Steven Cress’ 6 Picks: 3 Dividend Income, 3 AI Growth Stocks

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Steve Cress on the power of quant (0:45). Barbell approach in times of market volatility (6:25). 3 dividend income stocks (16:00). 3 AI stocks (27:40). Recorded on November 19.

Transcript

Rena Sherbill: Steve Cress, our head of Quant at Seeking Alpha, always fantastic to talk to you on Investing Experts. Welcome back to the show.

Steve Cress: Rena, thank you so much for having me and organizing this today. It’s a pleasure to be back.

Rena Sherbill: For people that may have missed your last episode on every metric that we measure, it surpassed by far every previous episode that we’ve had.

So really want to encourage those listeners that haven’t heard it. You shared with us three stocks to buy from the PQP, the ProQuant portfolio and Alpha Picks. It was extremely salient for investors to understand how those portfolios, what the strategy is behind it, the timelines, how frequently you’re in and out of names.

If you could just catch listeners up that didn’t catch that episode and that just need a refresher in general, how you’re approaching stocks with the quant system. A very brief, I think, refresher would be instructive.

Steve Cress: Yeah, absolutely. I’ve been in the investment world for about 35 years. The bulk of my career was spent at Morgan Stanley, where I worked for 13 years running a prop trading desk in quantitative strategies. Later, I would work at Northern Trust heading up international investments. also founded a hedge fund that was focused on quantitative strategies.

And simultaneously, when I was running the hedge fund, I also started a Fintech company, which was an early version of AI and a systematic stock picking model that Seeking Alpha liked so much they bought the company. And that is what has brought me here today. And as we have integrated the quant into the Seeking Alpha platform.

So a little bit about what I would like to cover today. As we had just indicated, I’m going to give a little refresher on why quant. The last presentation, as she mentioned, we went over a couple of our top ideas from the PQP portfolio and from the AlphaPix portfolio.

But considering markets have been so volatile and whipsawing over the last month, I wanted to present a different strategy today. And I refer to this often as a barbell approach, since there’s a lot of uncertainty with the environment, the economy, the market, the Fed and interest rates, tariffs.

A good approach right now in periods of uncertainties to use, again, what I refer to as a barbell approach where we’ll focus on top income stocks, but we’ll also focus on top AI stocks that we expect to do well. So that’s combining growth with income. And we’re going to get into that in a little bit.

First, to answer Rena’s question and give a little refresher, how do we achieve our results with the quant system? Well, the quant system is really very similar to what a fundamental analyst does. If you were an analyst at Merrill Lynch or Morgan Stanley or Goldman Sachs, you would apply fundamental analysis techniques where you look at conventional metrics for value, profitability, growth.

The only issue is when you are an analyst of that sort, you’re only capable of maybe covering 15 to 20 stocks. And typically they do it in one sector. And often in their coverage of 15 to 20 stocks, because there’s limited time and writing up these companies and how they’re being impacted by the environment or earnings, they typically can only get a handful of reports out every month.

And this is where the power of quant comes in. We still apply the same fundamentals. Quant fundamentals and metrics can be different. What we use is what I refer to as a GARP approach. At Seeking Alpha, a GAARP would be growth at a reasonable price. And we also add a little extra to that. We focus on momentum. And we also focus on positive analyst revisions as well.

So it’s really a dynamic model where we’re focusing on a couple of different styles. We like the diversification because we believe that diversification minimizes risk and maximizes returns over the long term.

So then we add the power of computer processing, which really helps put the quant word into it. We look at it sometimes as quantimental where we combine quant and fundamental, but the power of that computer processing gives us the ability to cover about 4,500 stocks versus a human analyst that could maybe only cover 15 to 20 stocks.

And we, through our power of computer processing, can issue fresh and directional recommendations on a stock every single day. So literally every day we go through every company’s cash flow, income statements, balance sheets, hundreds of financial metrics. We update it every morning between 4 a.m. and 6 a.m. And based on the fresh data that comes out every single day, we issue in essence, a new directional recommendation.

