Buying and holding stocks for a lifetime can be tough to find, especially with the wave of artificial intelligence (AI) sweeping through various industries. Undoubtedly, there will be massive winners from the AI race, but there will also be firms that take heavy hits to the chin. In fact, some firms may stand to get disrupted in a way such that their economic moats have eroded away to become narrow or, in some cases, non-existent.
Indeed, generative AI is a powerful technology, and it will keep getting better, even as the AI trade goes up in a poof of smoke, as it did in the past few weeks. Personally, I think any dips could prove great opportunities to buy over the long run. That said, don’t expect them to bottom out overnight, as tech-driven market corrections tend to be the ugliest.
In any case, this piece will look at two intriguing stocks that I believe have wide enough economic moats to survive the so-called AI-driven fourth industrial revolution. Though they may not be “lifetime” holds in your portfolio, I think that they’re best held over lengthy periods of time. Think of an investment horizon well beyond 10 years.
So, without further ado, here are two Canadian stocks that you can retain their long-term durable competitive advantages long after the wave of AI disruption has worked its course.
CN Rail
Really no surprises here. CN Rail (TSX:CNR) is one of the oldest companies in Canada and perhaps one with the widest moat. Indeed, CN Rail’s North American rail network is basically impossible to replicate. Indeed, it’s just too expensive and time-consuming to start laying down new tracks. Not to mention various local authorities may block such from happening.
Indeed, it seems like the only way to grow is via acquisition. And though CN Rail may have missed out on buying up Kansas City Southern, I see CN as having numerous options to help it jolt its long-term growth. Smaller-scale deals (think Iowa Northern Railway and the Cape Breton & Central Nova Scotia Railway) seem to make a lot of sense. Though they’re less of a needle mover for a relatively large $98.9 billion firm like CN, I find ample value to be had from such investments.
As CN takes a slow and steady approach to expanding while making moves to improve operating efficiencies (the operating ratio), I’d not be afraid to go against the grain as CNR stock heads lower from here. After correcting close to 15%, CNR looks like a deep value play. The 2.2% dividend yield is a nice addition for income-focused investors seeking to set their future selves up with a nice, growing income stream.
TD Bank
TD Bank (TSX:TD) is another wide-moat firm that’s trading at a discount right now. The stock is going for $77 and change after a shortlived rally that briefly sent shares of the bank above the $80 mark. As the bank moves on from macro headwinds, it also has an opportunity to unlock ample efficiencies via generative AI. Indeed, the company has been quite active on the tech front, introducing intriguing new features and advancements for its users over the years.
Recently, TD reportedly inked a deal to test the large language model (LLM) offering of Canadian tech firm Cohere. Indeed, Cohere is a big name in the Canadian AI space, and TD is wasting no time looking to unearth the benefits of such a game-changing technology.
Sure, ChatGPT may get most of the fame, but I wouldn’t count Cohere and its own intriguing offerings, like Coral, out of the game.
