Webinar Replay: Top Quant Stock In Each Sector

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Daniel Snyder: Hello, everyone. Welcome to this new engaging Seeking Alpha webinar because we have a lot to dive into today. Obviously, you’re here. You saw what this is about. We’re going through the top Quant stock across 11 market sectors. And I’m joined by the one, the only Steven Cress, Head of Quantitative Strategies, here at Seeking Alpha today. Steve, how are you?

Steven Cress: I’m doing very well, Daniel. Thank you so much for having me back on.

DS: Of course. Everybody loves you. I see all the comments all the time. If you go watch the replay, scroll down to the comment section in the article, people are just praising the research that you bring here and enlighten all of us too. So I want to go ahead and dive in with our little disclaimer. Let’s get it out of the way, do a little housekeeping here, so that we can zap right in because there is a lot of information here.

SC: My favorite part.

DS: We are not advising you personally concerning the nature, potential, value, or suitability of any particular security. You alone are solely responsible for determining whether any investment, security or strategy, or any product or service is appropriate or suitable for you based on your investment objectives and personal and financial situations. Past performance is no guarantee of future results, and Seeking Alpha is not a licensed securities dealer, broker, or US investment adviser or investment bank. We just bring great ideas of stocks to dive deeper into, which we’re doing today. So, Steve, let’s get into these Top 11.

SC: Alright. Let’s do it. And, credit to you, Daniel. This is your brainchild, top stocks by sector, and it’s a really important theme.

So, as we get into the theme, I just want to do a little background on Quant itself. What is quantitative analysis? How do we go about it? We look at Quant sort of in three different, tiles here. One, there’s the basic to Quant, which is investment research. And, you could think of an individual investment research analyst and the work that they do. They’re looking at companies, balance sheets, cash flow statements, income statements, and they’re looking at the metrics for those companies compared to the rest of the sectors.

So what makes it Quant? We take exactly what an investment analyst does, but we add the power of computer processing. And once we add the power of computer processing, we can then leverage what basic investment fundamentals are, what basic research is, and do it not only for one stock or a handful of stock, but literally for thousands and thousands of stocks on a daily basis. So what we do with Quant is sort of beyond what any one individual or human being is even capable of doing because we have macros and algos and models that are calculating millions and millions of bits of data, in almost nanoseconds. So within a couple hours, we could literally provide fresh investment research on every stock in our universe.

However, that’s not all there is to Quant. You have to have a good strategy and a lot of investors will have a growth strategy. Some will have a value strategy. Some have momentum. What we do on our side is we look at it from sort of a GARP perspective, which is called growth at a reasonable price. But we’re adding on, analyst EPS revisions, and we’re adding momentum onto that too. So it’s sort of GARP plus 2. And it’s a strategy that has worked for a really, really long time. I will show you some of those performance stats. So that’s what we view as quantitative analysis.

How does our system work? As I mentioned, there are core investment characteristics that we look at, which is value, growth, profitability, EPS revisions and momentum. So, when we score stocks, we’re looking to identify stocks that are collectively strong on all of those attributes. So it’s sort of a diversified approach. We’re not married to any one single style. We’re not married to growth. We’re not married to value. We’re looking for stocks that are collectively strong on those traits. And what we do is, when we look at those traits for a company, we’re comparing it to the all the other companies in the same sector, and we’re scoring it. And the companies that have the highest scores are the ones that come up with the strong buys. The ones with the lowest scores are the ones that have the strong sells. And we back-tested this over many, many years and the strategy works. And we’ve been using this for a number of years outside of the back-test and the strategy continues to work really well. Hence, if you’re familiar with a lot of the articles that I write on Top Stocks for 2023 or 2024 or Top Small Cap, you know the performance is good. And we also have back-tests that we often refer to as well.

Sometimes a picture is worth a thousand words. If you look on the lower right hand side, you’ll see these factor grades. And if you’re a client of Seeking Alpha Premium, you’ll recognize that we have that on every stock page. So, those are the grades for the investment characteristics. And what those grades do is they provide an instant characterization of how that company looks versus the sector. So, if you’re looking at that valuation grade and you see a D, you’ll know that it’s kind of overvalued to the rest of the sector. If the growth is a B and the profitability is an A+, you’ll know the growth and the profitability are far stronger than the sector. So the purpose of those grades are to give that instant characterization of where the stock stands.

Daniel, you got any questions?

DS: Not really. I just think — I want to reiterate, like, this whole idea here today is taking the Quant system and creating these ideas of stocks because we don’t know what your investment type is. We don’t know if you’re looking to fill something in a portfolio of yours. Maybe you love energy. Maybe you love industrials. That’s why we want to dive into all of this today.

SC: Alrighty. Thanks. So — oh, I mentioned the back-test, and here it is. I actually have it included in the presentation. You could see it goes back to 2010. So were you to invest $10,000 back in 2010, it would be worth $251,000 now. Likewise, if we were to take that $10,000 and put it in the S&P, it would be worth $51,000. Either way, those are pretty good returns on $10,000 but obviously our Quant Strong Buys really excel. So that shows — and the purpose of this is not like we’re offering an investable product, it’s not an ETF or it’s not a mutual fund. The purpose of showing this is to let you know that the strategy works well. So, when we identify stocks that are strong on these investment characteristics, you could know that it’s been back-tested. And many of our simulated trades since 2020 reflect that performance as well. In fact, the simulated trades you can see which start in 2020 is when we actually started this, the performance is even better than the back-test.

So you don’t have to take it from me. I’m really pleased to share with you that the University of Kentucky performed an independent study. And when they came out with this, I wasn’t even aware of the study that basically assessed the Seeking Alpha Quant system as well as the Seeking Alpha Quant system where it was used by contributors. And what this study showed is that the Quant system itself beat many factor models that were by top academics and that Seeking Alpha contributors that use the Quant grades had better performance. And we included a link there for the study. It’s a rather large study, but, I wanted to highlight it’s independent and Seeking Alpha had no idea that this was going on.