Now, often that directional recommendation, it’s say the same, it could be a strong buy or hold or sell. Sometimes it changes. It’s all based on how the data comes in. And when we look at a company, and we make that decision for buying or selling, what we do is we measure the strength or weakness of that company and its metrics and its balance sheet and income statement against other companies in the same sector. So it’s really a relative analysis.

And that’s how we have the ability to really rank one through 4,500 and then within sectors, the strong from the weak. So that’s a little bit of a refresher there. And the system works.Our simulated trades, this is not really an investable product because on any given day, there’s about 350 to 400 strong buys. But a daily balance of our strong buys versus a daily balance of Wall Street strong buys and the S&P 500 (SP500).

And you can see over the last five years, the Seeking Alpha quant strong buys are up 219%, as you’ll notice on the left-hand side, versus Wall Street analysts for the same period. Their strong buys are up only 33%, and they actually ended up performing the S&P 500, which is up 64%, but the quant absolute crushing both using our methodology.

So I thought, what we would do is talk about something a little bit different. As I mentioned, considering there’s been a lot of volatility in the markets, I like a barbell approach during periods of uncertainty. The S&P 500 has really unchanged from where it was four weeks ago, but it’s had some big swings up and down in that period. So we’re really uncertain as to what could transpire over the next few weeks. Volatility could remain with the market.

Largely that volatility has come from the government shutdown, which is now over, but it was just about the longest government shutdown we ever had. It went from October 1st to November 12th. Previous to the government shutdown, the markets were optimistic because the Fed was on a trend of cutting interest rates.

And they were cutting interest rates because there was concern over labor. They felt that the time that was outweighing the sticky inflation that the economy is still experiencing. Unfortunately, that sticky inflation is still around. There are a number of elements that contribute to it. Tariffs are really starting to have a fuller effect now compared to when they were announced many months ago. So the Fed is uncertain with the data that they’re seeing.

And in fact, most interest rate traders are sort of split between feeling if there will be a rate cut or there will not be a rate cut and the size of that rate cut. Market volatility actually just over the last five days, the best performing sector has been energy, utilities and consumer staples and healthcare. Even though they’re down, they have outperformed technology, consumer discretionary and financial services down by about 4%.

So what this indicates to us is that there’s a rotation to safe haven sectors and stocks. And clearly we have seen that in stocks with many of the consumer discretionary companies, technology companies, small cap, mid cap, really selling off quite sharply over the last month. Even though the broader index has unchanged, some of the sectors that are more risk on have really come off and stocks within those sectors have come off.

So the market’s been getting very defensive. And headlines that you see are probably very typical of what we saw yesterday. Meta (META) opening up down 1.4%. AI bubble fears are in the spotlight. So for equities, valuations have been stretched. For many AI stocks, they have been extremely stretched.

And we no longer have the confidence that the Fed will continue to cut rates. So that has introduced a lot of uncertainty and volatility. Fed speak index is near the most hawkish that it has been in a month, really going from the negative domain to a positive domain, where the Fed increasing that hawkish sentiment.

On top of that, when we have the government shutdown, there was delayed key economic data that creates uncertainty because we don’t know what economic data will be coming out. Is it good? Is it bad? So in coming weeks, we will see more economic data. But there’s definitely been a lag in it.

Fed officials have definitely, as I mentioned, turned more hawkish, suggesting a third cut may be unnecessary during the month of December. In addition, outside of Fed’s Powell and his hawkish sentiment, the Kansas City and Boston Fed chiefs Jeffery Schmidt and Susan Collins both mentioned further cuts could stall the 2 % inflation target. So investors wait to release a backlog data, especially the September job reports.

On November 6th, 70% of interest rate traders expected a rate cut in December, 30% did not. Today, 53% of traders expect a rate cut and 47% do not. So it’s really evened out. Nobody’s really sure what’s going to happen. And we’ll see in the coming days what happens.

