Rumors of the AI trade’s death have been greatly exaggerated…
Over the past few days, we have received repeated confirmation that AI is very much alive and well. We’ll talk about what this means… and how my system is suggesting we should trade the news. And most importantly, we’ll be covering the newly “Bullish” stocks of the week. I’m finding opportunities in everything from tools to Taco Bell.
Of course, Palantir (PLTR) was the biggest winner this week. The leader in AI analytics and tools saw its shares pop by 30% on Wednesday after raising its revenue and earnings projections for the year. We own Palantir in my Green Zone Fortunes investment newsletter… and are sitting on profits of over 600%.
Hyperscalers Microsoft (MSFT) and Amazon (AMZN) also reported monster quarters and demonstrated that the gargantuan sums of money they’re dumping into AI infrastructure are leading to growth. Microsoft’s Azure cloud revenues jumped by 43%, propelling the company’s market cap higher by a record $450 billion in one day.
It wasn’t all that long ago that $450 billion would have been the total market cap of the world’s largest company. Today, in the AI era, that’s a single day’s move.
Amazon, Microsoft’s biggest rival in the cloud, saw its cloud revenues jump by a similar 37%, its fastest growth in 18 quarters. Its shares jumped by 10% on the news.
But what does my system say?
My Green Zone Power Ratings system has identified risk… and opportunity.
For example, Tesla and SpaceX both rate exceptionally poorly, both registering as “High Risk” in my system. (In fairness to SpaceX, new companies generally rate poorly due to a lack of historical data.)
Both of these companies are doing amazing things, and I am wildly bullish on Tesla’s battery storage business in particular. But my system is suggesting we should hold off on buying these shares for now.
Alphabet, on the other hand, rates as “Bullish” and rates exceptionally well on its quality and growth factors (98 and 99, respectively). Alphabet sits at the intersection of virtually every AI-related trend. Its Gemini model competes directly with ChatGPT and Claude, and its cloud and datacenter businesses go head-to-head with Microsoft and Amazon.
All the same, Alphabet isn’t exactly an undiscovered gem. It’s the third-largest company in the world by market cap with a valuation of over $4.3 trillion.
If you own an S&P 500 index fund… or really any growth-oriented mutual fund or ETF… you already have ample exposure to Alphabet and the rest of the Mag 7.
So, if you’re looking to beat the market, you’ll want to cast your net a little wider.
It’s Thursday, which means we’ll be looking at stocks that recently crossed into “Bullish” territory by earning a Green Zone Power Rating of 60 or higher.
Let’s start with the newest additions from the S&P 500 Index.
S&P 500 New Bulls
I ran my usual screen for S&P 500 companies that popped up as “Bullish” this week, and this is what I came up with:
Stanley Black & Decker (SWK), the iconic tool maker, takes the top slot this week, as its Green Zone Power Rating rose by over 43 points.
The company’s shares have been exploding higher since April, yet remain very attractively priced. They rate a “Strong Bullish” 80 on value and a “Bullish” 76 and 74 on quality and growth.
Yum! Brands (YUM), the parent company of Taco Bell, KFC and other fast food chains, also made the list. As I discussed yesterday, the U.S. consumer isn’t quite dead yet… but they’re hurting. Eating at Taco Bell might not be great for your health, but it is often cheaper than eating at home. At a time when many Americans are struggling to pay the bills, inexpensive fast food is a lifeline.
I’d also point out that the shares rate exceptionally well on their volatility and quality factors. So, if we end up having some market choppiness in the months ahead, YUM could be a profitable place to hide.
New Bulls Outside the S&P 500
Let’s cast the net a little wider and look at the newly “Bullish” stocks outside of the S&P 500. I ran a screen for the top 20 stocks with the largest score increases over the past month, and this is what popped up:
We see a lot of consumer names this week. Movie theater chain Cinemark Holdings (CNK) made the list, due in part to hype surrounding this summer’s blockbusters, Spider-Man Brand New Day and The Odyssey.
The narrative over the past decade – and particularly since the pandemic – has been that movie theaters are a dying format and that “everyone” prefers to stream content at home.
Well, I can’t comment on what “everyone” is doing. But I can tell you that Cinemark rates as “Strong Bullish” overall with particularly strong factor ratings in growth, value, volatility and momentum.
If there were ever a “world’s ugliest shoe” competition, Crocs’ (CROX) rubber clogs would certainly be in the running for the top prize. Yet somehow, after all these years, the brand is still around and still thriving. Crocs rates as “Strong Bullish” on my Green Zone power ratings system and boasts particularly strong ratings on its value, quality and momentum factors. The shares also rate respectably “neutral” on growth.
I don’t know that Crocs will ever qualify as a trendy fashion item. But the shares are attractive on my system and are trending higher.
To good profits,
Adam O’Dell
Editor, What My System Says Today