So where does this bring us to? Daniel wanted to talk about sector diversification. I thought it was a great idea because sector diversification minimizes your risk and it maximizes your returns. And part of the issue that a lot of people have with ETFs like the — that are based on the S&P 500 or the NASDAQ is they are market cap weighted. So in the case of the, like, S&P, you’ll have your Top 6 stocks in the S&P out of 500 will basically be, like, 30% of the weight of the entire index. In the case of the NASDAQ, it’s even higher. And in the case of, you looked at something like the S&P tech sector, 40% comes from just two stocks. So that’s why it’s really important as an investor to look beyond the ETFs that are available, the common ETFs, and look for stocks to give you additional diversification.

So, why do you want to diversify portfolios? It helps you to mitigate industry risk and overexposure to any single sector. Sector performance often varies across different phases in different business cycles and we’ll go into that in another slide to show that certain sectors perform better during certain cycles and other sectors perform worse during those cycles. Over the past year, you’ll see that the communication tech sectors have been the best performing sectors. That would be over the last 52 weeks. Likewise, the biggest underperformers were real estate and consumer staples. Year-to-date utilities, energy, and communication have led the way. Consumer discretionary, real estate have been at the bottom of the pack. And it’s really interesting because when you look at the stocks that we recommend, we have stocks that are consumer discretionary, consumer staple, that are tech, that have all performed well. So, again, it demonstrates our strategy. If you’re looking for stocks that are collectively strong and those core investment characteristics, that’s where you find the winners.

So the importance of sector diversification, first and foremost is to reduce risk. You’re spreading your risk across different investment sectors and companies, and that minimizes the impact of poor performance by any single security. It offers stability, it maximizes your opportunities and your rewards. So you increase exposure to various growth opportunities and market segments. So again, it’s about minimizing risk and maximizing your return potential and diversification helps you with that. It helps protect against market volatility. So, if there is market volatility, sometimes the tech sector could get hit really hard. So, if your assets are spread throughout different sectors, it helps to smooth that out. Likewise, it will enhance your long term returns. And long term growth is often supported and sustained by diverse economic and market conditions, which you get through sector diversification.

So, this is how sectors look by the S&P 500. You could see, information technology is a whopping 30% of the S&P 500. Financials come in second at 13% and health care at 12%. Interesting enough, energy is only 4% of the S&P 500, but has a tremendous impact on the overall economy. Again, something that I want to mention is, if you were to buy a passive ETF that reflected these indexes, typically, they’re market cap weighted. And you would see that the S&P 500 cap weighted is heavily skewed towards technology. I also wanted to point out as — and I did mention this before, that 40% of the S&P 500 tech sector resides in just two stocks, which is Apple and Microsoft. So, like, when you’re thinking, okay, I want to play tech, I’m going to go into the S&P 500 IT sector ETF, remember, 40% of your assets are going to be just in two stocks. That’s an incredible concentration risk. So these are things to keep in mind when you’re investing in ETFs that are market cap weighted.

So this is showing you different asset classes from 2009 to 2024. This isn’t necessarily by sector, but I wanted people to see what a vast difference there is in terms of looking at large cap, looking at REITs, looking at emerging markets, looking at cash. So, you could see, the top row are the best performing sectors for that year. The second row would be the second best performing. Third row, third, and so on. And you can see there’s a really incredible diversification. Over recent years, if you look at like 2021, you can see that REITs were up 41%. And then the following year, you got completely crushed in REITs. If you look at 2022, you could see they were down 25%. So there’s huge changes that occur within these sectors.

If you’re looking at the top row, you could see in 2016, small cap was the best. 2017, with a return of 37%. That’s huge. Emerging markets was the top. Then in 2018, cash was the best and then high yield bonds. So there’s just amazing returns spread over different asset classes. It doesn’t always come from large cap. I know in 2023, the Magnificent Seven, basically generated the returns for the index. The Mag Seven were up about a 111% on average in 2023, leading the S&P to be up about 26%. But you could see from all these other years, there were only two other years where a large cap really led, even though year-to-date it’s leading again. But you can see there’s just amazing diversification in sector performance over more than a decade.

DS: Hey, Steve. Real quick on that back one slide.

SC: Yeah.

DS: A question just came in. For the people that might not know, obviously, we have large cap, international, small cap, AA. What is AA?

SC: AA is a diverse portfolio. It’s an asset allocation portfolio. So that’s if you wanted to combine a lot of different market caps and investment styles into one product, that’s what that AA would reflect. That’s asset allocation. So, good question.

So I mentioned before, when you look at different business cycles, you get different performance. Now, past performance is no guarantee of future results. And I often find that to be the case when you’re looking at specific cycles too. A lot of people would have looked at the most recent cycle in 2023. That was — that period actually reflected a lot of investor concern about the potential of interest rates continuing to go up, inflation continuing to go up. But what — the stocks that actually performed well were some of the largest market cap stocks in technology, and that’s because they were the most profitable. So, it used to be when people were worried about a recession, there would be a flight to safety, investors would get defensive and they would stockpile to consumer staples and utilities. That’s changed a little bit. You now have sort of the Mag Seven that would come at the top. And obviously those drew a lot of attention during 2023. The rest of technology, a lot of those stocks did get crushed, but there was a heavy amount of concentration on the Mag Seven. So there’s a bit of a divergence that comes here. But typically when you’re in expansion phase, you can see financials and technology do well. When there’s a slowdown, people will be in consumer staples and health care. Same for a recessionary period. People will be in consumer staples and utilities. And then when you get into the recovery phase, that could be a period when interest rates start coming down. Consumer discretionary will do well and real estate will do well.

So, a lot of different returns over different investment cycles, but we tend, at Seeking Alpha Quant, not to focus on that. I often tell people if I had a superpower, it would be not to pay attention to what the talking heads are saying on CNBC and Bloomberg. And it’s just to sort of keep that discipline and keep investing in stocks that have great investment fundamentals. So, we tend not to focus too much on the cycles that we’re in. We want to focus on stocks that have great investment fundamentals.