So in addition to that, looking at general sentiment for the market, I often look at an index called the CNN fear and greed index. It’s just about as good as any to give you sort of an indication where market sentiment was. And a couple of weeks ago, I’d say four to six weeks ago, we were sort of in the greed territory, then it went into neutral. Last week it was in the fear territory, and now it’s in the extreme fear territory. So a softer labor market could really anchor expectations for those rate cuts. And we’ll have to see what happens on the back of that.

We could see a pullback as we have seen with some of the broader market, the Magnificent Seven. They have come down, but not nearly as much as the broader market. We could see a retraction and we have seen a retraction in evaluations of many AI stocks and many tech stocks and consumer discretionary and small and mid cap.

Having said that, Buffett seems to have confidence. He took a new position in Alphabet (GOOG) (GOOGL) and was a huge position of $4.3 billion, which signals confidence in AI from one of the market’s most traditional and cautious investors.

So think that’s a fairly good sign. AI stocks with strong fundamentals and durable demand do remain well positioned for a long-term recovery. So some of them have come down, and mostly the ones that have to do with powering up data centers and the infrastructure which were really rocketing earlier in the year have come down considerably.

But the earnings outlook and really recent earnings for many of these companies, both top and bottom line, were very good. So it’s really a market that’s being driven by sentiment more so than fundamentals.

Rena Sherbill: Can I ask to that point, something that Brian Stewart and I have been talking about on the Wall Street Roundup podcast on Fridays has been this notion of the fact that it’s so difficult to ascertain valuation specifically with AI related names. And the fact that if you look at the quant ratings for almost every AI name, the valuation grade is a D or an F. And Brian was saying that in this time, he’s kind of taking valuation out of the picture because there are other elements that play beyond fundamentals.

What would you say to that in terms of grounding Quant’s place in this market and also the notion of valuation?

Steve Cress: Quant, I believe it’s a very flexible model. For a stock that’s rated a strong buy or buy with a valuation grade of a D, it’s basically D through A+, can allow a stock to have a strong buy when it does, move into the D- or F territory. That’s sort of a circuit breaker if you do see it, and often those stocks can be a hold or sometimes a sell, it does mean the valuation is extreme.

And our preference would be to look for stocks that have a better valuation framework. And it doesn’t have to be much better. So the company could still have substantial growth and you could still have a valuation grade of a D or D+ and buy the stock.

That has kept us out of some stocks like Nvidia (NVDA), which has done really well. At one point Tesla (TSLA) when it did really well, the valuation grades were F and the system didn’t allow us to buy it.

But I will say the system also recommended other stocks that actually outperformed those stocks. And we have a very good track record. We’ve beaten the S&P 500 every year since 2010 using our methodology.

So I would say you could be flexible with valuation, but only up to a certain point with our quant model. Once you see that D minus or F for the valuation grade, it could be a winner and we can let that winner run as a hold, but we’re not adding to the position.

Rena Sherbill: Appreciate that. Thank you.

Steve Cress: I hope that gives a little bit of an explanation. Conversely, I would say if I took the other side, this quant model we’re running in like 1999, 98, year 2000, absolutely would have avoided a lot of the stocks that blew up. And in fact, having run the model pack at that point in time, I could tell you what it did do is it actually in 2001, 2002, 2003, it started focusing heavily on industrial material stocks.

And it was actually an incredible period for our quant. The quant product that I was running at the time was actually for Morgan Stanley on the prop trading desk. So during that period, the quant model absolutely did quite well. And it avoided a lot of the blowups that occurred during the TMT era. If you were in 97 through 2000, people could have argued, you know, oh, there were many stocks that had no earnings and no revenue, but the stocks were appreciating like by a thousand percent, they were 10 baggers up until they did.

So it gives you a little bit of history, longer history on the model, the focus we do, there are AI stocks that we do believe are attractive at this level, but since there is uncertainty and volatility in the environment, I also want to make the case for couple defensive stocks which have quality yields. So as I mentioned, we have strong labor data that will reduce the likelihood of a near term rate cut.

