AI looks like it’s here to stay, but investors don’t know what to make of it. That’s why share prices have been falling – and I’m looking to take advantage.

Disruption

Conflict in the Middle East has caused some investors to take their eye off the AI threat to software. But it hasn’t gone away. There are some main threats.

The first is that businesses will cancel their software subscriptions and move to cheaper AI-powered alternatives. Even if this doesn’t happen, there’s a risk increased competition will make it harder to raise prices. And this makes high valuations hard to justify.

Displacing existing businesses won’t be straightforward. But I think some companies will prove harder to disrupt than others.

The stock market has been treating software companies as largely the same. And that’s where I think opportunities might be starting to emerge.

Resilience

There are a few things investors can do to try and find opportunities right now. One is to look for unusually high barriers to entry. A good example is software that serves regulated industries. In this case, competing involves more than having a better or cheaper product.

Another is by being vertically integrated into hardware. That makes changing provider a more complicated process than just switching software.

Another strategy is to diversify. Uncertainty brings risk and that means investors might be wise to look to limit their exposure to any given name.

Based on this, one name in particular stands out to me and I’ve started buying it for my Stocks and Shares ISA in the last month.

Software opportunity

The stock is Roper Technologies (NASDAQ:ROP). It’s a group of around 30 software businesses that provides diversification across various industries. 

Some operate in regulated industries where barriers to entry are high. As an example, Deltek provides approved software for government contractors. Others are protected by hardware. Neptune provides software for water meters, but it also manufactures these, making it more difficult to disrupt.

In general, Roper’s subsidiaries are focused and specific, rather than broad and generic. And I think that makes them more resilient. 

Despite this, the stock’s been falling along with the wider industry. As a result, it’s trading at its lowest free cash flow multiple in the last decade. 

Time to buy?

Roper’s forecasting $21.30 in earnings per share this year and the stock is trading at $351. That’s a price-to-earnings (P/E) ratio of 16.5.

The thing is, the stock’s clearly risky. The danger is that the rise of AI means things will look fine until they suddenly don’t. There’s not much management can say to reassure the market in this situation. So investors who are thinking of buying need to be brave.

Roper’s valuation is at a 10-year low. And that reflects sentiment towards the company hasn’t been weaker in the last decade.

I think though, this is a business with unique strengths in an industry that’s firmly out of favour. That’s why I’m looking to keep buying.

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Shares in a number of outstanding businesses are unusually cheap right now. And I think that’s a sign there are some unusually good opportunities for investors to take note of here.

Valuation multiples

The stock market usually has a good sense of which companies are likely to grow in future – especially in the most plausible cases. And share prices often reflect high expectations.

There’s nothing intrinsically wrong with buying a stock at a price-to-earnings (P/E) ratio of 40, or even higher. But investors need to be aware of what they’re doing. 

At that multiple, a company is going to have to grow a lot in order to return enough cash to investors to justify its current valuation. And that’s likely to take some time. 

Buying growth stocks at high multiples and waiting has worked out very well for investors in a number of cases. But it’s even better to buy them when they’re trading at lower valuations.

RELX

A good example from the FTSE 100 right now is RELX (LSE:REL). Based on earnings expectations for 2026, the stock trades at a P/E ratio of just over 16. 

Based on trailing earnings, the stock hasn’t traded at that multiple in the last decade. So anyone thinking of buying the stock right now might only have to wait until it looks incredibly cheap.

There are, of course, risks. The big concern right now is that artificial intelligence (AI) might render its searchable legal data obsolete – or at least inhibit its ability to charge subscription fees for it.

That’s a real risk, but a lot of RELX’s data is proprietary and can’t be found elsewhere. And a solid recent update means the stock might be worth considering at today’s unusually low multiples.

Roper Technologies

RELX shares look cheap, but the stock at the top of my buy list right now is Roper Technologies (NASDAQ:ROP). It’s a collection of software businesses that focus on specific industries.

As with RELX, the big concern with Roper is that AI is going to reduce the value of its software products. That’s impossible to ignore, especially in Aderant – its legal software subsidiary.

The company, however, thinks AI could in fact give it a boost. By launching its own AI products, it’s hoping to deter companies from incurring the high costs associated with switching. 

This could be a good strategy and Roper operates across several different industries, which I see as a benefit. And at a forward P/E ratio of 13.6, it’s on offer at a historically low valuation multiple.

Minimising risks

When it comes to the stock market, there are never any certainties. But investors should still look to do as much as they can to limit their overall risk.

A big part of this involves thinking about what price they’re paying for shares. Higher multiples mean that future growth simply has to come through for an investment to work out.

With RELX and Roper, though, multiples have collapsed recently. And while I prefer the latter, I think this could be a really interesting time to take a serious look at either.

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With my contribution limit reached until April, I’ve had to sell in order to buy. And while I’m not thrilled about that, I think it’s the right decision. 