So, this is a quick chart that just shows you over the last, 52 weeks. You can see in the far right hand column what the performance has been on the 11 gig sectors. As I mentioned before, technology and communication services, leading with whopper returns over 30%. And then when you look at the bottom, consumer staples just barely being in positive territory and real estate of about 2.9%. So that is indicative of the environment that we’ve been in for the past 52 weeks.

Now this brings us to, Daniel, the part that everybody has probably been waiting for is Seeking Alpha Quant top stocks by sector. So if you’re looking for diversification and you want to add to the 11 different sectors and give yourself that diversity throughout your portfolio, these are the stocks that we would recommend. And by the way, that’s not difficult to find either. If you’re on Seeking Alpha premium and you go to the left-hand rail and I’m actually going to show you how to do this, you’ll see an area that looks like this, find and compare.

You could go to the stock screeners and then Seeking Alpha screens. And when you’re in that, you’ll see we have top tech stocks, top health care, top financials. It’s really easy to find, but I’m actually going to bring you to the platform. So you could see this first hand. Let’s see. All right. So how did we get here?

We’re just going to the left-hand rail. We’re going to stock screener. And when you’re on the stock screener, you have the ability to create your own stock screeners and as you can see, I actually have a lot of stock screeners. But I’m not going to bore you with all the different stock screeners that I have. I’m going to take you to the ones that are prebaked by Seeking Alpha. So if you have no stock screeners, this is the first thing that would come up.

And you can see we have top rated stocks, top Quant stocks, high dividend yield stocks. And as you scroll down, you’ll actually see, by sector, top technology stocks, top health care, top financials, top communication. So it’s really easy for the user really within, you know, two clicks, stock screener, and then you go to our prebaked ones.

And if you’re interested in finding top technology stocks, you just click on it. And here is a list that you will find and these are derived by our Quant ratings. So these underlying metrics are scored and then we come up with a total Quant rating And this is ranked, in descending order by our strongest stocks and that’s — that easy to find.

So I’m going to bring you back to the presentation.

DS: I also want to point out real quick that you can actually create advanced filters. You can squeeze that down, say you don’t want to invest in small caps because you’re not comfortable there you can drag that slider up. Say you want something 1 billion and over, you can do that. You can really get in and tailor those metrics when you have those screeners. So very useful for all Premium subscribers.

SC: Absolutely. Daniel, I was just pointing we have these advanced filters or you can add it to filters that are there. You just click on that and you could do it by market cap. And you could say, you know, you want to look at specific Quant factors and say you want to look at companies that are really profitable. So I’m going to click done and then I can edit the filters so I could change that market cap.

You know, I want something that’s north of, say, you have 100 billion. And then I could look at companies that are north of 100 billion. I could look at stocks that are just a Strong Buy, 4.5. So I got my Strong Buy and two names come up. So really very, you know, I’m looking for companies that have like strong profitability. Here you can see A+ and we have Taiwan Semiconductor and Oracle coming up. If I take that market cap down a little bit, let’s say, I just change that to, 925 million just under 1 billion. You can see the list will expand to 36 stocks. So giving yourself a little bit more flexibility if you’re flexible on the market cap. So, Daniel, thank you for highlighting that.

So back to our slideshow here. So that brings us to the names that we’re recommending here. So, we’re taking a look at our top recommendations for gig sectors. We’ve identified a top stock in each sector based on the following requirements. It has to be a Strong Buy Quant rating. It’s got to have a market cap above 500 million. It has to have positive earnings growth and there have to be at least two Wall Street analysts covering the stock. Those are some of the top criteria. The stock and the list are up on average a 175% in the past year.

So these Strong Buys have done incredibly well. Eight of the stocks on the list are crushing it with a one-year price performance ranging from anywhere between being up 48% to up 591%. SA Quant ratings are not designed to determine the best sectors necessarily, but what we’re doing is we’re going into each sector and identifying the stocks with the best investment characteristics, the best fundamentals.

So you can see, the performance has absolutely crushed the S&P. The S&P is up 28%. I think of our top stocks here, per sector, there’s only been one, and that’s been a real estate one, that’s underperformed the S&P 500 and that’s up only 8%. All the other stocks have completely crushed it. So what does it look like?

DS: Berkshire is in line. But remember Berkshire is heavily weighted in Apple, Financials, Industrials and it very mimics the S&P 500 on that list.

SC: It does. And, interesting enough, if you look at it on a year-to-date performance, it’s actually outperformed the financial sector and the S&P 500. So it’s, you know, we’re not necessarily, you know, trying to pick stocks that did well a year ago. We’re looking at the investment characteristics now. But most of these have been a Strong Buy for a while. And, the performance is certainly showing you that it’s been beating the benchmarks.

So when I take a look, I uploaded these stocks to our portfolio tool. This will actually show you how they score on those core investment characteristics that I was referring to value, growth, profitability, momentum and EPS revisions. And again these academic letter grades show you how the stocks compare versus the sector. So they give you that instant characterization. So you know exactly how the company is performing on a growth basis or profitability basis or value basis compared to that sector.

So I wanted to give you a quick snapshot of what the stocks look like. For the most part we see a lot of green there which is really good. In terms of the valuation, most of them are in line with the sector. Maybe some are slightly expensive, but some are undervalued compared to the sectors. Overall, it makes a great list.

DS: And we should have a reminder here that this Quant system updates every single day before market opens.

SC: Thank you.

DS: So these grades change, whether it’s an earnings announcement or some other kind of fundamental shift or across the hundreds of thousands of points that this Quant system is running every single day. This can change at a moment’s notice, which is why it’s great to put it all in a portfolio and keep an eye on it.

SC: Daniel, really excellent point because, many times, like, if you have a professional analyst for Morgan Stanley or Merrill Lynch or Goldman Sachs writing about a stock, that report could be two weeks old, four weeks old, two months old. Personally, I don’t want to make an investment decision on an article that was written like two months ago.

That’s like reading a newspaper article two months ago and making that investment decision. I want fresh data that’s updated every day and that’s exactly what the Quant system does. So, yeah, stocks trade every day. Sometimes they make big moves. So a lot of these factor grades will change, especially on the EPS side or if analysts are moving their EPS revisions, the grades will change. But that’s exactly what you want to see. You want to know where the stock is being valued compared to the sector at that moment in time.