And that will add to the uncertainty of the equity markets. In volatile environments, investors can often rotate towards dividend stocks that have a reliable earnings, steady cash flow, and attractive yields. And of course, quality high dividend yield stocks can provide stability during periods of uncertainty.

So without further ado, I want to go into three income stocks that I like. We have Merck (MRK), which is a healthcare company, pharmaceutical. It’s a tremendous company. It’s got a market cap of $230 billion. It has a quant strong buy rating. And our quant system within the healthcare sector ranks eight out of 976 stocks. And within the pharmaceutical industry, ranks three out of 177 stocks.

Mostly people know that this company operates through pharmaceutical and health animal segments. The company has a tremendous ROE. It’s a 40 % return on equity. The forward EBITDA growth is 47%. It is dirt cheap. The multiple on this company, the forward PE is 10.4 times. And the interest coverage ratio for the dividend is 21.3 times.

So actually what I’d like to do is take us into the platform where you could see Merck stock is up a little bit today. Year to date, the stock is down 4.5%. But we do have a quant strong buy on it. Over the last month, you can see the stock is up 10.63%. So when the S &P has been flat, this is actually appreciated.

And if you look to the right side, you’ll see the rating summary. That rating summary actually shows you three independent sources is Seeking Alpha contributors and the consensus there is buy. Wall Street consensus is a buy and the quant system has a strong buy. So certainly over the last month, the quant system has definitely been right on that. What makes up that quant strong buy or the factor grades underneath?

As I mentioned, we look at five core factors, which would be evaluation, growth, profitability, momentum and EPS revisions. And if we clicked on valuation, you could see that the underlying metrics look really good. And what we attempt to do by showing these academic letter grades, we want to give you an instant characterization of how the company compares to its sector. So when you look at the PE, and it has a B plus, the absolute multiple is 11 times. The sector is 17 times.

So it’s at a 36% discount to the sector, hence the B plus grade and the forward P is actually even more attractive at 10.7 times versus the sector at 18 times, hence the A minus grade. So that academic letter grade instantly tells you, okay, this stock has a better valuation framework compared to this sector.

If we were to go to growth, and we scroll down to say EPS, forward EPS growth, it has an A plus, the forward EPS growth rate for Merck is 80% versus a sector with just an 8 % growth rate, hence the A plus grade.

So you can see the earnings per share growth is absolutely tremendous for Merck at this time. So from a valuation standpoint, it looks great. From a growth standpoint, it looks great. From a profitability standpoint, it’s an A plus. If you look at the EBITDA margin, it’s 49 % versus the sector at 9.2%. If you look at the return on common equity, it’s 39.5 % versus the sector at negative 34%. So Merck looks really good there. And if I go back to the main stock page, you can see the yield on the stock is 3.36%. So that’s almost more than three times the yield on the S &P 500.

And it’s also about three times what you would get on the (VIG), which is the Vanguard Income and Growth ETF, which is commonly used as a benchmark. So Merck looking really good there.

I am going to take us to Alpine Income Property Trust (PINE). So this is a smaller REIT. The market cap is about $252 million, but it is a quant strong buy. Within the REIT segment, it ranks nine out of 172 REITs. And within its industry, which is diversified REITs, it ranks one out of 12.

The forward yield on this is 6.94%. That is a whopping yield. It is a diversified REIT. They own and operate a portfolio of 128 commercial properties across 34 states. So that certainly provides a lot of diversification. Current occupancy is currently at 99%, with 48 % of those occupants being investment grade tenants.

In terms of metrics that we look at for REITs, we took typically look at FFO or FFO and then we take multiples on that. So the Ford price over FFO multiple is 9.1 times that puts out at a 40 % discount to the sector. The growth, the Ford FFO growth is 9%, which is a 277 % premium to the sector. And the FFO margin is 48%. So really great stats there.

If you look at the far right, you can see the rating summary for both valuation and growth. has an A, A minus and A, profitability at B minus, momentum very strong. And then you can see the dividend safety grades are fairly solid in line with the sector.

