Is it time to start thinking about playing a bit of defence while most others continue piling money into the red-hot, aggressive momentum plays? Indeed, AI stocks aren’t the only way to build wealth. And while I do view the AI revolution as one that could power productivity growth across the board (in and outside of the tech sector), I think investors should be cautious of overpaying for AI exposure when it comes to some of the market’s more obvious AI beneficiaries.
Sure, it’s easy to give in to the fear of missing out (FOMO) by backing up the truck on the AI stocks that are working in this market (think the AI hardware plays). But, at the end of the day, there’s more than just red-hot AI stocks in this market, and they might have more upside over the long haul Thus is especially true as other investors discover what they have to gain from the AI boom as AI looks to become more specialized across various industries and sub-industries.
In this piece, we’ll look at two defensive stocks that can still grow at an impressive rate. While defensive growth stocks are a rare breed, I find the following names can help investors move forward, regardless of what bumps the broad markets will encounter next. With all the AI bubble talks, I think it’s only wise to have a backup plan. And the following names, I believe, won’t cause you to miss out on growth, as they execute on opportunities that I view as lower risk and less dependent on the state of the economy.
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Dollarama
Dollarama (TSX:DOL) is arguably the Canadian king of discount retail. Whenever you walk into a Dollarama, you just know that you’ll stretch every dollar as far as it can go. And at the till, you’ll experience the opposite of sticker shock, even amid the recent wave of inflation that Canadians have been through. That’s part of the reason why Dollarama is such a standout success in the dollar-store scene.
In any case, as rates fall and stubborn food inflation looks to inch higher again, I think Dollarama could grow its sales and earnings by enough to allow the stock to continue its record run.
Even at $184 a share (close to new highs), I view the stock as a great defensive grower, as the firm expands its store count. It’s hard to believe that shares have gained 265% in five years, which is more impressive than many tech stocks, even with their AI tailwinds. It really is incredible for a name in consumer retail. As management continues to give consumers what they want, I think Dollarama can keep taking share. Perhaps the 41 times trailing price-to-earnings (P/E) multiple is worth paying, even if you’re a more value-minded investor.
Walmart
Walmart (NYSE:WMT) is another discount retailer that’s been investing quite a bit in its growth profile. Over the years, the company has really enhanced its high-tech offerings. With low-cost grocery deliveries and intriguing new value-oriented offerings that could keep consumers coming back, even when inflation backs down, I view Walmart, the retailer famous for its rollbacks, as a great place to be.
Like Dollarama stock, WMT shares are getting pricey at 38.8 times trailing P/E. The stock has been consolidating for a few quarters now and could make for a great buy before its next breakout moment, which might not be all too far off, especially as Walmart looks to get more aggressive with its rollbacks in a bid to take more share away from pricier grocers.