This is showing you the year-to-date performance on some of the stocks. Super Micro Computer has just done really, really well. It’s up 220%. People would say to me, well, if the stocks made that kind of move, I don’t want to chase it. You can’t look at it that way. Okay. The performance is a good indication that the company’s management is doing something well or that they have the right product. But more importantly, what you have to do is you have to look at the valuation growth right now. That’s what it’s important. It’s not important that the stock is up 200%. You’re not missing anything. Okay. You’re making your investment decision on the valuation framework of the stock, on the profitability of the stock. And that happens every day when we refresh these data points.

Another stock that I really like a lot is called Giga Cloud. That’s actually a consumer discretionary stock that’s up at 97%. TGB up 92%. You can see our year-to-date performance has been really strong for most of these stocks. I think every one of them actually year-to-date has beaten the S&P 500, even Berkshire, which is at the bottom there.

So I’m going to give you a couple of details on each of the stocks. So we’re looking at Google here, our report card, our academic letter grades, you could see the valuation is D. So compared to the rest of the IT sector, it’s a little bit rich, but it’s not, you know, totally out of the realm. Out of the realm is like when you get in F territory, D- territory. Those would be stocks that would probably default to Hold automatically.

But if you’re in a D territory, it’s, you know, it could be just slightly expensive versus the sector. But when you look at the other factors for growth, profitability, momentum, analyst upward revisions, it’s a great report card.

Do you own Google, Daniel?

DS: I do not, but I have recommended it to people. But, I want to point out as well, people are – may be wondering, right? The valuation grade of D is, why does it get a D? Well, it’s look at the profitability grade. Look at the momentum, right? Like people are willing to pay up a higher multiple for a stock like this, but it’s kind of hard to ever get that perfect pullback because everyone is waiting for it, right? So that’s why you’ll oftentimes see that D valuation on a company like Google.

SC: Yeah. And, Daniel, we’re really transparent with it. So if you go to Seeking Alpha’s stock page for Google and you click into valuation, you can see exactly why it’s got that D grade. We show you all the underlying metrics that make a valuation and that contribute to that. So we’re looking at P/E. We’re looking at EV to sales. We’re looking at PEG. We’re looking at price to sales. We’re looking at price to book. We’re not looking at just one metric. A lot of investors will say, well, where’s the P/E of the stock? Okay. That will give me an idea if it’s overvalued or undervalued. That’s not the way it works with us. We look at a lot of different metrics for value, then we score all of them. And that’s how we come up with the overall value grade.

And just as you said, Daniel, like it is important to take a look at these underlying metrics because you can make a case. Like, if you’re looking at it on a P/E GAAP basis, it’s actually at a C, which is pretty much in line with the sector. You know, if you look at it on a PEG, it’s really in line with the sector. So you can make a really good argument, you know, that the stock it’s at fair value compared to the sector.

If you click on the growth metric, okay, you could see compared to the rest of the communication service sector, why it’s doing so well. So revenue growth year-over-year is stronger. It’s up 11% versus the sector at 2.4%. So that’s at a 387% premium. Now you’re going to see how these grades come into being, why they sort of give you that instant characterization. This is very transparent. There’s no Black Box here. It’s not hidden. We have the absolute data points right next to the grade. So you can see for the revenue growth forward, it’s at a revenue growth of 10% versus the sector at 2.8%. That’s why it’s a B+. If you’re looking at the EBITDA growth rate, 29% versus the sector at 2.9%. That’s why it’s an A. So it becomes very intuitive. You could trust these grades because it’s a data driven system and it’s reflecting these data points where it compares to the sector median.

And you know, if you were to say, well, okay, I want to see what the number one stock is in communication services. All you have to do is just click on the sector here and we’ll show you the top ranked. And then it will show you the ones that are underneath it as well. We show all 239 stocks in the sector.

So we were, like, referring to Google. I think that gives you sort of a good idea of why we like Google. It just has really strong grades. Profitability is an A+. You can see it crushes on its gross profit margin, its EBIT margin, its net income margin, 25% versus the sector at 2.7%. Now you can kind of see why we like Google. And then you get to like some of the return stats, return on equity, return on total capital. You can see these are monster numbers that Google is putting up.

And then you want to say, okay, what are professional analysts doing? What do they think of the future for the company? So we go to the earnings card and this tells you professional analysts in the last 90 days, 50 professional analysts have moved their earnings estimate up and only one has moved it down. So this is telling you that professional analysts are really positive on the future for Google because they’re moving up their earnings estimates. They are not moving them down.

So Google is one of our top sector picks. Now I’m going to go to our next one, which is on the consumer discretionary sector, and that’s GCT. You can see a great report card as well. Valuation is actually a little bit better than Google at C+. And again, it’s versus consumer discretionary, not communication services. Growth is much stronger than the sector. Profitability is pretty darn strong. Momentum looks excellent. And analyst revisions look great. This is a smaller cap stock, but it’s a very, very fast, e-commerce company and a logistics company. They basically they ship around the world for many manufacturers, big bulky items like furniture, treadmills, just thousands and thousands of items that are big and bulky. And they warehouse the items for the manufacturers in their warehouses all across the world. So they basically collect it from the manufacturer. They’re responsible for shipping overseas and then shipping on ground as well.

A lot of times the shipping on ground will be rolled out to a FedEx or UPS, but they, through their advanced algos, basically, from start to finish, they help figure out what the costs are, and they know what kind of rent to charge the manufacturers where they’re warehousing and then they ship it out. The stock has been growing incredibly well. They have something like 1200 employees. And of the 1200 employees, 260 work on software for the company. So they have some really advanced algos in terms of logistics. Stock was up 534% in the last year and 90% since making our top ten stock list in 2024. EBIT margins were up 186% year-over-year. The EBIT forward was up 72%, and the P/E is only 13 times for this company. So it’s really super attractive.