Rena Sherbill: Can you take us through for a second the metrics that you’re using for the REITs specifically, like the AFFO? Can you talk to us for a second about why those matter for REITs?

Steve Cress: Alpine Income Property, you can see today it’s down about 2.66 percent and today we had a bit of a rotation actually back into technology stocks so some consumer staples and REITs sold off. So just a lot of confusion with the markets year-to-date. This stock is flat, but the really cool thing about it is you can see over the last month the stock is up 15.64 percent, you can see even with the stock being up that much in the month, the dividend yield as I mentioned is 6.88%.

Now to answer Rena’s question, metrics that we utilize for REITs are different than stocks. So we basically look at like 11 sectors in a very similar format, but REITs are sort of a horse of a different breed. So when we look at valuation metrics for REITs, we will try to make it very centric. So you’re not going to see this for stocks where we have, AFFO and FFFO that is really solely for REITs. So what we’re doing is we’re looking at the metric compared to other REITs. And you could see from a valuation standpoint, it is attractive. The multiple is 9.3 times for the stock versus the sector at 14 times, putting out a 34 % discount for price over AFFO.

If we look at price over FFO, it’s still dirt cheap on a forward basis. It’s again, 9.12 times versus the sector at 13 times, a 31% discount to the sector. And we do look at some of the other conventional metrics such as EBITDA or price of sales where it comes in. The valuation grade is made up of the underlying metrics.

But again, these are a bit different than you would see for stocks. If we look at growth, you can see we’re looking at AFFO growth and FFFO growth along with lot of dividend data as well and EBITDA data. So again, there’s a mix of metrics there. We’re taking a combination of these metrics to come up with the overall growth grade for the REIT. But again, very centric towards REITs with the metrics that are used here.

I might add too, I’m going to go back to Merck because I actually want to show you the dividend grades. So, dividend grades are something that’s really unique to Seeking Alpha. I’m not familiar with any other platform that shows it. When we look at a stock where we are looking for capital appreciation, that quant rating signifies the potential or lack of thereof for appreciation, and we use the factor grades for that.

But many investors look at dividends, and they want to know when they buy a stock, that dividend safe and is it growing?

So we take a look at that. have metrics, underlying metrics that we’ve used and backtested to indicate to us that dividend is going to be safe. So as you look at this picture, we’re going to show you the cash dividend payout ratio, the dividend payout ratio, cash flow ratios, dividend coverage ratio, interest coverage ratio.

And we have backtested these to 2010. And we know some of these metrics are more predictive than others. So these aren’t equal weighted. Some have a higher weight.

And you can see some of the ones that have a higher weight contribute to the overall A minus dividend safety grade. And just to give you a little sense of what that back test looks like, if you were to take a look at our stocks that had a dividend safety grade of A plus to B minus, 98 % of the dividend cuts would have been averted by owning a stock that had that dividend safety grade anywhere between that range.

Conversely, going back to 2010, 70% of all stocks that had an F had cut their dividend. And 93 % of stocks that cut their dividend had a dividend safety grade of C plus to F. So it’s really a very, very powerful system. If you are a dividend investor, I would highly recommend that you use the dividend safety grades. We have a portfolio tool.

And it will show you what it looks like. I can probably give you a picture of that right here. So we’re going to switch back to Merck and I’m going to show you what a portfolio looks like. We’ll take Berkshire Hathaway (BRK.A) (BRK.B) and I’m going to show you what that portfolio looks like.

There are a number of tools that we could use here. You could look at performance. You could look at profitability. And what I want to pull up here is dividends and see if we have that. Yep. Dividends. And when you click on dividends for Berkshire Hathaway, you can see which companies have a dividend. I can actually sort it by the strength and some have a dividend safety rate of a plus. Some have a C, but purpose being here that you could load up your stocks and see what the dividend grades are. So it’s really a great tool. G

Taking us to our third stock, which is OneMain Holdings (OMF), that is a financial company. It’s got a market cap of 6.7 billion. Within the financial sector, ranks 25 out of 683 stocks. Within its industry, which is consumer finance, it ranks three out of 38.

