Three stocks for an AI, high inflation, and high interest rate world

Dan Scott Lintott of De Lisle Partners has selected three stocks to purchase in a world with similarities to the 1970s but this time with AI

New stocks are needed in a new world. To identify winners for the upcoming ten years, we employ the paradoxical combination of value and momentum in the VT De Lisle America Fund. Disinflation and falling interest rates produced a strong tailwind for steady growth stocks like Procter & Gamble, Nike, and McDonald's for forty years. They significantly outperformed the market because their predictability was rewarded with rising price-to-earnings (p/e) multiples. With the return of higher interest rates and inflation in 2021 and the introduction of ChatGPT in 2022, which directed funds toward AI infrastructure, everything changed.

Due to rising labor and material costs, higher rates and inflation typically drive down p/e multiples and strain profits. Simultaneously, the need to invest in developing AI forced money into previously unpopular sectors of the economy, such as manufacturing, construction, and blue-collar jobs. Investors prefer to make comparisons with previous cycles. The best precedent, in our opinion, comes from the 1970s, but with AI added. What is the outcome of that today?

In this new capital-expenditure-driven cycle, businesses with growing order backlogs and limited real-world assets gain pricing power, setting them up for success in the emerging industrial economy. Minor themes are also emerging within these large macro themes. One that appeals to us is the dismantling of established industrial conglomerates through "spin-offs"the packaging of neglected industrial assets into appealing new listed companies.

You should invest in three stocks.

Solstice Advanced Materials (Nasdaq: SOLS), Honeywell's specialty chemicals division, was spun off in 2025. In addition to growing its capacity in its specialty chemicals business, which supplies America's semiconductor supply chain, Solstice maintains an oligopolistic position in refrigerants, its cash cow and increasingly essential for data center cooling. Its ownership of the only uranium conversion facility in the United Statesone of just seven worldwideis the hidden gem, though, and it is a valuable asset during a nuclear renaissance. Its earnings power is undervalued as its chip exposure increases and higher-priced uranium contracts start to come in, despite its pricey appearance at a high 20s p/e.

High-tech components for oil wells and subsea exploration are produced by Forum Energy Technologies (NYSE: FET). It's a pick-and-shovel game about the growing complexity of extraction and the rising global energy needs brought on by AI. Forum is a dominant force in all of its product lines and operates in a high-value niche. The business takes great pride in its patented technical know-how, which makes it difficult to compete with. High levels of cash generation are also possible with low reinvestment requirements. Given its low cost in relation to cash flow, we believe Forum's stock is a buy even after nearly tripling over the past year.

Another kind of steady growth is provided by demographic trends. The US's aging population is seen by Pennant Group (Nasdaq: PNTG), which owns, leases, and runs senior care facilities, as a consistent source of growth for years to come. In a market where supply is limited by the cost of new construction, its capacity to renovate existing buildings to add value is remarkable. It has the opportunity to carry out its vision thanks to growing demand, limited resources, and enterprising local management teams. Pennant has an impressive p/e to growth ratio of just over one, thanks to its low 20s p/e and high double-digit growth rate.