I’ll take you to GCT here so you can take a look at it. How the picture comes up on our platform. So this is Seeking Alpha Premium. So you could see other than the Quant grades, you can also take a look at articles that are written by Seeking Alpha contributors. And there’s a number of articles you see there’s a bunch written in May, a bunch written in April. I even wrote one myself in April because I was so enamoured with this company, but also is one of our top, top ten picks back in January 1st of the year. So it’s done really well as one of our picks.

Coming back to our slide deck here. Our next stock, in the consumer staples sector is Sprouts Farmers, ticker symbol SFM. It’s the number one Quant rated food retailer, and it’s number two in the consumer staples sector. Over the last 52 weeks, the stock is up a 111%. Again, this is a consumer staples company. This is not a tech company. Year-to-date, the stock is up 60%. And you could look at the report card valuation. I’d say, in-line to maybe just a touch expensive, but growth is stronger than the consumer staples sector. Profitability is in-line, but momentum looks good and analyst revisions continue to look good.

Earnings per share growth year-over-year was up 24%. That’s almost unheard of — for a consumer staples stock. The sector was only up 8% in terms of EPS growth. And the forward EPS long term growth rate is 10%. There have been 15 upward analyst revisions in the stock in the last 90 days. So, Sprouts Farmers for consumer staples.

Our top energy stock, many of you may not be familiar with this, it’s Weatherford International, ticker symbol WFRD. This is an energy firm that operates through three different segments. They have drilling and evaluation, well construction, and production and intervention. So it’s not one of your full service companies. It’s not like a Chevron or it’s an Exxon. It’s a little bit more, focused within their three segments, but our grades look great on it.

Look at those academic letter grades, again valuation, maybe a tad expensive, but growth is an A+, profitability B-, momentum an A, EPS revisions an A-. In terms of the EPS year-over-year, it grew at a 154%. Leverage free cash flow grew at 70%, and the forward EPS grew at a 188%. Those numbers blow away Exxon. So I will take you to our sheet here. So I’m going to pull up, Weatherford, WFRD.

DS: Steve, if you — while you’re doing this real quick, I want to highlight that, there’s right there on the top of the news, right, Weatherford started with a Buy at Citi following ‘remarkable’ turnaround.

If we go into the revisions grade real quick or the — sorry the overall Quant grade, that shows that these are updated every single morning, you’ll actually see the switch from, the grade going from a B+ to A-, within the Quant rating for EPS revisions. If you just scroll down and look at the historical.

So this is what we are talking about. Right? These grades update every single morning before the market opens as new data points are coming in, which is why it’s crucial to keep an eye on them.

SC: Dan, I’m really glad you mentioned it because, I really often try to tell people this isn’t some kind of Black Box. You know, it’s a very transparent data system, and we show the data behind it. So you could look at this going back over a three year period. We will tell you every day for a three year period what the directional recommendation was and what the valuation grade was, the growth grade, profitability, momentum, EPS revisions. We’re not trying to hide everything anything here.

You could go back for quite a long time and see, you know, when the stock was a Strong Buy, when it was a Buy, and when it was a Hold. And, it’s really interesting the way this transpires. So you could see the stock back in February at a Hold it was at about $93. And then it was up to Strong Buy. The stock jumped from $93 to $98. So looking at the stock back in February is $98. And today, the stock is now $122. So it’s had a really good move when it went from a Hold to a Strong Buy.

Taking us to our next stock, Berkshire Hathaway. So everyone is familiar with this stock, and this reflects the one of our top stocks for the financials sector. And I — you might think, okay. It’s — it’s really diverse holdings. Is it really a financial stock? Well, this is a sector that it comes under. We do not do the sector industry classifications at Seeking Alpha that is dictated by S&P and MSCI. So we follow their classifications. And within the classifications, you could see the stock comes, up as you know, a Strong Buy.

And I’m just going to take you right into the platform. And, actually, I want to take you to this next page here because you could see year-to-date, that has actually outperformed the S&P 500 Financials Sector, which is up 12%. Berkshire is up 15%, and the S&P 500 is up 11.29%. So Berkshire has actually been outperforming both the sector and the S&P 500. So, you know, the system is doing what it says on the tin. It comes under that industry classification for financial. So that’s why it’s got the recommendation. It’s got the right factor grades, and I will show you that.

And a lot of — for many stocks, you could put the ticker symbol in, or sometimes you can just put the name in as well. So we’ll just put, BERK, and I don’t even have to fill out the rest of it. You’ll see it comes up as Berkshire Hathaway. We’ll click on it, and you could see the factor grades here. So value is fair, growth is stronger, profitability is better, momentum is stronger, and revisions are stronger than the rest of the sector. So if you wanted to see other financials, you could click on it and this will show you, the 684 stocks that come under the financials classification.

Now, again, if you remember early on, I did say we did have a couple of criteria that we were looking at. So it had to be of a certain market cap, and there were a few others. So you’re seeing at number five here. This does change every day. We actually wrote this up a couple days ago. A couple days ago, Wells Fargo was actually underneath Berkshire Hathaway. But remember, stocks trade every single day. And when you’re looking at things like PE, that’s price over earnings. So when that price changes, it’s going to impact that factor.

And this is a data driven system. So we’re not basing our decision on emotion or of how a stock looked five weeks ago. We’re looking at how it looks today. So actually, Wells Fargo moved up. We wrote this a couple of days ago. So Wells Fargo, you know, great stock to look at. You could look at the underlying metrics, but Berkshire Hathaway still continues to be strong, and hence its Strong Buy recommendation.

DS: I’m really glad you pointed that out, Steve. Real quick, would you jump into a momentum grade maybe for Berkshire? Because we’ve had a couple questions come in where people see a lot of the metrics with valuation, but they’re also asking about the technical, and the technical is actually included a little bit here within the momentum grade, whether you’re looking at a 200 day moving average, 50 day, that’s all included in here as well as the price performance.

SC: Right. So when – Daniel’s referring to momentum, as I mentioned numerous times that — the factor grade that you see compares it to the rest of the sector. So what we want to do is give you that instant characterization of how it looks versus the sector. The same is true on momentum. So you could look at three months, six months, nine months and one year and it will tell you how Berkshire compares in terms of its stock price momentum versus the rest of the sector.