This has a whopping yield of 7.36%. This company provides personal loans and credit products to non-prime consumers. So a little bit more risk there, hence probably the higher yield. But you can see with a dividend safety grade of A minus, our quant system is not concerned regarding the safety of that dividend. And if you look at the valuation and growth grade on the far right side, you can see it has stellar metrics with A, A minus, B plus.

Momentum being a B and revisions being an A. So some great stats here. Company has a return on equity of 21%. It’s got a PEG, which is a combination of PE and growth. Its PEG ratio is 0.4, which puts it at a 62 % discount to the sector.

And in terms of the revision rate, you can see it’s an A as I look at the far right. And what does that mean? That means we’re looking at the number of analysts that have actually revised our earnings estimate up. And in the last 90 days, 15 analysts have revised our earnings estimate up for this company, and zero have revised it down. So that’s our three dividend stocks.

Now I’m to take us to our three AI stocks. One company being Micron Technology, (MU). This is a huge company with a market cap of 271 billion. And as you mentioned early on, a lot of people are seeing AI companies with valuation grades that are F or D minus or D.

I’m pleased to showcase here that the valuation for this company has actually improved. So I’m to take us to the platform and we’re going to look at Micron. And you can see this stock is up 168 % year to date. In the last six months, the stock is up 129%. But despite being up 129%, if you look at the valuation, the valuation grade now is B versus six months ago, it was a C plus.

So the valuation framework has actually improved with this company as its growth has moved. And I already had a plus for growth. So it was already way ahead of the sector in terms of growth. And now it looks even stronger than the sector. So if I clicked on growth, you will see this is like a straight A report card. Revenue growth is 34 % versus sector at 7.6%. And EPS forward growth rate, 143%. versus the sector at just 12%.

So this company looks great on valuation basis. It looks great on a growth basis. It looks fantastic on a profitability basis. And this is a company that definitely will have AI power against growth in the future. The company was down today, but some good news must have come out afterwards because post-market, it is up 2.91%.

Rena Sherbill: Is that would you say on the back of Nvidia earnings?

Steve Cress: I’m actually pulling that up for us. So let’s see. NVIDIA did report post-market, during the day was up 2.8 % and post-market, the stock is up 3.69%, 50 minutes after the hour. So a lot of time to digest the market and the aftermarket, now up 4%. So I believe investors must have been very pleased with the earnings that came out.

And it looks like NVIDIA on a non-GAAP basis reported $1.30, so beat by 4 cents on the bottom line. Top line, $57 billion, a beat of $1.91 billion. So investors pleased to see that AI is still powering Nvidia. Hence, when we were looking at MU, the stock being up 3 % in the aftermarket.

Another stock that I’m going to take us to, which is one of our AI recommendations is Commscope Holdings (COMM). This company is not nearly the size of MU. It’s got a market cap of 3.69 billion, but still looks really good. You can see this is in the information technology sector and communications equipment. And if you’ve never been on the platform before, if you scroll down, it will actually tell you what the company does. There’s a company profile and you can see that they provide infrastructure solutions for communications data centers being the keyword here because data centers are powering, they hold the servers that really enable AI to operate at such fast speeds. And they also are in entertainment networks as well. So this stocks has done extraordinarily well.

Rena Sherbill: This was actually one of your PQP/AP stocks last time.

Steve Cress: It was, and I think we recommended it before that big surge as well. So the timing was perfect there and we still have a strong buy on it.

Despite the stock being up over the last six months, 191%, the valuation is still an A. So the valuation framework still looks good on this stock compared to the sector. And the growth is actually a little bit lower than it was, but they seem to be still doing a great business. Profitability looks great.

Profitability actually increased at the company, which is fantastic. So the profitability grade now is an A compared to C plus six months ago. So despite the growth coming off a little bit, I think investors are very pleased that the company is actually making more money and is more profitable.

