In the realm of investing and finance, the buzz around artificial intelligence (AI) often revolves around technology companies experiencing exponential growth. However, Nancy Tengler, CEO and CIO of Laffer Tengler Investments, emphasizes that AI is not exclusive to tech giants like Nvidia and Meta Platforms. Instead, Tengler highlights traditional “old economy” companies that are leveraging AI to enhance productivity and profitability. She identifies industrial and consumer discretionary stocks that have adapted to the digital age and AI advancements, leading to improved performance outcomes.
Tengler’s investment strategy centers on companies that are incorporating generative AI into their business models, as she believes this approach is more compelling than the internet revolution. By embracing robotics and AI, companies like Emerson Electric, L3Harris Technologies, Visa, Walmart, and McDonald’s are expected to thrive and outperform the market. Tengler refers to these companies as the “picks and shovels” of AI, indicating their vital role in driving growth through technological innovation.
Among the companies Tengler highlights, Emerson Electric and L3Harris Technologies are cited as prime examples of industrial firms automating their processes through digitization and AI integration. Emerson Electric, known for its production of fluid controls and industrial valves, has witnessed a significant stock price increase, outperforming the S&P 500 index. Analysts at Berenberg have identified Emerson as a top pick in the electrical equipment sector, projecting a substantial upside potential in its stock price.
On the other hand, L3Harris Technologies, a leader in aerospace and defense, has been utilizing AI and machine learning for years. The company secured a major contract with the Defense Department to deliver AI services to the defense and intelligence sectors. Analysts foresee a positive outlook for L3Harris, with a majority of them recommending a buy rating and predicting a notable increase in its stock value.
Walmart, a prevalent player in the retail industry, has also embraced AI to drive growth and enhance operational efficiency. Tengler highlights Walmart’s adoption of generative AI in its e-commerce operations, leading to significant improvements in productivity and profitability. The company’s strategic initiatives, including a stock split and dividend increase, have signaled strong quarterly performance and positive earnings trends.
Through increased automation in its distribution centers and fulfillment processes, Walmart has experienced a surge in global e-commerce sales. By leveraging AI technologies to streamline operations and eliminate mundane tasks, Walmart has achieved robust growth in both its online retail and advertising segments. Tengler views Walmart as a prime example of an old economy company successfully integrating AI to drive sustainable growth.
In addition to traditional old economy companies, Tengler’s investment strategy encompasses mainstream AI plays like Broadcom, Amazon, and Microsoft. These companies, recognized for their innovation and technological prowess, offer a blend of growth potential and reasonable valuations. By diversifying her portfolio with a mix of AI-focused companies across various sectors, Tengler aims to capitalize on the transformative power of artificial intelligence in driving long-term investment returns.
Overall, the integration of AI into old economy companies signifies a paradigm shift in the business landscape. As these firms adapt to the digital era and harness the capabilities of AI, they position themselves for sustained growth and competitive advantage. Through strategic investments in companies embracing AI technologies, investors like Nancy Tengler anticipate enhanced performance and value creation in the evolving market environment.
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