Again, very transparent. If you look at one year, Berkshire is up 27%. The financials sector is up 24%. If you look at it on a nine-month basis, Berkshire is up 16%. The sector is up 10%. On a six month basis, up 15% versus sector up 10%. So basically at all four price points that we’re looking at for momentum, three months, 6 months, 9 months, and one year, Berkshire has outperformed the sector.

So our system is doing exactly what it says. But again, if you feel like Berkshire isn’t a true financial, you can click on financials. And you can see all the other stocks that are there. If you want something that’s more of a conventional bank, just click on Wells Fargo, and you could see as a diversified bank, Wells Fargo is ranked number two. And you could even take a deeper look at the diversified banks by clicking on the rank or the industry. And you can see that we have an ADR, with a market cap that’s small at 844 million. That’s the number one ranked. But then you can see Wells Fargo coming in at number 2.

There’s actually quite a few foreign banks, that are coming up on the Quant model right now. And I think a lot of these foreign banks are hitting their sweet spot where the central banks in those foreign countries and where growth is for their economies, many of these foreign banks are actually doing really well. So how can I tell?

Let’s just click on performance. Okay. So, these are the same stocks where you saw the Quant Strong Buys. Look at the performance year-to-date on many of these stocks. So that small cap bank up 90%, Wells Fargo up 26%, BBAR up a 113%. Lot of these banks, I’m not really familiar with them. But, again, I don’t have to be. We have a Quant model that’s looking at historical data, forward data. It’s looking at profitability metrics, growth metrics, value metrics. Again, it’s a data driven system. So we’re looking at the data, and we’re reading the story that comes from the data and that tells us what we should be buying and selling. And as you can see, almost all these stocks for these top financial institutions have outperformed the S&P 500 and the financials sector year-to-date.

DS: Because banks can make money in a high interest rate environment.

SC: They can indeed. They can indeed. Our top healthcare stock is Tenet Healthcare Corporation, ticker symbol THC. It’s the number one Quant rated healthcare facility stock, and it’s the top 10 among 1,000 stocks in the sector. Their net income for the trailing 12 months was up 12% versus the sector, which was actually down — it was down negative 5% for the sector. That blows me away that the net income margin is actually negative for the entire sector. So with this coming in at 12%, definitely much higher than the sector.

If you looked at the, leverage free cash flow margin, it’s at 11% versus 1%, and the ROE is a crazy 111% for this company. THC beat 15 for the last earnings periods. So last 15 earnings, last 15 quarters, they beat expectations. So that’s pretty amazing. They’ve had 14 analysts take up their earnings per share estimates in the last 90 days and EPS is projected to grow at 27% for 2024. Over the last year the stock is up 87%, year-to-date it’s up 70%. It has been crushing the healthcare sector.

Next stock, our top industrial stock is SkyWest. It’s actually an airline. A lot of people don’t know this, but transportation stocks actually come within the industrial sector. It’s our number one Quant rated airline stock. In the last year, it’s up a 190%. Year-to-date, the stock is up 47%. Their leverage free cash flow margin is 12%. Their earnings per share growth rate going forward, it’s a whopping 120%.

For fiscal year 2024, it’s projected to grow at 787%. The P/E for this stock is, let me take you to the page for SkyWest, SKYW.

DS: That’s incredible.

SC: Let’s go there. SKYW. I must have to see it to believe it myself. So we’re going to go to valuation. Okay. So the Forward P/E for this stock is only 11 times versus the sector at 19 times. This stock is dirt cheap. On a PEG basis, my favorite metric combining growth and value, it’s an A+ at 0.09 versus a sector at 1.71.

Let me go back to the growth. So, revenue growth looks to be fairly in-line with the sector, but it’s really on the earnings level that they’re getting this incredible efficiency and growing. So last year, they grew at a whopping 318%. The forward EPS growth rate and that forward EPS growth rate, what we do is we take, consensus estimates from analysts, so it’s not Seeking Alpha projecting what they are going to be, we’re looking at what professional analysts are forecasting, and we’re taking that consensus. The consensus forecast for this stock is for its growth to be at 76% versus the sector at 8.97%. So just crushing in terms of its growth and profitability looks really strong too, especially if you’re looking at the leverage free cash flow margin, EBITDA margin, much stronger than the sector. Cash per share, much better than the sector coming in at $4.47 versus the sector median, which is $2.12.

Let me take you back to our slideshow, our next stock.

DS: I also want to just jump in and say, there’s the case for momentum here. And I’m going to drop here in the chat and put beneath the replay of the video a recent webinar that Zachary Marx did about momentum and why momentum works. Because I think a lot of people are seeing these stocks, seeing the all-time high price, and they’re just timid to get into it. And it’s just a reminder here with the valuation grades and the metrics like you’re talking about that these companies have great leadership. They’re continuing to perform, and that’s why these stock prices can continue to go higher.

SC: Yeah. And if you — you’re far better off buying stocks that are closer for — to a 52 week high or that are breaking through a 52 week high than stocks that are a 52 week low. I know a lot of people, their emotion is that they missed it. But the reality is if you’re buying a stock that’s near its 52 week low, you’re buying a stock that’s full of problems and issues. Okay? That’s why you’re much better off buying a stock that has strong momentum. You want one that’s going up. And as I said, you’re looking at the even though it’s gone up a 100%, 200%, 500%, what you need to be looking at is what is the valuation of the stock now? What is the growth on this stock now? What is the profitability? That’s what counts. Okay? It doesn’t matter that the stock is at a 52 week high.

DS: Steve, I want to blow your mind real quick. So somebody just chatted in here, said, SkyWest was actually one of your picks back on November 21, 2023, and the share price was $37.40 then.

