Rolls-Royce (LSE: RR.) shares have been an incredible investment recently. Anyone who bought them three years ago has made over 10 times their money!
Could ChatGPT help us find the next multibagger? I put it to the test by asking it for five shares that could be the ‘next Rolls-Royce’…
Rolls-Royce’s huge gains
Before I list ChatGPT’s stock picks, it’s worth looking at how Rolls-Royce managed to generate such huge returns for investors in the space of three years. Ultimately, several factors led to the gains.
First, the stock was well and truly out of favour three years ago and the share price was at rock-bottom levels (below £1). This can’t be ignored – it started from a very low base.
Second, the company’s performance was shocking back in 2022 (it was losing money hand over fist), partly due to Covid. Since then, CEO Tufan Erginbilgiç – who came in at the start of 2023 – has managed to increase profitability levels significantly, helped by a rebound in the civil aviation market.
Third, the company has become more diversified, moving into new areas such as small modular reactors (SMRs). This has excited investors and lifted the valuation to high levels.
ChatGPT’s picks
Given this background, I was a little surprised by ChatGPT’s picks. They were:
- Babcock
- RTX
- Hexcel
- Boeing
- Salesforce (NYSE: CRM)
Defence stocks Babcock and RTX have had huge runs recently and are currently trading near all-time highs. So, I highly doubt they’re going to be the next Rolls-Royce!
Turning to Hexcel, which supplies advanced composite materials to aircraft manufacturers, I can’t see it being a major multibagger in the next few years. It recently lowered its 2025 profit forecast due to tariff uncertainty.
Aerospace giant Boeing is more interesting – it’s out of favour right now and trading well below its highs. It’s also facing some operational issues.
I’d be very surprised if the stock was able to generate explosive gains over the next few years, though. With this company, there always seems to be problems with its planes (it just took a $4.9bn hit due to delays with its 777X jets).
Could this stock deliver huge gains?
That leaves us with software company Salesforce. Out of the five, I probably see the most similarities with Rolls-Royce here.
For starters, it’s hated right now, just like Rolls-Royce was three years ago. It hasn’t tanked in the same way that the Footsie stock did but it is about 30% off its highs.
Second, its performance hasn’t been great recently. Earlier in the year, for example, the company posted its lowest revenue growth ever.
Third, the company is making major moves to boost profitability. For instance, it recently announced the layoff of 4,000 employees.
Finally, the company is expanding into new areas. Specifically, it’s expanding into artificial intelligence via its agentic AI solution, Agentforce, which can boost efficiency in a wide range of different industries.
Now, if I’m honest, I don’t expect Salesforce to generate the kind of returns that Rolls-Royce did over the next three years. But I do believe there’s potential for attractive returns, so the stock could be worth considering.
An economic slowdown is a risk. This software company is economically sensitive.
With it trading on a forward-looking price-to-earnings (P/E) ratio of 21, however, I like the risk/reward proposition.
