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In last Sunday’s InvestorPlace Digest, we published five high-potential stocks that TradeSmith’s AI system had flagged as immediate buys. These picks were notable because our writers at InvestorPlace.com – our free news site — had come up with the same list.
One of the stocks is already up double digits. Anyone buying FiscalNote (NYSE:NOTE) on Monday morning after the Russell 3000 rebalance would be sitting on almost 10% gains! The company’s addition to the broad-based index proved to be the perfect buying catalyst.
Of course, the system isn’t perfect. Shares of Applied Digital (NASDAQ:APLD) temporarily fell double-digits this week after announcing a surprise at-the-market issuance. Even we couldn’t have predicted that the cash-flow-positive firm would decide this week to raise more cash.
But on average the TradeSmith artificial intelligence system is performing admirably. The five companies have now tripled the S&P 500 return. Even Applied Digital has clawed its way back to above its last week’s close.
That’s why we’re so excited to reveal another five picks from TradeSmith’s system this week.
These are stocks that the model predicts can rise at a 100% annualized rate or more – and that writers at InvestorPlace.com have also endorsed. Let’s take a look at what they’ve come up with…
This week, Upstart Holdings (NASDAQ:UPST) gets a double upgrade from TradeSmith. Not only does the AI system predict a 11.5% one-month return for this AI lending platform, but a recent 15% surge in price means TradeSmith’s proprietary VQ (volatility quotient) score gives the stock an additional green light. We know from history that rising shares of high-quality companies tend to signal greater gains to come.
InvestorPlace.com’s Muslim Farooque agrees. In a recent piece on “7 AI Stocks to Watch,” Farooque calls Upstart’s AI lending platform a viable contender to FICO scores:
Upstart’s AI-powered credit scoring model have effectively outperformed traditional methods such as FICO, creating an enticing proposition for investors eyeing profit and lenders seeking minimized risk.
That gives Upstart an unusually long growth runway. Wall Street analysts believe the Silicon Valley-based fintech will see double-digit revenue growth for the next several years, and that net income will rise from a $37 million loss to a $125 million profit by 2025.
Competitors like LendingClub (NYSE:LC) have long attempted to create better alternatives to FICO scores. Upstart’s large financial database and algorithms mean the firm might have beaten rivals to the punch.
TradeSmith’s AI prediction algorithms adds C3.ai (NYSE:AI) to its list of companies to buy. A sudden dip in prices puts shares of this enterprise AI stock close to the top of its list.
C3.ai is a Silicon Valley-based application software company that focuses on bringing AI applications to major enterprises. If an organization like the U.S. Air Force wants to solve its supply chain issues, they would contract with a firm like C3.ai to do the job. Even major tech firms often find it more economical to purchase prebuilt software-as-a-service (SaaS) platforms than build them from scratch.
InvestorPlace.com writer Tyrik Torres agrees. This week, he notes how C3.ai could generate triple-digit returns for investors this year.
“C3.ai has made a significant turnaround and has an amazing growth story,” he writes. Inconsistent profitability will likely become a thing of the past as the firm reaches scale.
Some Wall Street analysts also remain bullish, despite C3.ai’s expensive valuations. This week, Wedbush’s Daniel Ives reiterated his $50 target on the stock, suggesting a 43% upside to this high-growth stock. Long-term investors should tread carefully, but short-term traders can expect another 6% rise out of this stock in July.
Valuing companies like Carvana (NYSE:CVNA) is complicated at best. These firms use financial leverage to buy inventory, so tiny changes in asset values have enormous impacts to profitability. A 1% increase in used-car prices, for instance, would have added 92% to Carvana’s first-quarter income. Unlike commodity traders like Glencore (OTCMKTS:GLNCY) or privately held Trafigura, Carvana has no easy way to hedge away its risk, since its business of reselling used cars has no liquid index.
That makes TradeSmith’s choice of Carvana particularly intriguing. Shares of the car firm are already up 480% for the year after suffering a near-death experience in 2022. The AI system is now suggesting that 12% of upside is expected this month, a 300% annualized rate of return.
InvestorPlace.com’s Josh Enomoto also notes that the firm received a critical line of support earlier this month.
This high-risk stock isn’t for everyone, of course. This week, InvestorPlace.com writer Samuel O’Brient notes that the meme stock has one of the highest short floats of any major firm. Roughly 58% of its float is sold short, which historically corresponds to a significant decrease in expected excess returns.
