The anti-AI portfolio: fountain pens, Warhammer and film cameras

For investors concerned about the impending apocalypse or, more prosaically, whether the AI bubble might burst, a break from the whole topic might sound rather appealing. Consumers seem to feel the same way: journaling, sudoku, puzzle books and other non-digital pursuits are staging a comeback.

It isn’t hard to join up the dots. Michaels, the US craft retailer owned by private equity giant Apollo, said in March that searches on its website for analogue hobbies including knitting, journaling and painting had more than doubled in the prior six months. Organic sales of Moleskine journals rose over 6 per cent in the first half of the year after years of decline, says its Belgian owner D’Ieteren. And London’s high streets have been sprouting fancy stationery shops.

Physical versions of things that are available online are back in fashion, too. Warner Music’s revenue from vinyl, CDs and DVDs grew 15 per cent in its latest quarter after flatlining for years. Sales of Fujifilm’s Instax instant film cameras rose almost a third last quarter. Sudoku and number puzzles were up over a tenth last year, according to NielsenIQ.

For many large listed companies, their analogue businesses are too small to make much of an impact on valuation. But there are a few, more focused ones, that do benefit from this trend. Shares in The Works, a tiny UK high street retailer of books, crafts and hobbies, have almost tripled in value this year. Other winners include Newell Brands, the consumer company which owns Sharpie and Paper Mate pens. Its shares are up 60 per cent this year as it has returned to growth, driven in large part by its writing division. Games Workshop makes 95 per cent of its revenue from Warhammer miniatures and trades at a bellicose 28 times forward earnings, according to S&P Capital IQ.

Betting on analogue pursuits is, in some ways, the ultimate contrarian trade. AI giants are competing for increasing swaths of our headspace, with the technology becoming ever more capable, and the devices through which we access it ever more advanced. Presented with Apple’s new foldable phone, OpenAI’s upcoming home companion and much else besides, consumers may find unhooking from the digital world more and more challenging. But investors may be willing to bet that when they do, they will do so with a vengeance.

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