A stock market crash is coming. The eye-watering sums invested in artificial intelligence (AI) can’t be justified. The return on investment companies are getting out of AI doesn’t match reality. A correction’s inevitable sooner or later. That’s what the talking heads are saying, at least.
Let’s assume a crash is coming because of AI. How can investors protect themselves? And where might the best stocks to buy be found? One strategy is to copy what worked the last time all this happened…
Test of time
The biggest parallel in recent history with the modern day is probably the dotcom boom. Just like with AI, the introduction of the internet promised amazing things. And yet, many of the most feted internet stocks suffered terribly when things went south.
Which stocks thrived? In general, companies that were highly cash-generative, with strong economic moats and trading at modest valuations. Sound familiar? It should. Buy good companies at reasonable prices – advice that has stood the test of time.
Even buying in 1999, companies such as pharma firm AstraZeneca and alcoholic drinks producer Diageo went up five to six times in value. British American Tobacco went up 10 times – without even taking into account dividends! US defence firm Lockheed Martin jumped 15 times.
To be clear, these increases took 10-20 years, or so. But it shows that many excellent stocks to buy weren’t closely related to the internet at all.
So what about today? What could be the big winners to buy in 2026?
Up and up
One stock I expect to weather any turbulence well is Rio Tinto (LSE: RIO). The FTSE 100 miner is a big-earning dividend stock, currently paying a dividend yield of 4.97%. The share price has been on the up and up recently too, rising 44% in the last year.
One of the reasons the shares are getting more of a look from investors is its defensive properties like strong cash flow and a sturdy balance sheet.
Its focus as a miner – its largest resources include metals such as iron ore, aluminium and copper that are important for green energy infrastructure – could be a further benefit as the green transition continues apace.
Rio Tinto won’t be immune to a severe crash in the markets. Reduced demand for its metals is one risk to consider should the economic situation worsen on the back of AI or anything else.
But consistent earnings and a cheap valuation could make this safer than other stocks. The current price-to-earnings ratio is around 12, one of the cheapest options on the FTSE 100. And it looks like a bargain compared to some of the elevated valuations going on in the world of AI. I think it’s worth considering.
Should you invest £5,000 in Rio Tinto Group right now?
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John Fieldsend owns shares in Rio Tinto, British American Tobacco, Diageo and AstraZeneca.
This story originally appeared on Motley Fool