And when we look at analyst revisions, I’m going to click on that. And you can see in the last 90 days, four analysts have taken their earnings estimates up for the company and zero have taken it down. So that’s very positive.

At our final stock, Celestica (CLS). This company was in Alpha Picks quite a while ago, doing very well on the back of Nvidia’s release. The stock during the day was up 4 % and post market, the stock is up almost close to 5%. Again, looking at this over the last six months, the stock is up 180%, but the valuation grade is a D plus now compared to C six months ago.

So really it’s just a little bit more expensive than it was six months ago. But here again, as a perfect example, the growth now is an A minus versus the sector compared to six months ago where it was a B minus. So the growth framework actually looking stronger for the company now than it did six months ago. So definitely justifying the value that you’re paying for it. Also, probability improved to B compared to six months ago where it was a C.

This company ranks currently in the sector of IT 6 out of 537, and within its industry of electronic manufacturing services, 1 out of 18. I think that really, I’m going take us back to the presentation. I think we’ve covered the companies. Our top income stocks were Merck, OneMain Financial, and Alpine Property Trust.

You can see the yield on average is 5.93 % for those three stocks versus the S &P with an average yield of 1.1%. So the yield is far, far stronger than the S &P for those three stocks. And then on the other side, we’re going with top AI growth companies, Micron Technologies, Celestica, and CommScope, all doing very well today on the back of NVIDIA’s holdings.

I wrote an article today, so feel free to look for that article, top income and AI growth stocks worth watching. And if you find the article, I do ask that you follow me. And this way, any article I release, and I read about three to four articles a week, those articles will come your way. So please feel free to do that.

There are some products that I do mention or manage on behalf of Seeking Alpha. The quant system is great, but it does require work. You have to go to the premium platform and you have to go through the screeners. And a lot of times people want us to do the work for them.

So I created two products. One product is called Alpha Picks and Alpha Picks produces my two top quant strong buys every month. And the trading date closest to the first and the 15th. It has a separate platform where you could find the stocks, but you would also get an email as well, which goes directly to your inbox and it highlights the stocks that I am showcasing for that month.

It has a very good track record. I started Alpha Picks about three and a half years ago. Since its inception, it’s up 248 % versus the S&P up 76%. And year to date, Alpha Picks is up about 34 % versus the S&P up 13.5%, as you can see on the far right side. If you want more than two picks a month, which many investors do,

We have another product called ProQuant Portfolio, and that actually provides you with on average about two to three ideas a week. So we rebalance that every Monday. It’s a fixed portfolio of 30 stocks. We just started that product in June, and you can see since June, it’s up 25.83 % versus the S &P on an equal weighted basis of 5.14%. For that, our benchmark is equal weighted since the portfolio is equal weighted.

So Alpha Picks giving you two ideas a month and ProQuant portfolio providing you with two to three stocks per week. And there are some differences in it. I will say less restrictions with a ProQuant portfolio. We look at stocks of all market cap. We look at stocks across the globe, being that they have ADRs throughout the globe.

And for Alpha Picks, there is a market cap restriction. We don’t go below 500 million. We do not invest in stocks under $10. And the only ADRs would be ADRs that are primarily listed in the US. So it’s only just a few handful of ADRs that we would look at. And I think that pretty much covers it.

Rena, I’m not sure if you’re familiar with the Black Friday Sale. Are you aware of that at all?

Rena Sherbill: Heck yeah. And our listeners are too, I bet, but let them have more insight into what we’re offering.

Steve Cress: What I could tell you is that if you’re interested in the premium product, you get 20 % off of that. If you’re interested in the Pro product, 20 % off. Alpha Picks, which I mentioned, 20% off. And any investing group, you can get 20 % off. So it’s basically a 20 % off site-wide sale.

