Beyond AI: Eight Companies Poised for Profit Growth This Decade
The U.S. stock market is heavily focused on artificial intelligence, leading to a concentration in major stock indices that may pose a risk to investors if AI's pace disappoints. For Israeli savers, whose pension funds are largely invested in these global indices, this concentration is particularly relevant. Diversifying beyond AI-focused stocks is presented not as a bet against the technology, but as a form of insurance.
Eight companies are highlighted as having the potential to double their profits by the end of the decade without relying on AI in their growth narrative. Royal Caribbean, despite a 15-month pandemic shutdown and costly debt, has seen its stock return 352% over ten years, outperforming the S&P 500. Its current profit forecasts suggest a doubling by 2030. Eli Lilly's weight-loss drug, Zepbound, is a significant asset, with studies showing reduced healthcare costs for patients. The company's free cash flow is projected to surge from under $10 billion to over $50 billion by 2030.
Biomarin, with its achondroplasia treatment Voxzogo and recent acquisitions, is also positioned for growth, with potential sales of over $1 billion for each of its new rare disease therapies. Five Below, a discount retailer, is demonstrating strong growth in comparable store sales, with management clarifying that a viral toy contributed only a small percentage to its success. Charles Schwab is recovering from a period where rising interest rates shifted customer funds, impacting its profits. The company's earnings and stock price have rebounded, though its valuation multiple remains lower than historical averages.
Planet Fitness is a riskier bet, having lost significant value this year after a weak start led to deferred price increases and lowered forecasts. However, its low-price, high-volume model and stable subscriber base suggest potential. Smurfit WestRock, a packaging manufacturer formed by a merger, expects over 50% earnings per share growth next year through efficiency gains. Take-Two Interactive is anticipating the November launch of Grand Theft Auto VI, a highly anticipated release that has occurred alongside steady profit increases since the previous installment.
The common thread among these companies is that their current lower valuations stem not from poor performance, but from not aligning with the market's current AI-driven narrative. Each faces specific risks, such as overcapacity in the cruise industry, drug pricing regulations, changing consumer trends, or game launch delays. Diversification is advised as a way to mitigate reliance on a single market story.
