When AI threatens the moat #2 Our selection of AI risk-proof long ideas

Summary of Key Points from the Conference Call Industry and Company Overview - The report focuses on the European SMID (Small and Mid-cap) stocks and their resilience against AI disruption, particularly in the context of generative AI technologies [2][5]. Core Insights and Arguments - A proprietary AI Displacement Risk framework was introduced, rating 184 European SMID stocks from 0 (no/very low AI moat risk) to 4 (very high risk) [5]. - Eight "AI risk-proof" stocks were identified, which are fundamentally attractive and have the potential for performance catch-up against their peers [2][8]. - The selected stocks are characterized by durable competitive advantages that are not easily disrupted by AI technologies [8]. Specific Company Insights 1. Asmodee: - AI tools cannot replace the appeal of physical board games, but can enhance development and productivity. The stock was added to the top picks on January 21 [4]. 2. BAM Groep: - Operates in a sector where execution and client relationships are key, with AI serving as a tool rather than a competitive threat [4]. 3. Bunzl: - Value creation is based on physical logistics, indicating no AI threat to its competitive moat [4]. 4. EasyJet: - The core strengths lie in tangible assets like airport slots, with AI enhancing operational efficiency rather than posing a threat [4]. 5. Enagás: - Minimal structural impact from AI due to its regulated role as Spain's gas transmission operator [4]. 6. Flughafen Zürich: - Largely insulated from AI disruption, with only mild long-term pressure anticipated on business travel [4]. 7. Merlin Properties: - Transitioning towards becoming a major data center owner-operator, presenting a compelling opportunity in AI infrastructure [4]. 8. Princes Group: - Operates in a capital-intensive food processing environment, where value is driven by scale and relationships rather than digital processes [4]. Additional Important Insights - The "0" risk category stocks have shown solid positive returns, outperforming those with higher AI exposure [6]. - The report emphasizes the importance of distinguishing between companies with durable moats and those that may be vulnerable to AI disruption [8]. - The average year-to-date performance of the selected low-risk stocks was calculated, highlighting the potential for re-rating among underperformers [7][9]. Performance Metrics - The average performance of the selected stocks rated with the lowest risk of AI displacement was noted to be 7.1% year-to-date [10]. Conclusion - The report provides a focused selection of stocks that are expected to perform well despite the rise of AI technologies, emphasizing the importance of fundamental analysis in identifying resilient companies [8].