Markets can often get ahead of themselves, particularly with tech trends. The internet boom of the 1990s led to the creation of many companies, but most of those companies died out before they could become profitable.
Today, AI is garnering similar attention. But AI programs can be incorporated into existing companies across a number of sectors immediately. And it can be improved over time. Companies that have started to integrate AI now may see the benefits of that play out this year.
For instance, in the insurance industry, Progressive (PGR), is already using AI to improve its policy underwriting, and is ahead of the industry in doing so.
The insurance industry tends to be highly profitable over time, particularly the auto insurance industry. Progressive is coming off a strong year, with revenues up 21 percent, and earnings growth surging 803 percent.
AI can ensure that the company manages to continue growing its earnings over time.
Action to take: Long-term investors may like shares here, as the industry likely has steady growth ahead of it for some time. At current prices, Progressive pays a 0.7 percent dividend. While not huge, it has a history of raising its payout over time.
For traders, shares have been trending higher over the last year. That trend looks set to continue. The August 2024 $180 calls, last going for about $6.20, could see mid-double-digit returns on a further trend higher.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any companies mentioned in this article.