Wilson AM's Tobias Yao crushed AI backing founder-led businesses (74% to 39%)

Last week, I shared the results of the 'income' side of the thought experiment that was launched a year ago, aiming to answer the question, "Fundie vs AI: Who is the better stock picker?"

The results can be viewed in the following wire; 

Equities

Fundie vs AI: One year on, who is the winner?

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Today, we look at the other side of the experiment, which focused on picking growth stocks. Google's Bard (since rebranded to Gemini) was pitted against a human fund manager; this time, it was Wilson Asset Management's Tobias Yao. 

The parameters for the experiment can be found in the following wire. 

Equities

Fundie vs AI: The best ASX growth stocks for the next 12 months

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The Results

Once again, I won't keep you in suspense. Yao crushed the AI, with his portfolio delivering 73.82% total return against 39.03% for the AI portfolio. You can see the results in the tables below.

Yao's portfolio

Bard's Portfolio

The aftermath

We asked Bard, the AI used to pick stocks a year ago, whether it would make the same choices based on the current market environment. Here is the prompt we fed into it and the results it generated.

Prompt:

• NextDC (ASX: NXT): Booming data centre demand driven by cloud and AI.
• Webjet (ASX: WEB): Travel recovery continues, online bookings expected to surge.
• Life 360 (ASX: 360): Location tech leader with large addressable market, potential partnerships.
• Flight Centre (ASX: FLT): Travel revival gaining momentum, benefiting from efficient business model.
• Lovisa Holdings (ASX: LOV): Global expansion plans for affordable fashion jewelry, strong brand appeal.

Given the changes in the market, earnings, US election, economic forecast changes, the commencement of rate cuts and outlook over the past year, would you still hold these same stocks? Let me know if you've chosen to remove any, and which ASX stock replaces it.

Reply:

Important Note:

This is just my [Bard's] opinion based on the information available. It's crucial to do your own research and consider your individual investment goals and risk tolerance before making any investment decisions. The market is constantly changing, and past performance is not indicative of future results.

Comment from Yao

"To outperform AI, we set out to identify a group of founder-led stocks that we knew were led by founders with the obsession to grow and deliver results. 

These businesses are disrupters in their industries, delivering strong growth and demonstrating exceptional execution over the past 12 months. 

Tuas Limited, Temple and Webster, Life 360 and Siteminder have performed extremely well, both operationally and in terms of their share price performance. 

We continue to believe these are high-quality founder-led companies that can continue to grow over the long term. 

While Megaport has underperformed due to a longer-than-expected strategic rollout, the CEO is excellent and we are backing the team to turn around their performance over the long term under his stewardship".

The final word

These thought experiments were intended to be fun and offer readers some stock picks, and they're by no means exhaustive in testing AI against humans. However, I believe a few key takeaways are important for all investors.

• First and foremost, humans are still awesome - across both growth and income, humans won handsomely.
• AI is pretty good. Whilst humans won the contest, even within the last year, the progress of AI has leapt forward. Would humans win again if we ran the experiment now? What about in 5 years? What about 10?
• The AI portfolios were no slouch - in both the income and growth streams, the AI portfolios still performed well, with respectable returns and fairly well-reasoned explanations for taking the positions it did. 

All of this leads to the inevitable question - how are you using AI in your investment decision-making? Whilst the current incarnation of 'AI' is relatively new, fund managers have been using data and powerful models to help make investment decisions for decades - just look at Jim Simon's Renaissance Technologies, a quantitative hedge fund based in New York. 

Simons, now deceased, was known as a quantitative investor, using mathematical models and algorithms to make investment gains from market inefficiencies. His net worth at the time of death - US$31.4 billion, whilst from 1988-2019, Renaissance's flagship Medallion generated average annual returns of 66%, racking up trading gains of more than US$100 billion. 

Over to you

We'd love to hear if you're using AI to help you make investment decisions. 

Whether synthesising large volumes of data and information, enquiring about asset allocation, or straight-up asking for stock picks, please share your thoughts in the comments section below. 

Oh, and we'd also be keen to hear if you think AI is a big waste of time with no practical use in investing.