Still, Carvana remains the top dog in the vehicle iBuying business. If demand for used cars begin to reaccelerate, investors can expect the Tempe, Arizona-based firm to reap enormous benefits. Financial leverage, after all, cuts both ways.
Opendoor is the biggest iBuyer and operates in the most markets with the most cash. And it has the most talented team and the best technologies, including the best consumer UX and pricing algorithms….
So long as this housing crash only lasts another few quarters and we get back to normal operating conditions in 2023, Opendoor stock is a fantastic buy.
Shares have since surged from $1.35 to $4 – a remarkable 200% return on investment.
This week, TradeSmith’s AI model joins Luke’s in its bullishness. The algorithm now predicts that shares will rise another 7% this month, a 120% annualized rate of return. Its proprietary VQ score has turned positive.
Investors can point to a recovery in the U.S. housing market as the cause. Last week, the U.S. Census Bureau revealed that the number of housing starts – a measure of new home construction – came in far ahead of expectations. Luke Lango notes that the 1.63 million figure represents a stunning 20% increase from the prior month.
Home-price estimates are seeing major upward revisions. In May, Zillow increased its 2023 home price forecast from 0.6% to 3.9%. Analysts polled by Reuters have revised their estimates up by 1.7% since March.
That means Opendoor’s price could rise further this year. The home iBuyer has large exposure to home values, and every 1% increase in prices translates to a $212 million unrealized gain in asset values.
Bloom Energy (BE)
Finally, TradeSmith’s AI model picks out Bloom Energy (NYSE:BE) to buy in July for its expected one-month return of 6%, or a 101% annualized rate. Shares of the fuel cell firm are down 14% this year, and the algorithm believes that now is the chance to buy the dip.
Vandita Jadeja, a writer at InvestorPlace.com, agrees. This week, she writes about Bloom Energy in her latest piece, “How To Retire Rich – Hydrogen Stocks Edition.”
The company isn’t profitable yet, but it is close… The discount on the stock is a good opportunity to buy.
Bloom Energy is a leader in solid-oxide fuel cells for power generation. The company’s products are used as backup power to manufacturing facilities, data centers, and other critical infrastructure. It’s a far greener alternative to diesel generators, and uses 1/125th the space of photovoltaic solar installations.
That said, there are some risks to Bloom. Shares have fallen this year because of a $550 million convertible debt issuance – a risky form of funding that can dilute existing shareholders if prices fall.
Lower fossil fuel prices have also put pressure on energy companies. Analysts have now cut their 2023 earnings estimates from 14 cents per share to -23 cents. Downward revisions of these sizes tend to signal more losses to come.
Nevertheless, Jadeja and the TradeSmith AI system are confident that they’ve seen this story before. To them, Bloom Energy is a risky but compelling short-term “buy-the-dip” play for risk-seeking investors.
… And 3 Stocks to Sell
It turns out that TradeSmith’s AI system is also quite talented at telling investors which stocks to sell.
This week, it names three “meme” stocks on its “danger zone” list:
- Vinco Ventures (NASDAQ:BBIG). Infighting continues at this rudderless company. The digital media and advertising firm has now churned through at least three different management teams since 2021.
- Lordstown Motors (NASDAQ:RIDE). The recently bankrupt EV startup still trades at $2. Experience tells us that firms undergoing Chapter 11 tend to leave investors with nothing, especially those with weak asset values.
- Troika Media Group (NASDAQ:TRKA). The highly dilutive stock was forced to reverse split its shares in May to avoid getting delisted from the Nasdaq Composite. Studies show that reverse splits are a highly bearish signal.
In each case, the AI system has flagged these firms as low-quality companies that will keep going down. Firms like Lordstown Motors lack meaningful hard assets, so bankruptcy will probably leave equity investors with nothing.
This is an important strategy. In 2021, the late hedge fund titan Julian Robertson outlined his trading philosophy in an interview with Charlie Rose. If an investor can identify 200 stocks to go long and 200 stocks to go short, they will naturally come out ahead. Surely, any Wall Street analyst who’s worth their salt can manage that task!
The TradeSmith AI system now brings this ability to regular investors. By identifying both stocks to buy and stocks to sell, the system has created a version of Robertson’s high-paid analysts that’s now available to you.
Of course, I’m not the only one at InvestorPlace taking a look at TradeSmith’s AI system. Analyst Louis Navellier recently sat down with TradeSmith to talk about their brand-new AI-driven research service.
He did so to show folks what they could do with the kind of predictive power we’ve been talking about here.
For a limited time, TradeSmith is offering access to their research service at a 70% discount.
As of this writing, Tom Yeung did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.