You don’t need to take on a ton of risk to have a good shot at achieving a TSX Index-beating level of capital appreciation. Indeed, all of those red-hot artificial intelligence (AI) and semiconductor stocks may be in fashion (though they have more recently taken a bit of a hit), but there will be a swift correction, and those who show up late to the party may be the ones that walk away with losses in hand.
Indeed, AI is one of those technologies that will likely revolutionize almost every industry. From automating tedious office tasks to replacing baristas at the local coffee shop, the power of AI and automation robotics is massive. That said, it’s tough to know just which firms stand to gain the most.
It’s not just about AI, folks!
Of course, the mega-cap tech stars have been spending the most aggressively to improve their chances of having the AI product to rule them all. That said, I’d argue that there are numerous smaller-cap companies (many of which are neglected by everyday retail investors) that can also thrive as they unlock the power of AI for very specific applications.
Either way, as the AI stock boom begins to show signs it’s running out of gas, I think it’s only smart to give the well-run defensive companies a second look. Sure, they may not have the most exciting technologies under the hood. However, they also stand to benefit indirectly from AI.
Additionally, if you’re one of many new investors who’s lacking on non-tech plays, the following name, I believe, could make a fine portfolio diversifier as the AI stock boom goes bust. Just because AI stocks stand to sink does not mean that AI technology is about to slow, however. Eventually, the AI-driven correction will lead to huge opportunities. However, until then, it may make sense to consider a low-tech firm that has its own market-beating edge.
Loblaw stock: A defensive, low-tech play in a climate where investors may be overweight the AI trade
Loblaw (TSX: L) is a major Canadian grocer that’s been thriving amid inflation and subtle economic headwinds. Undoubtedly, inflation has come down in a major way. But if Canada sinks into a recession at some point over the next few years (Bank of Canada rate cuts may or may not rescue the economy from a bit of a mild slump), Loblaw stock could be a defensive stock that helps keep your portfolio above water as the tides roughen.
At writing, shares of L are up an impressive 52% in the past year. Perhaps the most impressive thing is that Loblaw is an old-fashioned retailer and not an AI stock! Moving ahead, I’d look for a growth-to-value rotation to continue benefiting names like Loblaw. And, of course, a soft to medium landing for the economy may actually work in the grocer’s favour as it looks to beckon Canadian customers with its private-label brands (think No Name and President’s Choice).
Though the decision to launch a No Name store may be met with muted enthusiasm, I think the move could help Loblaw gain market share in the Canadian grocery scene while also padding Loblaw’s margins. In a prior piece, I applauded the move, which could extend L stock’s rally for quarters to come. Private-label goods don’t just offer customers more value for their buck; they tend to be great margin-enhancers for the retailers themselves.
As inflation worries turn to recession jitters, I expect No Name stores could be a smash hit that may just challenge the dominance of discount retailers and dollar stores. In addition, Marvel superhero cards are a nice bonus that could push families to spend more at the local Shoppers Drug Mart. All considered, Loblaw is standing out as a must-own defensive stock, even after its marvelous run!
