3 stocks to buy from Alpha Picks/Pro Quant Portfolio

0:00Thank you.

0:30Steven Cress:gets excited about your picks, some of our top content, some of our most engaged with content in terms of you letting us know the top quant stocks of the year, of the second half of the year. That has been extraordinarily helpful for people I know firsthand. So I think a great place for us to start, for those that do know and for those that don't know, if you could give us a refresher, a brief refresher on what our quant system does. We just had Emma on talking about cannabis. So she briefly laid out what quant does and how it thinks about cannabis. But broadly speaking, what do you head up? What is our quant system at Seeking Alpha?

1:12Yeah, fair enough. So I do head up the quant team at Seeking Alpha as well as our terrific data team as well. So anything that is quant or data related comes through my team. And it's very helpful in my research process when I'm looking at stocks that come at the top of our screener and looking at the data at the same time. But the essence of quant, and it's really not that dissimilar to what a fundamental analyst would do at Morgan Stanley or Goldman Sachs or Merrill Lynch, but we use more of a data-driven process. So we're using mathematics and algorithms to help identify investment opportunities.

1:50And that's similar to what an analyst at Morgan Stanley or Goldman Sachs would do. They look at a company's financial data. They look at the industry. They see how fast that company is growing. They look at the valuation framework. They look at the profitability. And we're doing the same thing, but we're doing it on a massive scale. So instead of looking at one company at a time, we are looking at about 5 ,000 companies at the same time. So at Seeking Alpha, we do have a specific quant strategy. There are different quant strategies. The strategy that we have, I refer to as GARP Plus, which would be growth at a reasonable price.

2:29There are other quant strategies that are just driven by momentum or driven by value or solely driven by growth. And we have a bit of a diversified approach. And that approach has worked fairly well over the period of time, actually a really long time. I've been at this for about 30 plus years, and I've been in the world of quant for a long time. The bulk of my career is actually spent at Morgan Stanley, where I ran a trading desk in quant strategies. And many of the strategies that I utilize now were really formulated around the year 2000, 2001, 2002. So the strategy really goes back a long way.

3:07And I really like this GARP diversified approach. And specifically, we took a deep dive into GARP for us. we're looking for stocks that are collectively strong on value, growth, profitability, momentum, and EPS revisions. And that would be analysts that are making positive or negative EPS revisions. So those are the fundamentals that we dig into. And again, those are sort of similar to the fundamentals that an analyst for Morgan Stanley would dig into. But again, we're not looking at it on a company by company basis. We're looking at thousands of stocks at the same time. Something that our powerful computer processing system enables us to do is when we look at these companies, we're not looking at them in absolute terms.

3:52We're not looking just at the growth rate of a company or its value. We're actually comparing each company and all their metrics to other companies in the sector. This gives us the ability to sort out the strong companies from the weak companies.

4:05Steven Cress:Can I ask you a question about the metrics? Because I know you've been on before touting how much you like the peg ratio. Gary Vaughn has also been on a couple times reiterating that point. Can you talk to us about, A, how the peg ratio, why you favor that or why you like that so much? and if you would, I'm also curious in this time, in these unprecedented times, are there metrics that you are favoring or paying more attention to or trying to place them in context a bit more than usual? Yeah, Gary's a super nice guy. I really like him a lot. He has highlighted, I guess, a specific metric that I do like.

4:48And the reason why I like Peg is a lot of times when people are looking at value, they'll typically look at PE or price to book or price to sales. And that is a conventional value metric, but it doesn't bring in the growth aspect of a company into the value. So you're looking at the value, but you're kind of ignoring growth. What I love about PEG is you're looking at the growth rate of a company combined along with its PE ratio. So it sort of provides you with a growth framework and a value framework all in one metric. So I find many times where a company could be extremely overvalued, where it could have a multiple of like 50, 60, 70 times, something that we would never think of buying or like on our quant system would probably have a grade of an F with a multiple like that.

