Right now, investors are wide-eyed over industrial stocks that are benefiting from the artificial intelligence (AI) infrastructure build-out. It is lifting the entire sector, bringing valuations to premium levels. The thinking on Wall Street is that this AI infrastructure investment will continue to grow forever, meaning that these stocks deserve premium multiples.
Eventually, the stock market will crash, perhaps as the AI boom morphs into a bust. If that happens, these two industrial stocks not associated with the AI boom will be great buys once again.
Missed AI’s “Act 1”? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
WM’s constant processing needs
WM (NYSE: WM), formerly known as Waste Management, is the largest waste-removal, recycling, and renewable-energy company in North America. You may use its services for your home or company.
WM signs long-term contracts to manage waste in areas, with built-in price flexibility to allow it to keep prices up with inflation. This makes it a steady growth stock, but not something that will blow your socks off on the income statement. Revenue was up 4% year over year last quarter.
Long-term, WM is reinvesting to expand its recycling and landfill-to-energy production segments, which can help create an even deeper ecosystem that customers will rely on. Landfills can now be built to safely convert waste into electricity that can be sold back to the grid, which will be a nice growth driver for WM in the future.
Right now, WM trades at a premium price-to-earnings ratio (P/E) of 29, even though it is not seeing rising demand because of AI. However, in a market downturn, it could be a cheap stock to buy that is insulated from the business cycle. No matter what happens in the economy, trash needs to be collected.
After the 2008 market crash, WM looked cheap. It has produced a total return of 884.4% since the beginning of 2009 and could do so again after the next crash, whenever it occurs.
WM Total Return Level data by YCharts.
The transportation backbone of North America
Canadian Pacific Kansas City (NYSE: CP) is a newly formed railroad resulting from the merger of Canadian Pacific and Kansas City Southern in 2023. The combined rail network connects Canada to the Midwest of the United States, the Great Lakes, and the Northeast, running through the middle of the country and into Mexico.