I will say to you, I think a great combo, which I recommend to lot of people and they’re doing, I’ve been asking them to do this for like two years and they finally have done it where you can get a bundle of premium and alpha picks together. The reason why I feel that’s really important is alpha picks. do the work for you. You get our two top ideas, but really to do a lot of the research on a continued basis, you want premium. So if you have other stocks outside of alpha picks, you can load them up to the portfolio tool.

If you want to look for more ideas than just AlphaPix, you have the screeners, you have all the news, you have all the analysis from contributors, so there’s a ton on premium. So I really highly, highly recommend that you bundle and get both premium and Alpha Picks. Normally that would be $798 and you can get that on sale for $574.

And just to sort of give you an idea of Alpha Picks and the performance that it has had, as I mentioned, one of the stocks we’re recommending today is Celestica.

We put Celestica into Alpha Picks back in October of 2023, and that stock is up 1,046%. Another stock that is in Alpha Picks is App11, which is up 1,148%. So these are a couple of our top winners. And of course, there’s losers as well. But as you can see by the performance, our winners way outstrip our losers.

Another company that we had that was up almost a thousand percent was SuperMicro (SMCI) and we took that out really in the nick of time things actually Started to fall apart for that company and our quant system being as terrific as it is it took us out of the stock So we’re able to get a return of nine hundred and sixty eight percent on that stock I’ll show you a couple others sterling and pal Sterling (STRL) up four hundred and twenty five percent, Pal up four hundred and twenty two percent Modine Manufacturing (MOD) up three hundred and forty eight percent.

So that is the benefit of having our top quant stocks brought right to you. You can see the return. This is actually the Alpha Picks platform. You can see the return on those stocks, the date that we put them into the portfolio, the price that they were purchased at. And with all the stocks, there is the analysis page. And this is archived all the way three and a half years ago. So we have every single stock, the price that it was at, and the weight that it was for the portfolio at the time.

And I believe that sort of concludes it. Do you have any questions? That was a mouthful. Sorry.

Rena Sherbill: Chock full of insight and information per usual. We’ve come to expect nothing less. We appreciate that. First of all, kudos on the bundle. I love a bundle also. That’s really good stuff. And I would agree, premium and Alpha Picks go together like love and marriage. It’s a nice bundling opportunity.

I would say in closing out this conversation, my question is, does quant inherently solve for the risk? Like what factor does risk play in your strategy? Because it seems like it’s just coming to you that it’s filtering out the risk, right? The grades are reflective of the fact that it’s filtering out the risk. What would you say to the point of how to think about risk factors within the quant system?

Steve Cress: So we have an algo and we actually have risk factors in the algo. We don’t necessarily highlight risk as one of the core five metrics, but it is sort of embedded into the system. So we are looking at risk metrics versus the sector.

And then we also look at certain debt levels, debt to equity, debt to capital, a number of debt oriented metrics. And those leverage debt metrics often take risk on board as well. So we are comparing the metrics for the stocks versus the sector, and that receives a grade or a Z score as well. So it does incorporate risk into the model.

Rena Sherbill: Much appreciated. Happy for you to, if you want to leave anything for listeners that you feel like would succinctly sum up where we’re at in the market. I’m happy to leave you with that last word.

Steve Cress: So really the whole point of the approach today was that there has been volatility in the market. Again, if you look back four weeks, the market’s virtually unchanged. But over the course of last four weeks, there’s been a lot of rotation.

There’s been a lot of concern, which was, as I mentioned, on the back of the government shutdown, concern that inflation is sticky and labor might be improving, which would imply that there would not be a rate cut.

So good reason to be concerned at this point in time, hence sort of that strategy that I believe is very smart. And the most important thing is to sort of keep investing. And if things get bad, I often say if I had a superpower, it would be to ignore the talking heads on Wall Street and the economists and the strategists that could scare you out of the market.

Don’t pay attention because obviously the name of the game here is buy low and sell high. And the best period is to buy low when people are really frightened. And if you just stay with a consistent strategy month in and month out, you’re buying and you have a diverse portfolio. That is how wealth is built. So that would be my parting words.