A new world calls for new stocks. In the VT De Lisle America Fund, we use the paradoxical combination of value plus momentum to find winners for the next decade. For 40 years, declining interest rates and disinflation created a powerful tailwind for steady growth stocks such as McDonald's, Nike and Procter & Gamble. Their predictability was rewarded with rising price-to-earnings (p/e) multiples, thus they strongly outperformed the market. That all changed in 2021 with the return of higher interest rates and inflation, combined with the launch in 2022 of ChatGPT, which funnelled capital into AI infrastructure.
Higher rates and inflation tend to push down p/e multiples and put pressure on profits due to rising costs of materials and labour. At the same time, the urgency to spend on building out AI pushed capital into different, previously unloved, parts of the economy: construction, manufacturing and blue-collar jobs. Investors like to find a comparison with past cycles. We think the 1970s provides the best precedent, but with the addition of AI. So how will that play out today?
Companies that own scarce real-world assets and have growing order backlogs gain pricing power in this new capital-expenditure-driven cycle, positioning them to thrive in the new industrial economy. Within these big macro themes, minor ones are also emerging. One we like is the break-up of old industrial conglomerates via “spin-offs” – the packaging of overlooked industrial assets into attractive new listed companies.
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Three stocks for your portfolio
In 2025, Honeywell spun off its speciality chemicals division, Solstice Advanced Materials (Nasdaq: SOLS). Solstice holds an oligopolistic position in refrigerants (its cash cow, increasingly necessary for data-centre cooling) while expanding capacity in its specialist chemicals business, supplying America's semiconductor supply chain. But the hidden crown jewel is its stake in the only US uranium conversion facility – one of only seven in the world – and a scarce asset during a nuclear renaissance. Although expensive-looking at a high 20s p/e, its earnings power is underappreciated as its chip exposure grows and higher-priced uranium contracts begin to roll in.
Forum Energy Technologies (NYSE: FET) makes high-tech parts for oil wells and subsea exploration. It is a picks-and-shovels play on rising global energy needs due to AI and on the increasing complexity of extraction. Forum operates in a high-value niche and is a leading player in all its product lines. The company prides itself on its patented technical know-how, which makes it hard to compete against. Low reinvestment requirements also provide high levels of cash generation. Even after a near tripling over a year, we think Forum's stock is a buy given its cheapness relative to cash flow.
Demographic trends offer another type of steady growth. Pennant Group (Nasdaq: PNTG) owns, leases and operates care facilities for the elderly and sees the ageing population in the US as a steady tailwind to increase sales for years. Its ability to renovate old buildings to add value in a market where supply is constrained by the cost of new-builds is impressive. Growing demand and scarcer assets, plus entrepreneurial local management teams, are giving it the chance to execute its vision. Pennant trades on a low 20s p/e and has a high double-digit growth rate, giving it an enviable p/e to growth ratio of not much above one.
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