Profit From the Rise of AI

Written By Christian DeHaemer

Updated May 15, 2024

Game over, man.

I’ve been writing about artificial intelligence and the singularity since I read an article from Steve Wozniak about 15 years ago. It scared the shit out of me then, and it's only gotten worse.

Henry Kissinger of all people wrote a huge two-page article in The Wall Street Journal this past weekend talking about the philosophical dangers of machines knowing more than anyone human. Of course, Kissinger warns that it will start a new war.

It worried my father so much that he called me to ask about it. I told him AI was so good it was going to put me out of business.

If you haven't messed around with ChatGPT yet, you should. Let me give you an example.

Here is what I asked it:

Write an article on the history and benefit of growth at a reasonable price and three stocks to buy now.

Here is what it wrote in about three seconds:

Growth at a reasonable price (GARP) is an investment strategy that has gained popularity in recent years. It is a hybrid of growth investing and value investing, where investors seek to find stocks that are trading at a reasonable price relative to their growth potential. This approach has a long history of success and can offer several benefits for investors.

The concept of GARP was first introduced by Thomas Rowe Price Jr. in the 1930s. Price believed that investors should focus on companies with strong growth potential, but also ensure that they are not overpaying for that growth. This approach has been refined over the years, and today, it is a popular investment strategy among both institutional and individual investors.

One of the benefits of GARP investing is that it allows investors to take advantage of growth potential while also managing risk. By focusing on stocks with reasonable valuations, investors can avoid the high-risk/high-reward approach of pure growth investing while still benefiting from the potential for strong returns.

Another benefit of GARP investing is that it can offer a margin of safety. By focusing on stocks with a reasonable price-to-earnings ratio (P/E ratio) or price-to-sales ratio (P/S ratio), investors can ensure that they are not overpaying for a stock relative to its growth potential. This can help to mitigate the risk of a significant downturn in the stock price.

Three stocks that are worth considering for GARP investors are Apple Inc. (NASDAQ: AAPL), Mastercard Inc. (NYSE: MA), and Visa Inc. (NYSE: V).

Apple Inc. is a technology company that has been at the forefront of innovation in the consumer electronics industry. With a P/E ratio of 28.6, the stock is trading at a reasonable price relative to its growth potential. Apple's strong brand recognition, loyal customer base, and innovative product pipeline make it a compelling investment opportunity for GARP investors.

Mastercard Inc. is a payment technology company that is well-positioned to benefit from the ongoing shift toward digital payments. With a P/E ratio of 48.3, Mastercard is trading at a premium relative to other stocks in the financial services sector. However, its strong earnings growth potential, robust balance sheet, and global reach make it an attractive investment opportunity for GARP investors.

Visa Inc. is another payment technology company that is worth considering for GARP investors. With a P/E ratio of 43.5, Visa is trading at a premium relative to other stocks in the financial services sector. However, its strong earnings growth potential, dominance in the payment processing industry, and robust business model make it a compelling investment opportunity for GARP investors.

In conclusion, GARP investing is a time-tested investment strategy that can offer several benefits for investors. By focusing on stocks with a reasonable valuation and strong growth potential, investors can benefit from the potential for strong returns, while managing risk. Apple Inc., Mastercard Inc., and Visa Inc. are three stocks that are worth considering for GARP investors looking to build a diversified portfolio.

Not Bad for Old Data

The big qualifier for ChatGPT is that all its data comes from before 2021, so nothing is recent. I’m sure real-time AI will be available before you know it.

Visa and Mastercard have been flat for the past two years due to COVID, but that is changing. Both have lower P/E ratios than the information that ChatGPT put out.

Apple is having problems due to the fact that all of its supply comes from China, and there are now restrictions on semiconductor chips enacted by the Biden administration. The company is moving its supply chains to India and Vietnam, but that will take up to 10 years.

The credit card companies are benefiting from the end of COVID and the increase in both tourism and credit card use. Mastercard makes a lot of money when you buy things in a foreign currency. Both Visa and Mastercard are long-term holds in my Bull and Bust Report portfolio. Apple is a sell.

The point is AI is incredibly powerful even with its blemishes. It will only get better and it cannot be stopped.

In my Launchpad Trader service, I’ve been recommending AI stocks. The first trade jumped 48% in five trading days, and our second trade was up 31% last Friday alone. If you can’t beat them, join them. It's time for you to harness AI and make some money. Join us on this new adventure.

All the best,

Christian DeHaemer Signature

Christian DeHaemer

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Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.

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