Sell: CNH Industrial

I don’t really feel good about selling my stake in CNH Industrial (NYSE:CNH). I think the farm and construction equipment business is still in a cyclical downturn and has a lot of potential. 

I’m definitely not ruling out the possibility of coming back to the stock in the future. But with crop prices still near their five-year lows, I’m not seeing obvious signs of a recovery yet.

I think it’s easy to underestimate the company’s strengths. It looks like it has a lot of debt on its balance sheet – and it does – but this is less of a problem than investors might think. 

Virtually all of this is tied to future receivables – payments CNH expects to receive in exchange for products it has already provided. And if it doesn’t, it can take the equipment back.

That means its financial position is much stronger than it looks. But there’s still a risk that its assets might not be worth the full value of the loan they’re secured against if it has to repossess them.

I still have a positive view of the stock – and I’m retaining a small stake outside my ISA. But I’m in a position where I have to sell to buy and CNH is the name at the top of my list right now.

Buy: Roper Technologies

The stock I’m bringing in is Roper Technologies (NASDAQ:ROP). In recent years, the company’s been extremely successful in acquiring specialised software businesses.

Despite this, the stock’s crashed to a five-year low, falling 39% in the last 12 months. One reason for this is the rise of artificial intelligence (AI) – which remains a risk – but it’s not the only factor.

In recent years, Roper has been paying higher valuations as opportunities have been harder to come by. And investors are concerned this is a sign the company has lost its investing discipline.

I disagree. At the start of Q4 2025, Roper made a strategic decision to shift away from buying other businesses and towards a mixed approach involving acquisitions and share buybacks.

I see this as a clear sign that management is focused on creating shareholder value, rather than growth at all costs. And the firm has $6bn available to deploy in 2026. 

At today’s prices, that’s enough to bring the share count down by 16%. So with the stock trading at a price-to-earnings (P/E) ratio of 16 (based on the firm’s expected earnings) I’m not willing to miss out.

Opportunity knocks

CNH is still well below the price I expected to be thinking of selling the stock at. But it’s up over 25% from where I bought it three months ago and I think I have a better opportunity. 

In that time, Roper Technologies has seen its stock fall 22%. And since I think the firm’s long-term prospects are still very strong, I’ve made the decision to switch them in my ISA.

The post 2 moves I’ve just made in my Stocks and Shares ISA appeared first on The Motley Fool UK.

The company’s issued earnings per share guidance of at least $21.30 for 2026, but the stock’s crashed to $369. At a price-to-earnings (P/E) ratio of 17, I think it’s too cheap for me to ignore. 

Software as a service

Roper’s a collection of smaller businesses that provide the software that organisations in specific industries use to run their operations. These include government contractors, law, and laboratories.

The firm typically looks for acquisition targets that have strong positions in expanding niche industries. This means they have growth prospects while also being difficult to disrupt. But we can’t ignore that acquisitions always carry risk of not working out.

That aside, the obvious question is who’s selling businesses that have all these attractive properties? The answer is private equity firms that are usually looking to move on to provide returns for investors.

Roper’s strategy has worked very well over the last 10 years, with revenues more than doubling and free cash flows up almost 200%. But artificial intelligence (AI) means there’s a new threat.

AI disruption

The rise of AI has caused a huge shift in stock market thinking. Investors have gone from being enchanted by software companies to selling them off almost indiscriminately.

In some cases, I think this makes sense. AI that can write software code makes it much easier to build websites or create programmes that can help people learn languages, so the threat’s very real.

In other cases though, I think the market’s overreacting. Companies with products that can’t just be replaced by an AI-generated alternative should still be in a strong position to grow.

It’s up to investors to figure out which ones these are. But while the stock market seems to think Roper Technologies is in the first category, my view is that it’s actually in the second. 

Roper’s resistance

Unlike some other software companies, competing with Roper’s subsidiaries isn’t as straightforward as writing code. The industries it operates in often have high regulatory barriers to entry. 

Deltek is one of the firm’s businesses that provides software for government contractors. Creating a competing product would require years of auditing to become compliant. 

That means customers can’t easily switch to a new AI competitor. And the risks of doing so are extremely high – one hallucination could cost them their entire business. 

Deltek’s one example, but the situation’s similar with a number of Roper’s other subsidiaries. That’s why I think the stock market’s making a mistake in selling the stock.

A buying opportunity

Roper’s recent guidance fell short of what investors were expecting. But it’s now down 33% in its last 12 months and it’s unusual to find the stock at a P/E multiple of 17. 

On top of this, I can see growth potential. Software businesses trading at discounted multiples should be a good thing for a company that looks to acquire them.

As a result, the threat of AI disruption could give Roper the chance to expand its existing portfolio at bargain prices. And I’m looking to add the stock to mine.

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