search for "top AI companies" and you'll find dozens and dozens of dot-ai businesses you've never heard of... But you just know they're on every investment banker's dialing-for-dollars list.
The rough part is that everybody is looking at the same thing here, trying to identify who the winners will be, when there are plenty of winners right beneath their noses over there...
Except, they have nothing to do with AI and everything to do with real companies that make real things that real people need, use, and want.
This isn't rocket science...
It's common sense, and that runs through the kinds of companies I like in my Empire Real Wealth and QUANT-X System newsletters.
I've been thinking a lot about this about in the wake of so much talk about everybody who will supposedly lose their jobs at the hands of AI.
You know who won't? Plumbers, because AI can't fix a broken toilet. Carpenters, because AI can't put the finishing touches on building a house or installing a new gate. The same goes for anybody who lays tile or installs flooring or roofing. And welders? There will never be an AI app for any of that stuff.
I was chatting about this with a friend (on the phone, no less – a wonderful invention – using voice, not text) and we started talking about companies that aren't AI plays that will do well.
That's where the 'revenge of the trades' idea, as I call it, came from...
He started talking about a few of his favorite stocks, which have done well for him, like Owens Corning (OC).
You probably haven't thought much about Owens lately. It's not the type of company that the mainstream media is clamoring to talk about. Owens makes roofing and insulation materials.
The one thing its products all have in common: construction. Owens is the ultimate anti-AI play. While the company may very well use AI in its factories – and I hope it does! – human beings have to apply or install most of its products.
We're supposedly either in or headed for a recession, yet Owens is trading at record highs...
And yet, the stock is still arguably cheap.
It's clearly positioned for whatever happens. It has a strong enough balance sheet – and good enough free cash flow – to boast a total shareholder yield of 10%, via buybacks and dividends. And it has done that without increasing debt.
That doesn't mean it won't get hit if the economy slows down. In fact, management says it could.
► It's the same setup at another infrastructure play in my QUANT-X System model portfolio...
The company scores a 93 out of 100 on my quantitative scoring system, making it one of the higher-scoring stocks in the portfolio. Its stock is up 20% in the month since my recommendation, and I think the gains are just getting started... because fundamentally, it's doing well despite the economy. Plus, it's dirt-cheap.
(My subscribers can read my write-up right here. Shameless self-promotion alert: To learn how to sign up for my QUANT-X System newsletter at a 40% discount, click here.)
Like Owens, this company is hitting new all-time highs... all without being a play on AI.
Just remember that next time you need a plumber.
Have any favorite non-AI ideas that play off basic Trades? Let me know.
Meanwhile, if you missed it, I introduced my Red Flag Alert yesterday….
One of the companies I flagged was Topgolf Callaway Brands (MODG.) You can what I wrote here. After the market closed that day, despite beating estimates, the company cut its earnings guidance and the stock tumbled.
Score one for the data!
Feel free to contact me at herbgreenberg@substack.com. You can follow me on Twitter
Terrific points; thanks for sharing!
very thoguhtful.