SC: Wow. That’s — thank you for that highlight. I appreciate it. I think I even forgot that myself, but it was one of the stocks that we focused on. Thank you so much for that. I really appreciate it. So, taking us to the next sector pick, we have our top material stock is Taseko Mines, ticker symbol TGB. Not sure if everybody is familiar with commodities and how they’re trading. Copper hit a record high this week. Now up 30% over the last year. TGB is the highest performing pure play copper stock. Year-to-date, the stock is up 95%. And you know what? The valuation on it is a C+. It’s not even in D territory. So from a valuation, this actually looks like a good valuation. Obviously, growth is super strong with that A+ grade compared to the rest of the mining sector.

Profitability is a bit on the weaker side for this company, but, like, uber impressive momentum and analysts are loving it because they keep taking their numbers up on it. The EPS, the diluted growth — the forward growth EPS is a mind boggling 210%. So it looks really, really impressive. It’s driven by its huge investments in CapEx sales, which are — last year the trailing 12 months was up 34% versus the sector which it’s CapEx to sales is only 7%. So again, this is a material stock mining. They’re in the right sector at the right time. Copper hitting a record high.

So our top real estate stock, and this is one that you will see some changes within the sector, but the performance can — this is one of the ones that has not had, like, uber great performance. It is a REIT after all. They do pay a dividend, but there are some impressive stats for it. Let’s go to EPRT. EPRT coming up on the Seeking Alpha platform. You can see year-to-date the stock is up 7. 7%. I think that actually has outperformed the real estate sector.

And how will I know that? If I want to take a look at the sector performance, Daniel, all I have to do is click on market data on the left-hand rail. You can see me do this and the sectors actually come up right away. I’m going to sort by year-to-date and we could see what the performance is. So if we’re looking at REITs, you can actually see that REITs are down 3% year-to-date. So in fact, the stock has — where did we go with the stock? All right. Let’s bring it back up. It disappeared on me. So we’re just going to put the symbol in again. All right. Here we go. So year-to-date stock is up 7% and as you can see, the sector was down. So this is exactly what we’re looking to do. That’s why our grades are sector relative. We’re looking to outperform the sectors and it is doing what we want.

And then when you see the growth grades and profitability grades, momentum, EPS revision, that looks great. If you want to look at other stocks in the REIT sector, all you have to do is click on Real Estate and you will see some other stocks. And one that I actually happen to like a lot, but its market cap is only $429 million. As you might remember, I said one of the criteria is, we were looking at stocks that had a market cap over $500 million, but I do like NewLake Capital Partners. I wrote it up not too long ago. And if you like dividend yield, NewLake has a dividend yield of 7. 7%. But for that matter, if you even look at EPRT, it’s got a dividend yield of about 4%. You want that out of your real estate stocks. You want to have a good yield, but you also want to be able to have that Strong Buy because you want capital appreciation on it as well.

And so, this is going to take us to — that was our top real estate stock. And our top tech stock is Super Micro Computer. Now we’ve probably talked about this stock a lot back in January of 2023, over a year and a half ago, it was my top stock. It’s up about 590% in the last year, but I think since last November of 2022, when I initially picked the stock, it’s up over a 1000%. So this is a stock that despite it being up over a 1000% since November of 2022, the valuation grade on it is a C. The growth is in A+. Momentum is in A+. Analyst EPS revisions is an A+. The stock looks great. On a PEG valuation, it looks fantastic.

Sales for the company were up 80% year-over-year. Earnings per share were up 70%. EBITDA on a forward basis up 84%. The forward EPS we’re looking for is 81%, and the longer term forward EPS growth rate, we’re looking to be 46%. So Super Micro has just been a great performer. Nobody knew about the stock when I wrote about it in November of 2022. I actually picked it as my top stock for 2023. And I think, like, three people read the articles. It was a complete unknown at the time.

Daniel, that almost brings us to our conclusion. So what we’ve done here is, we have gone over top stocks for each sector to help people add some diversification to their portfolio. We showed you how to get to the screens to help you do it. How easy it is to find each of the stocks. But, Daniel, for a lot of people, they don’t have this kind of time to research stocks. So, about a year and a half ago, I created a product called Alpha Picks, and I launched Alpha Picks in July of 2022 to help people who do not have a lot of time. And what Alpha Picks does is, it takes my two top Quant recommendations every month and we send you an email. We actually have a separate platform for Alpha Picks that you can go to and look at the articles. I write an article on every stock.

So it’s meant for long term investors. Typically, when a stock is added to a portfolio, even if it drops to a Hold, we actually keep it on the portfolio. You can see the return has been fantastic. So just focusing on the top two stocks per month, that return is up a 132% versus the S&P for the same period up 40%. So we have some stricter criteria that we look at for Alpha Picks. We actually do not invest in the REIT sector. So invest in 10 gig sectors. We limit it to stocks that are in the US or ADRs that are primarily listed in the US. The market cap has to be above $500 million. Liquidity, it needs an average daily dollar volume that has to be in excess of $10 million.

And again, even if a stock drops to Hold, Hold does not mean sell. We will keep it in the Alpha Picks portfolio for 180 days. After 180 days, we’re like, okay, it’s time to start looking for some new stocks. But a lot of times, these stocks have very strong fundamentals even when they’re in Hold territory. And that’s why we encourage people to Hold, not Sell.

To give you a better understanding of how that performance looks. As I mentioned, it looks great going back or since its inception. But if you were to look at Alpha Picks over the last 52 weeks, it’s up 98% versus the S&P up 26%. If you were to look at it over the last three months, it’s up 31% versus the S&P up 9%. What we do is, we also — this is an actively run portfolio system, so we try to show people outside of comparing to the stock index like the S&P 500, we’ve taken two of the biggest mutual funds that are active equity mutual funds, so we could show you the performance.

So for that period, Alpha Picks, you could see the alpha generated was up 78% for Baron Partners, it was down 6%. And for Polen Growth, it was down 8.3%. So you could see how strong Alpha Picks has performed versus some of the largest mutual funds in the business.

And then I want to take you to another slide, which basically will show you the performance of some of our top picks. So we mentioned Super Micro Computer I wrote about it as one of my top stocks for 2023, but also made it into the Alpha Picks portfolio. We picked it in November 15, 2022. The stock is up 1000%. Modine Manufacturing is up 434%. M/I Homes is up 259%. Powell Industries is up 211%. So when you’re in the Alpha Picks platform, you could see exactly when it was picked, what the purchase price is, what the return is and what the return is versus the benchmark as well.

