Speculation and Substance: Navigating 2025’s AI-fueled Markets
By Constantine Lyocs
As I am writing this today, October 10, 2025, speculation in the capital markets remains rampant with artificial intelligence (AI) related stocks such as NVDIA making all-time highs. Valuations for stocks are very high, while the general economy excluding AI spending is generally flat. Real gross domestic product (GDP) growth for advanced economies as predicted by the International Monetary Fund (IMF) is on pace to be only 1.4% in 2025, which would be the lowest growth in the last 22 years, excluding the financial crisis of 2008-2009 and 2020, the first year of the COVID pandemic. Source: https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/ADVEC
Governments around the world, however, are spending borrowed money at the rather high rate of 4.3% of GDP, meaning they are spending over and above what they are generating in tax revenue by a substantial amount. This liquidity is helping support the economy and the markets, and is partly responsible for speculative fervour – the rise in stock prices, gold, and cryptocurrencies. Regardless of economic conditions, it is normally wise for investors to mostly ignore the economic indicators and focus on investing in good businesses whose shares are not overpriced. This is what we do!
My three stock picks:
Groupo Financiero Galicia SA (NASDAQ:GGAL, $33 per share) Not for the faint of heart, this stock is one of the cheapest in the world, trading at about 5x earnings. The company is a financial services conglomerate based in Argentina, a country that historically has seen capital destroyed through socialism, corruption, and theft. Since the election of President Javier Milei, however, investment conditions have started to improve, with reduced government deficit spending, reduced corruption, reduced inflation, and rent and other market controls reduced or eliminated – all conditions that restore free markets, and free markets offer the best path to prosperity.
Banks offer a levered bet to economic activity, so a bet on Argentinian banks is a bet on Argentina and a bet on Milei. A bet on free markets is a no-brainer, but the political stability of a country such as Argentina is not. Hence, the low valuation of this stock. In a relatively stable economy such as Canada’s, a bank that generates around 20% return on equity would trade at around 20x earnings, at a 400% higher valuation than this bank.
BW LPG Holdings (NYSE:BWLP, $12.50) My second stock pick is transportation firm BW LPG. This is a shipping company that primarily transports Liquified Petroleum Gas. It is an energy transportation company with massive tankers. It is a cyclical business, so it would be affected by a slowdown – not in a good way. However, the company has been very profitable. We need to own companies that can take advantage of anticipated increases in energy demand, and rising energy needs are here for the foreseeable future, especially considering AI’s insatiable appetite for power. Somebody needs to transport this energy, and BW is a very profitable and solid choice.
KB Homes (NYSE:KBH, $57.90) My third pick is homebuilder KB Homes, symbol KBH on the NYSE. KB builds single-family homes and communities across different geographical segments in the U.S. including the West Coast. With the unfortunate fires in LA, homebuilders including KB should have additional demand for their services. It is a reasonably profitable company that has generated a median return on equity of 13% over the last 10 years. KB trades at a discount of 0.95 times book. Good company, good price, good pick.
As always, if you have any questions about these investment opportunities or any other investment-related matter, give us a call or drop a line at constantine@lycosasset.com
(Constantine Lycos, Business Edge Media, 2025)