Trading Desk
World champion at a discount price
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Martin Raab
Investment-Stratege
While AI stocks are trading at record-high valuations, some titans are available at bargain prices. Could the top performers of the coming months be found among the underdogs?
Once upon a time, there was a market where stocks were valued based on earnings, cash flow, and occasionally management quality. Today, the rule of the stock market is this: if you can’t demonstrate a connection to AI and the use of artificial intelligence, you’re treated like a fax machine at a startup fair. The result: trendy AI stocks are racing from record to record, while solid industrial conglomerates and global giants sit quietly on the sidelines—valued like a cheap snack from a fast-food chain, even though they’ve been reliably turning a profit for decades.
For anyone who hasn’t fully bought into the AI hype yet, there’s good news: History often has bad timing, but good punchlines. Anyone who remembers the year 2000, when the Nasdaq hangover set in and Old Economy stocks suddenly rose like a phoenix from the ashes, has a sense of what might be coming. The question isn’t whether the rotation will happen, but when the market will realize that the tide is turning. Of course, a risk remains: Sometimes cheap is just cheap. Not every inexpensive stock is an overlooked gem; some are value traps. But those who calculate free cash flow (FCF) with a calculator today and critically analyze the sector teams’ charts will find true champions at prices the market has overlooked in its collective AI euphoria.
Potential performance champions include, among others, the logistics group Kühne + Nagel (EBIT: CHF 1.25 to 1.40 billion), the U.S. financial data provider FactSet Research (EBIT: USD 900 million, FCF: USD 680 million), as well as substitutes PayPal Holdings (FCF: USD 5.5 billion) and the food company General Mills (FCF: USD 1.6 billion), which, although world-class, are currently trading at lower-tier price levels. The IT dinosaur HP Inc. has already gotten off to a strong start (+29% in one month). This proves that the bench isn’t just filled with second-rate players. The odds are currently good for buying stocks at bargain prices while they’re on the sidelines. And it’s significantly less nerve-wracking than buying the seventeenth Nvidia split.