So the performance for Alpha Picks is not necessarily from one stock. In fact, I think we have 6 or 7 stocks that are up over a 100%. And I think currently there’s about 34 or 35 stocks in the portfolio and about 15 of them are up in excess of 50%. So Alpha Picks being a great product.

Daniel, I’m going to stop sharing.

DS: Now hold on, Steve. Don’t stop sharing, because if I’m counting correctly, I think we missed a sector. When you do a rewind, and I’m talking about the sector that’s up 15% in the last month, and that’s utilities.

SC: Utilities. All right. Let’s take us to utilities. I think you’re absolutely right.

DS: We got to give them 11 stocks. We got to give them 11.

SC: Let’s share. All right. Let’s see what we missed over here. NRG. You’re right. Last but not least, our number one Quant rated electric utilities stock, often a very boring sector for most people, this stock has been anything but boring. In the last year, it’s up a 150%. Year-to-date the stock is up 63%. So, this has been one of our top rated utility companies. The return on equity for this stock is up 62%. Goldman Sachs would kill to have an ROE that’s up 62%. The forward-looking growth rate is at 10%. That’s very strong for utility. The EBIT growth rate going forward is 29%. So some really strong metrics there for the utility. My apologies for leaving that one out, but that should give us the 11 gig sectors.

DS: You saved the day, Steve. Appreciate that. Now I think before we jump off here, I know we’re getting to the top of the hour. We need to do a quick touch on Sell. How does the Sell work? Right? So we talked a lot about Strong Buy ratings, and we had some questions come in today about, well, one, do you guys provide price targets, which maybe you might be able to answer. And then two, is there a Sell rating? Is there a Strong Sell rating? How does that work with the Quant system as well?

SC: Absolutely. So we break our directional recommendations into five groups. You have Strong Buys, Buy, Hold, Sell, and Strong Sell. So we take our universe of 4500 stocks and at any given day, you’ll have just as many Strong Buys as you have Strong Sells and roughly the same amount of Buys as you have Sells. The biggest component of stocks for — comes within the Hold recommendations. But I think what’s really important about that, Daniel, if you were to go to Wall Street and you were to look at Merrill Lynch or Morgan Stanley or Goldman Sachs, probably only 3% to 5% of their stocks would have Sell recommendations. We have just as many Sells as we do Buys.

So it shows you we really look at it from a data driven process, and it’s a scoring system. And our Sells, they work. So I want to share my screen with you and, let me make sure that I’m doing that. So we’re going to go to this page over here, and I want to tell — go to the screener. So we’re going to go to stock screens and we’re just going to click on, let’s see what happens when we do…

DS: Give us a good one, Steve. Give us a good one.

SC: All right. We’re going to go to, let’s say, all stocks. All right. So we’re going to make it easy here. There are no active filters here. This is going to show you a whopping 23,000 stocks. And if you want to see where some of the Quant Sells are, all you have to do is click right there on Quant ratings and it will show you where the Strong Sells are. Now, I showed you how strong that performance is by looking at our Strong Buys. I’m going to show you the same thing for our Sells.

So, let me just back it up there for a second. We got to make sure that we have — all right. So, basically what I want to show you is that, we track our performance for our Sells and Strong Sells the same way we do for the Strong Buys. So I’m going to try to bring that up. So you could see when we have a Strong Sell, what the factor grades look like. And in this case you could see outside of value. Perfect example. This is a stock that’s fairly cheap, not super cheap, okay, but growth, profitability, momentum straight Fs for this student. Okay. That is why that total Quant is Sell.

And if you want to see why we give a warning banner and when you click on the warning banner, it’s going to tell you why the stock is performing so poorly. And we’ll give you a couple of the key metrics. And you could see CapEx to growth, which is a very predictive factor. If it comes an F with negative CapEx to growth, that is not a good sign. When you look at price momentum versus the sector, you could see this is awful, like almost down a 100% for its one year performance versus the sector, which is almost flat.

But I want to take you over here. This would show you going back to 2010 if you looked at our Sells and Strong Sells, they actually have underperformed the S&P. The return under the S&P has been negative 472%, while the S&P has been up 512%. So that’s exactly what you want to see. If you have a Sell or Strong Sell, you want it underperforming the benchmark and that’s exactly what our Sells have done.

So, yes, indeed, we do have Sells. And in terms of monitoring the performance, it has significantly underperformed the S&P 500.

DS: Thanks for showing us that. And I just want to add as well that, if you have stocks and you’re Seeking Alpha Premium member, you can create a portfolio, throw those in there, and you can actually get an email every single morning about what ratings are switching within what stocks so you’re always on top of whatever you’re — watch listing or holding within your portfolio. So I appreciate that.

And, also, today, what you saw was Seeking Alpha premium on full display. I know we talked about Alpha Picks. Alpha Picks, just as a reminder, is that product for somebody that just wants to kind of hand off, don’t want to do all the leg work and everything else. Steve has put together a great product for that, and the returns have definitely showed that it is something to consider. So go ahead and check out that link. I put it in the chat, as well I’ll put it below the video if you’re watching the replay.

And thank you so much for joining us today. Hopefully, one of these 11 stocks piqued your interest. This was something that I was like, we have to do this. So, hopefully, it’s valuable information for all of you. And, Steve, we’re going to jump off here. But before we do, anything you want to say?

SC: Yeah. Daniel, I’ll just say we wrote an article on this today. So if you’re Seeking Alpha Premium client, I will just show you really quickly where that article is. And we have a comment section. So this is the article itself. You could see there’s only 10 comments. If you have any questions, feel free to go to the comment section and put a comment in, ask a question, and we’ll try to get back to you within a couple of days on it.

DS: That’s right. All right, everyone. Thank you so much for hanging out with us this hour. We’ll see you in the next webinar. In the meantime, have a great rest of the week.

SC: Thank you so much.