5:38If you look at the peg metric, sometimes that peg metric could be an A or an A plus while the PE is an F. And the reason being is if you're adding a company's growth rate, which is growing at say 50%, 60%, 100 % growth with a PE, it makes it all relative. So all of a sudden, the company is not as expensive as you thought. So a lot of times our stocks will have to default to a hold rating from a strong buy. And that often occurs when the value grade goes to a D minus. And it's sort of like a circuit breaker that we have in our system, because we want to make sure we're not buying anything too expensive.

6:20But I always say a hold is a hold. It doesn't mean sell. And even when that's triggered, if I look at a company's value metrics and I see right across the board, but I see that peg ratio at A +, it gives me more comfort holding onto that stock as opposed to just selling it. So really, to answer the question specifically, it's great to have a metric that you can blend together that has both growth and value combined one.

6:48Steven Cress:And to the point at hand, in terms of the unprecedented nature of the market right now, valuation is one of those things that is very hard to ascertain. So it seems like this might be a nice workaround that troubling or challenging metric at this point. Yeah. And often you'll hit stocks that are really in a winning cycle, but because the PE and price of sales are in the stratosphere, a stock will be a hold and it would be a shame to get rid of a stock that's a hold if it had a peg metric that was super attractive. And again, it should give you confidence to hold on to that. Typically, like when we have a product called AlphaPix, which I'll tell you more about, we will keep a company in that portfolio with a hold rating for about 180 days.

7:40After 180 days, like if the stock really isn't moving, That's when we decide to like eliminate that from the portfolio. But we really do say hold means hold. And that peg metric can often give you confidence. If it's an attractive trade, you know, yeah, I should probably hold on to the stock. Regardless of the environment, we're looking at these core factors, whether we're in a correction mode or, you know, whether there's wars happening throughout the world or there's hyperinflation, we're still going to be focused on those collective factors that we're looking at with value of growth, profitability, momentum, and EPS revision.

8:19That would not change. And that's part of our diversified approach. And sometimes the value stocks work better than growth. Sometimes profitability works better than value, but having a diverse set of metrics to look at consistently over time, we find that's the best way to achieve the performance. And our track record definitely shows that perfect segue so i guess track record is not a bad thing to talk so in terms of the the track record i look at it from three different perspectives uh we have and we show this we're really transparent about this we show what the performance is for our quant strong buys going back to 2010 and we actually have a back test that went from like 2010 to 2019 And then after 2019, it's simulated trade.

9:04So you could see the real performance. And it pleases me to say the combined backtest and the simulated trade since 2010, our quant system has beat the S &P 500 every year. And that is a very difficult task. And we could take sort of a shorter period as well. We created the AlphaPix portfolio, where quant strong buys could be anywhere from 350 stocks to 400 stocks that get rebalanced on a daily basis. It's not really investable, but the AlphaPix portfolio is. And we developed that and launched it in July of 2022. And we have really strong performance with that.

9:42Steven Cress:Is there a place, by the way, for listeners to see the performance? Absolutely. So if you are on the premium site, you literally could go to any stock and on the right-hand side, it will say QAMP beats the market. and you could click on that and that will show you the performance for the QuantStron buys. It'll show you the performance for our dividend grades. It'll show you the performance for our REITs. So we have QuantFactors across a number of different products. It's not just equities. So there's ETFs as well. So we're very transparent. We show the performance for the QuantStron buys for all of those various factor grades.

10:25And then if you go to AlphaPix About page, it shows you the performance. Or if you go to PQP, which we just launched in June of this year, it shows you the performance as well. So if we were to take a look at just the quant strong buys, which, as I mentioned, could be like 400 strong buys at any given day, we rebalance it. So if a stock comes out and it's not a strong buy, we wouldn't count the performance. If it comes in as a strong buy, we count it. over the last five years, the quant strong buys are up 265 % versus the S &P up 85 % for the same period. And in Wall Street Annals, we actually measure their strong buys on a daily basis as well.

