Investors are watching which companies are spending wisely in the AI era. BNN Bloomberg contributor Jon Erlichman spoke with a market pro about eight stocks where disciplined capital allocation and smart management decisions could pay off.
Artificial intelligence is forcing companies into some of the most important capital allocation decisions in years. Billions of dollars are being committed to new infrastructure, software, and automation. But for investors, the key question is not who is spending the most. It’s who is earning the best return on those investments.
Recent volatility in tech stocks reflects growing uncertainty around this issue. Some investors worry certain companies may be overspending on AI without a clear path to profits. Others worry companies that move too slowly could be disrupted by competitors using AI to operate more efficiently and capture market share.
Both risks point to the same underlying principle. Management teams must make smart decisions about how they invest capital.
Companies that invest aggressively without generating higher revenue, stronger margins, or durable competitive advantages risk destroying shareholder value. At the same time, companies that fail to invest in ways that improve their business risk falling behind in an increasingly competitive environment.
In the latest episode of Ticker Take on YouTube, I spoke with portfolio manager Kyle Taylor about how he identifies companies that consistently generate strong return on investment. His focus is on what he calls self-help stories. These are businesses actively improving their own performance through disciplined capital allocation, operational improvements, and thoughtful growth initiatives.
Taylor takes a style agnostic approach. Rather than focusing on whether a stock fits into a growth or value category, he looks for companies with strong management teams, competitive advantages, and clear opportunities to deploy capital in ways that strengthen the business over time.
Here are eight companies he highlighted.
RBC Bearings manufactures highly engineered components used in aerospace and defense applications, including critical systems in aircraft and submarines. Taylor points to management’s long track record of disciplined acquisitions and operational improvements.
Under CEO Michael Hartnett, the company has compounded growth at an impressive rate over decades. It encourages divisions to generate ideas to improve performance, reinforcing a culture focused on incremental gains. With a growing aerospace backlog and exposure to defense spending, Taylor believes the company continues to generate strong returns on invested capital.
Deere is widely known for its agricultural equipment, but Taylor increasingly views it as a data and technology company. Its machines collect and analyze vast amounts of information, helping farmers increase yield and efficiency.
Ongoing investments in precision agriculture, automation, and software strengthen Deere’s competitive position. By improving productivity for customers, the company enhances pricing power and long term profitability.
Roblox operates a global online platform where users create and play games. Taylor describes it as a digital ecosystem with both creators and consumers.
Management has taken a measured approach to monetization, gradually expanding advertising and moving more transactions onto its own infrastructure. With a large and engaged user base, Roblox has multiple levers to grow revenue while improving margins over time.
Extendicare provides long term care and home health services across Canada. Demographic trends support demand, but Taylor also points to internal initiatives.
The company has expanded through acquisitions and continues to invest in improving operations and service delivery. Its significant exposure to government funded contracts provides stability, while operational improvements offer upside.
Exchange Income Corp. follows a disciplined strategy of acquiring niche businesses with strong cash flow, particularly in aerospace and aviation services.
Taylor highlights its conservative balance sheet and focus on integrating and strengthening acquired businesses. Rather than chasing rapid expansion, the company emphasizes steady improvements and cash flow generation.
Rogers Sugar refines and distributes sugar and maple syrup products across Canada and internationally. While it may not be seen as a growth stock, Taylor considers it a self-help story.
The company has invested in expanding capacity and improving efficiency, which has supported profitability. Its stable market position and dividend profile add to its appeal for income focused investors.
Cameco is one of the world’s largest uranium producers and sits at the center of renewed interest in nuclear power.
Taylor praises management’s disciplined approach to production and contract pricing. By focusing on securing favorable long term agreements rather than overproducing, Cameco aims to protect returns in a cyclical commodity business.
Pan American Silver produces silver and gold across the Americas. Taylor sees value in its operational discipline and acquisition strategy.
Beyond precious metals demand, silver’s industrial uses in electronics and clean energy applications provide additional growth potential. The company also maintains financial flexibility to pursue strategic opportunities.
The Ticker Take
In an environment defined by heavy AI spending and rapid technological change, capital allocation matters more than ever.
Some companies risk overspending in pursuit of growth. Others risk falling behind if they fail to adapt. The common thread between both outcomes is return on investment.
Taylor’s eight picks reflect a focus on management teams that prioritize disciplined spending, operational improvement, and competitive advantage. For investors navigating a market shaped by AI enthusiasm and uncertainty, looking beyond headlines to how effectively companies deploy capital may prove to be one of the most important strategies of all.
Jon Erlichman is a BNN Bloomberg contributor and the host of Ticker Take on YouTube.