This AI winner might surprise you
April 2024
It’s not just high-tech companies that can profit from the artificial intelligence (AI) boom. One Australian company – Goodman Group – is already proving this to be the case.
Goodman is the biggest real estate investment trust on the ASX and has benefited from recent economic trends in two ways. Firstly, its warehouses and logistics operations have done well as the digital economy has grown. In other words, warehouse space and logistics are in hot demand as more parcels are delivered.
And, now, data centres with sufficient power capacity to process and store the giant volumes of information used by regenerative AI are in short supply. Goodman has made a strategic decision to include data centres in its portfolio of properties to capture this demand.
The company’s continued growth drove its recent inclusion in a global index of real investment trusts known as the FTSE Nareit US Real Estate Index. As a result, more offshore investors have needed to buy shares in Goodman as part of their investment strategies. This has provided extra support for its share price – which had risen to $33.81 by March 31, up from $25.30 on January 2 this year. This resulted in a total return of 33.6% over the March quarter and 72.1% for the year.^
Goodman is part of our parcel of 30 direct shares as it meets one of the criteria of our algorithmic investment strategy. This number-crunching model chooses holdings based on stock characteristics that our research shows are likely to deliver returns over the long term.
These five characteristics – or “factors” in technical terms – are value, quality, low volatility, momentum and growth.
The basic principle is that a selection of shares which each display some of these characteristics can be brought together in a portfolio which outperforms over time.
Goodman was selected for the direct equity portfolio because it has “momentum” characteristics. It currently constitutes around 4.5% of the Cornerstone direct equity portfolio and we believe it’s likely to remain a steady performer over the short term.
^Source: Bloomberg
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