11:05Wall Street Annals are only up about 53 % for their strong buys, again, versus the CK Alpha quant strong buys up 265%. If we were to look at those products that we created, AlphaPix has been around about three years, that's up 240 % versus the S &P up 74%. And the ProQuant portfolio, which we just launched really around June 1st, is up 40 % versus the S &P up 6.83%. So that's actually an amazing return. June 1st, up 40 % is incredible. We're only at September 16th. The product is really performing the way that we expect across a number of different portfolios or everything all in.

11:50Steven Cress:maybe explain how you get the alpha picks each month but if you would also share how you get the pro quant picks and then maybe if we could give an example for each portfolio so listeners have an idea of what we're talking about and kind of a real world example never heard anybody yeah alpha picks of your on the premium platform you'll see on the left hand menu alpha picks you can simply just click on it and you can get more information. But it is interesting. I'll showcase the entire performance. And a few years ago, a lot of people would say, I can't buy 400 stocks every day. Is there a better way to do this?

12:32So that's when I actually created a system called AlphaPix. And AlphaPix was designed for long-term investors that just wanted a couple ideas a month. And that's what we do with AlphaPix. We take our top two want strong buys every month. So on the trading day closest to the first of the month and the 15th of the month, we send out an email or we post it on a separate platform for AlphaPix and we unveil what the idea is. So it's pretty straightforward. It's very transparent. We have some parameters and criteria that are designed for longer term investors and people who don't want a lot of volatility.

13:10So the market cap can't be below 500 million with AlphaPix. We don't have stocks under$10. and it's mostly just US stocks. The only ADRs that would be in Alphapix are ADRs that are primarily listed in the United States. So the performance has been great. As I said, it's up about 240 % versus the S &P up 74%. But something we learned along the way is that people wanted more than two ideas a month. So I went back to it with the quant team. And as a result of that request, we developed the pro quant portfolio. and with Alphapix, it's could be sort of unlimited ideas. We're coming out with the two ideas every month with a pro-quant portfolio, people wanted a fixed portfolio.

13:57So it's a fixed portfolio of 30 stocks, but we rebalance it on a weekly basis. So every Monday we will rebalance it. And on average, I'd say there's about two to three new ideas that come out every week for the pro-quant portfolio. Whereas the Alphapix, as I mentioned, was just two ideas a month. This is about two to three a week. We also have less stringent criteria on the pro quant portfolio. Basically, we'll invest in any market cap. So we don't have that 500 million restriction. The stock price could be any level for the most part. So it could be below$10. And we invest in ADRs all over the world.

14:38And that diversification, as I mentioned earlier, like with the factor grades, where we focus on five core factors for diversification. I found over time and through our back test that ProQuant Portfolio actually had better performance than Alphapix. And I believe it's because we have that diversification of market cap size, as well as global diversification as well. And that can actually be found on our Pro platform. So if you are Pro customer, you get that for free in essence, where with Alphapix, you have to pay, I believe it's$499 to get access to the AlphaPix platform. If you are a pro subscriber, it comes with that application.

15:21Steven Cress:So basically the pro quant portfolio is something you get by being a pro subscriber. You can't not be a pro subscriber and then access that portfolio? Correct. You have to be a pro subscriber to get that portfolio. So yeah, the systems are a little different, but the bottom line is it's all really a derivative of our quant system. And our quant system ranks over 5 ,000 securities. And we look at the specific investment characteristics that I mentioned, and we score each of those investment metrics. And actually, if you were on the premium platform and you clicked on value, you'd probably see about 20 metrics.

16:04So if you clicked on growth, you'd see more than 20 metrics, profitability, more than 20. And each of those metrics gets scored. And we put them into those buckets of value, growth, and profitability. So then we'll give value a score and growth the score for the company. And the companies that score the highest are strong buys. And the ones that are the weakest are the strong sells. And we do that for close to 5 ,000 stocks on our platform. and if you were like to go into the platform and I would really advise anybody who you know has not been on the platform you know give it a try register for the site so you could see what we're talking about because the free site at Siki Alpha is a lot different than the paid site for premium on the premium site you get the factor grades and really the purpose of the factor grades you can put in any stock, IBM, Apple, Exxon.

