Here’s how football can inform a defensive investment strategy.
In February 2018, the New England Patriots were riding high, having won two out of their last three Super Bowls. Star quarterback Tom Brady was back, leading the team to another championship game.
He put on quite a show. In that Super Bowl against the Philadelphia Eagles, Brady threw for an astonishing 505 yards, breaking NFL playoff records without a single interception.
Yet, despite his remarkable performance, the Patriots lost.
The reason? That season, their focus was almost entirely on offense. Key defensive players had been let go, and they strangely benched one of their better defenders.
The Eagles capitalized, scoring five touchdowns and three field goals against the weak Patriots defense, ultimately winning the game 41-33 in an upset.
Similarly, investors need to pay attention to defense. Relying solely on high-growth AI stocks may yield short-term gains, but the risks remain if there’s not a strong defensive strategy in place.
Take, for instance, the investors at Situational Awareness. Their AI-focused fund saw a remarkable 270% increase earlier this year, managing $45 billion by July, but swiftly lost much of it within weeks as margin calls came in and leverage took a nosedive.
In this update, let’s explore three defensive investment choices that Eric is enthusiastic about.
Surprisingly, defending your investments in this market can be engaging. These “AI Survivors” present high-growth opportunities with substantial upside potential. They are likely to support portfolios even if other AI stocks falter.
It’s worth mentioning Eric doesn’t endorse these companies. To access his curated list of “AI Survivors,” sign up elsewhere.
Still, I think highlighting these robust companies can show how appealing AI Survivors can be, illustrating their potential for solid long-term returns, comparable to aggressive AI strategies.
First AI Survivor Stock: Winning the Ground Game
Earlier this year, my neighbors installed a new in-ground pool.
They aren’t the only ones. Since 2025, interest in in-ground pools has rebounded in the U.S. after a post-COVID slump. With high mortgage rates keeping people at home, many are opting to invest in that dream pool.
To capitalize on this trend, my top choice is Latham Group Inc. (SWIM).
Based in Albany, New York, Latham is the largest supplier of fiberglass pools, which are increasingly popular. These pools require less time and money to build compared to traditional concrete options and are more durable than vinyl-lined ones that can easily leak.
Currently, about one in four pools in the U.S. is fiberglass, a notable increase from one in six just a few years ago.
This trend is proving beneficial for Latham. They’re capturing 1% of market share annually, resulting in double-digit sales growth while many competitors struggle. The fiberglass trend is especially strong in regions like Florida, Arizona, and California, which were already seeing growth.
Latham has established an extensive supply network over the last four years and now operates nine fiberglass plants across the country, allowing for quick distribution. In contrast, its nearest competitor has just two plants, which is quite a disadvantage.
Given these factors, I believe Latham will continue to gain ground against competitors in the gunite and vinyl pool markets while also benefiting from a gradual pickup in national pool construction.
Second AI Survivor Stock: Diving into the Deeper End
Fans of Smart Money know that Eric and I share a positive outlook on energy. Approximately 40% of AI data center projects have been pushed back to 2027 due to power shortfalls. Moreover, there are currently multiple conflicts impacting oil supplies around the world.
The demand for energy is escalating.
While many U.S. investors are focused on domestic shale plays, energy firms are exploring longer-lasting offshore sources, where breakeven costs are generally much lower.
Recently, companies like Shell PLC (SHEL), ExxonMobil Holdings Corp. (XOM), and Chevron Corp. (CVX) have intensified their activities in offshore regions such as Guyana and West Africa.
It’s interesting to note that these large oil companies often don’t handle all operations independently. They frequently purchase or lease the necessary equipment and infrastructure, which can be complicated.
That’s why I recommend Oil States International Inc. (OIS) in this sector.
Oil States has shifted its focus from less profitable land operations to deepwater projects. It specializes in supplying high-tech components for deep-water drilling, a segment that’s poised for growth as offshore drilling ramps up.
Additionally, the U.S. Navy has started procuring sound-dampening products from Oil States for submarines, which has bolstered their backlog substantially.
As the competition among naval powers increases, I foresee revenues at OIS rising 10% by fiscal 2027, and profits might even double—an impressive feat for any company, AI-focused or otherwise.
Third AI Survivor Stock: Bouncing Back from a Fumble
Many are familiar with discount stores like TJ Maxx or Ross Dress for Less. These retailers generally perform well during various market conditions. When times are good, they benefit from increased shopping; during downturns, they attract cost-conscious consumers.
My last pick is a discount grocery retailer.
Grocery Outlet Holding Corp. (GO) stands out as the largest extreme-value grocer in the U.S., operating around 550 stores and offering significant discounts on closeout and surplus items.
If you’re curious about what happens to nearly expired groceries, just stop by a Grocery Outlet.
However, the company’s past few years have been challenging. Rapid expansion and management missteps, including losing a CEO and multiple CFOs, led to difficulties.
Yet, new management is making strides to turn things around. They recently closed unprofitable stores and revamped their inventory strategy to improve operations and customer offerings.
The results have been promising.
After announcing its first positive earnings in three years, the company’s traffic increased, margins exceeded expectations, and profits surged, driving shares higher.
I expect continued progress for Grocery Outlet. Other discount retailers are already seeing affluent consumers opting for cheaper options, which bodes well for Grocery Outlet’s future.
Plus, shares are still being valued conservatively; if management can restore past performance levels, there’s potential for substantial gains.
Transforming the Game
Thankfully for local football supporters, the Patriots learned from their 2018 loss. In subsequent seasons, they revamped their defense and ultimately became the league’s top team in points allowed by 2019, starting the season 8-0.
Eric’s investment approach mirrors this: balancing strong offensive strategies with solid defensive investments. It’s crucial to integrate both aspects for optimal performance.
While these components may seem unrelated—much like the distinct coaching roles in football—they’re equally essential for success in investing.
At Fry’s Investment Report, Eric identifies AI Survivor stocks that could keep investors in the game, regardless of fluctuations in the AI market. For those interested in his insights, further resources on his research can be found.
Until next time,
Thomas Yeung, CFA
Market Analyst
