AI Models Favor These Stocks and ETFs, As Market Gives Mixed Signals

Treasury yields are rising quickly leading many experts to question whether the rally in stocks will continue. After disappointing unemployment numbers came in on Thursday, Treasury Secretary Janet Yellen insisted that additional stimulus is needed. Her comments sparked a rally on Friday that allowed markets to recover some losses from earlier in the week. Overall, investors remain optimistic about the economic recovery despite the struggling labor market.

Before we dive into this week's trades, we wanted to share that hundreds of subscribers from this newsletter have already claimed their early access to the Forbes AI Investor research tool. Tired of spending hours finding what stocks and ETFs to trade? Our institutional-grade AI, which is the same technology used by Wall Street pros to get ahead, takes the guesswork out of investing and finds actionable stock and ETF ideas every day. Forbes AI investor is the easiest way to discover your next investment. As a subscriber to this newsletter, you get early access! Sign up here to try it for free for one month.

Our AI models have identified Apple Inc (AAPL) as a Top Buy for the next week. It’s been a while since we’ve seen Big Tech stocks in our shortlist of Top Buys, especially with the current rotation into cyclical stocks. The stock received Q-Factor Scores of C in Technicals, B in Growth, B in Momentum Volatility and C in Quality Value. The other stock with a Top Buy rating for the next week is Premier Inc (PINC), which earned a C in Technicals, B in Growth, B in Low Volatility Momentum and B in Quality Value.

Other notable technology stocks our AI has highlighted include Square Inc (SQ) and TTM Technologies Inc (TTMI). Square was rated Top Short by our AI and received Q-Factor Scores of F in Technicals, D in Growth, F in Low Volatility Momentum and D in Quality Value. On the other hand, TTM Technologies has been rated Top Buy for the next 30 days and scored a C in Technicals, A in Growth, A in Low Volatility Momentum and Quality Value.

For the next 30 days, Visa Inc (V) holds a Top Buy rating. The stock has stood out among its competitors despite its disappointing performance this week. That could be why the stock is so attractive to our AI, which assigned factor scores of C in Technicals, B in Growth, A in Low Volatility Momentum and A in Quality Value. The final Top Buy for the next 30 days is Lamar Advertising Co (LAMR). The advertising company is currently positive on the year and received an A in Technicals, A in Growth, B in Low Volatility Momentum and A in Quality Value.

Several ETFs are rated Top Short next week, all of which are bonds. This includes iShares 7-10 Year Treasury Bond (IEF), Vanguard Short-Term Bond (BSV) and iShares U.S. Treasury Bond (GOVT). You won’t see any of these ETFs on the Top Short picklist for the next 30 days, though. For that timeframe, Vanguard Small-Cap Growth (VBK) and Vanguard Mid-Cap Growth (VOT), ETFs that expose investors to small and mid-cap growth companies, are rated Top Short. Vanguard Consumer Staples (VDC) has also been rated Top Short for the next 30 days. Its 200 day SMA compared against its 12-month performance suggests that the ETF is most likely overvalued at this time, which likely warrants the score received from our AI.

Some of our favorite options trades this week: 

Short Call Spread in Freeport-McMoRan (FCX) –  Bearish trade in one of our Top Short stocks ideas.  Freeport-McMoRan (FCX) is an indirect play on Copper prices and offers some downside protection of a portfolio that might be overexposed to pro-cyclical stocks.

Long Call Spread in SPDR S&P Metals & Mining ETF (XME) – Bullish trade on one of our Top Buy ETF ideas.  Unlike Freeport-McMoRan (FCX)  above, which is a direct play on copper, bullish exposure to SPDR S&P Metals & Mining ETF (XME) offers exposure to the entire mining industry.  

Long Call Spread in iShares Silver Trust (SLV) – Bullish trade on one of our Top Buy ETF Ideas.  iShares Silver Trust (SLV) offers downside protection for a portfolio that is over exposed to the stock market (beta north of 1.0).  

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Performance Update

It was a good start to the year for our AI models. Our monthly top buys for stocks have outperformed the SPDR S&P 500 ETF by over 27% since December 2013, generating a total return of 157%. In January, our top buys were up 1.37% vs -1.02% for the SPY ETF.† You can find this full list of monthly top buys for stocks and ETFs in a simple and easy to understand table on the AI Investor Investment Discovery platform. Sign up here to try it for free for one month.

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†As of 1/31/2021. The calculated returns above are based on paper trades and back tests during the relevant measuring period and therefore represent hypothetical performance. The average holding period for each security is 1 month with the return calculation assuming an equally-weighted theoretical portfolio. Returns reflect full reinvestment of dividends. The hypothetical returns do not include advisory fees or transaction costs as Qai does not maintain an investment advisory business and has no assets under management. However, an investor paying a professional advisor would have its return affected by any fees or commissions paid. Past performance is not an indication of future returns. Changes in economic conditions and market factors will affect the returns of investments in different ways. Any investment involves a risk of a loss. All information herein is from sources believed to be reliable but have not been independently verified. No representation or warranty can be given with respect to the accuracy or completeness of the information, and is subject to updating, revision, and amendment. Hypothetical returns are shown against the actual returns for the SPRD S&P 500 ETF Trust (SPY) during comparable periods. The strategy is based on buying an equal amount of all stocks ranked as Top Buys by the Q.ai Factor Models for US Large-Cap Stocks (and an identical back tested strategy employed in the earlier stages of the measuring period January 1, 2017 through January 31, 2021). The Q.ai Factor Models are calibrated to focus on capital appreciation. Q.ai is the trade name of both Quantalytics Research, LLC and Quantalytics Holdings, LLC.