17:02And what we want you to do is have like an instant characterization of how that stock compares to the rest of the sector and instantly know that stock is a buy or a sell. And that's what comes across in our rating summary. And for those valuation grades and growth grades, we make it super easy. We actually use academic letter grades. So if you're looking at value, you might see a C minus. If you look at growth, you might see an A plus. And that means that the company's growth rate on a relative basis is stronger than the sector. You know, valuation might be in line with the sector on profitability.

17:36It might be far superior to the sector. So again, really the whole purpose of those factor grades is for us to do the homework for everybody where we can give them that instant characterization of where the stock is relative to all other stocks. And I won't say it's rocket science, but we are crunching a lot of data every single day, hundreds of metrics, cashflow, income statements, balance sheets, all those metrics. So literally like millions and millions of calculations are being calculated every day to come up with a list of stocks. The portfolios are different, but some names are shared because after all, as I said, we're taking the top stocks from our quant system.

18:16And we're just trying to put it in a way that's sort of an investable format for our subscribers. some like a high frequency, as I mentioned, who will use Pro. Some just want like two ideas a month. So we'll use AlphaPix. But I will give you three names that are in both portfolios. And there's not a high crossover, believe it or not, even though we're focused on the top ideas because the ProQuant portfolio has a high frequency of change and we're constantly bringing the best names into it. There's actually not as much crossover as you would think, but I'll give you three stocks that do crossover.

18:50Steven Cress:Before you do, let me ask you, When investors are getting these picks, what comes with it? Like the information that you're about to tell us? Is it like a deep dive into each stock? What exactly comes with those picks? They actually, they do get a deep dive, yeah. For alpha picks, as I mentioned, it's on the first or the 15th of the month. At noon, like clockwork, they will get an email. And in that email, there will be an article on the pick. Or they could go to the platform as well. The platform is very transparent. So it provides the articles for every single stock that was ever recommended, the price that it was recommended at, what its weight is in the portfolio, what the quant rating is.

19:32So is it a cold? Is it a strong buy? Is it a buy? So it's very transparent. So the AlphaPix platform has a lot of information. And that would be the same with the ProQuant portfolio. but in the case, you know, this would be every Monday at 9.30 right now, we provide the picks so you get an email alert or you could go to the pro platform and see what the picks are. And we provide an article that reviews all the picks and all the sales and a little bit of a deep dive into it. All right. So I'm picking three names here that are in both AlphaPix and the pro-quant portfolio. First off is Kinross Gold.

20:13And I'm going to walk you through it sort of similar to if I was walking you through our platform. So sort of envision that you're looking at the premium or pro platform, you would see a chart of the stock. And if you're looking at the chart of the stock, you would see that Kinross Gold over the last year is up 140%. And you might say to yourself, wow, I really don't want to chase a stock that's up 140%. And I would say that would be a really big mistake because the valuation framework for this company is almost the same now that it was six months ago. So if you were on the premium platform and you looked on the right hand side below the ratings, and we actually show three different ratings, the consensus of Seeking Alpha contributors, the consensus of Wall Street, and our quant rating.

20:58So outside of the quant rating, you get to see what those other investment segments are saying on the stock. And below that rating summary, you would see the factor grades. And this is where we highlight value, growth, profitability, momentum, and revisions. And you get that instant characterization by looking at what the grade is for the stock. So on Kring Ross, currently the grade is C -. So that means relative to the sector, it's a fair valuation. It's not too expensive. And it's not overvalued. It's sort of right in the middle. And as I said, the stock was up 140%. but the valuation now at C minus is actually more attractive than it was six months ago.

21:37Six months ago, the valuation grade was a D. So that valuation framework has actually improved for the company. And six months ago, the growth grade was an F and now it's a B plus. So the stock has a better growth framework and a better valuation framework now than it did six months ago relative to the sector. Again, it's not on absolute terms. It's actually relative to the sector. So the company is growing way faster than the material sector. And if you were on the premium or pro page and you scroll down below the factor grades, you can see exactly where the ranks within the sector or the industry.

22:16So on Kinross, within this sector, it ranks eight out of 274 stocks. And within the gold industry, it ranks six out of 47. So again, it really gives you that instant characterization of where the company stands relative to the sector. And if a company pays dividends, I mentioned earlier, we actually provide dividend grades as well. There are really very few platforms out there that will be able to tell you if a dividend is safe or dividend is growing in sort of really an immediate fashion. And here you can see the dividend grades and Kinross does have a dividend. The yield is just about, the Ford yields a tad over a half a percent.

22:54So it's not a big yield, but they do pay a dividend. And if you looked at the dividend safety grade, you would see it's a B minus. And the dividend growth grade is a B plus. So that tells you that it's fairly safe. If I were to take a deeper dive into dividends and show you our backtest, you would see basically any company that has a dividend safety grade, B minus to A plus, has basically throughout 2010 to date has rarely, rarely ever had to cut their dividend. So about a 98 % success rate for anything that's in that territory. However, it has a big fail rate. If you have dividend grades that are D or lower or F, sometimes 60 % of those companies since 2010 have cut their dividend.

23:42So if you like dividends, those dividend grades are really important to look at. So I should probably tell you a little bit about K-Ross as well. K-Ross Gold, it engages in the acquisition, exploration, and development of gold properties, principally in North America and South America. So it's involved in the extraction and processing of gold, which has been a great segment to be in as of late because the price of gold has been doing well. But these companies that can actually extract the gold are printing presses for cash. they are doing incredibly well. So how would we know that? We can actually look at the profitability grade.

24:22And when we look at the profitability grade, we click into it and you see all the underlying metrics. So the overall profitability grade for KidRoss is an A+. But if you click on profitability, it will immediately show you those underlying metrics, such as gross profit margin, EBIT margin, EBITDA, net income, return on equity, cash from operations, cash per share. And you'd see the gross profit margin for this company with an A grade is 62%. So that gross profit margin is 62 % versus the sector at 29%. And you'd see underneath that, the EBITDA margin is at 56 % versus the sector at 17%. So an A plus.

25:04So it becomes very intuitive. You see the grades and then you see what the actual metric is and the sector's median metric as well. so you can quickly begin to say, oh, now I know why this is a day or now I know why it's a day. We make it very clear and straightforward. So that is KidRoss Gold. Our second stock is Comscope Holding, ticker symbol COMM, a bit of a different industry. We're going from gold to information technology and communications equipment. And this is a similar situation. This stock has done really well too, but it's growing and the valuation framework is good. So the value grade on TomScope Holding is a B.

25:54The growth grade is a B. The profitability grade is a B+. The momentum grade and momentum, again, relative to the sector, it's an A+. So it's crushing all the same stocks in the sector. And the revisions grade is an A-, which means that analysts are taking their earnings estimates up at a faster pace compared to other companies in the sector. This company provides infrastructure solutions and communications for data centers. And data centers are sort of like the new Pac-Man for energy. Like, they are just consuming huge amounts of energy right now. Now, obviously, that has a lot to do with the power needed to run chips for semiconductors and artificial intelligence.

26:39So data centers are growing like wild, and their demand for energy is growing like wild. And this company provides infrastructure solutions for data centers, entertainment networks, and communication centers. So our number two stock, as I mentioned, is Comscope Holding. looking at the factor grades, green across the board with Bs and As, and it has a quant strong buy. Our third stock that you would find in both AlphaPix and the ProQuant portfolio would be another mining company. This is SSR Mining, ticker symbol SSRM. So this is, again, a mining company that's primarily in North America. This stock has had a big run up too over the last year, I'm not gonna lie, it's up 272%.