Artificial intelligence (AI) isn’t new to the world of stock picking, but it hasn’t really been an option for retail investors. That is, until now.
Traditionally, powerful artificial intelligence systems – and the high-octane brainpower needed to develop and operate them – have been available only to institutional investors. We’re talking hedge funds, quant funds and a select group of asset management firms.
Financial technology company Danelfin, formerly known as Danel Capital, is trying to change all that.
Danelfin has developed an analytics platform that harnesses the power of big data technology and machine learning. The goal is to level the playing field by giving regular investors access to institutional-level technology that helps them make smarter decisions with their tactical stock picks. And helpfully, Danelfin’s recently redesigned platform is now free to use for retail investors. (Premium plans unlock access to additional features.)
What’s going on under the hood, however, remains the same. The company’s AI algorithms analyze more than 900 fundamental, technical and sentiment data points per day for 1,000 U.S.-listed shares and 600 stocks listed in Europe. Danelfin says that in total, its AI predictive scoring capability churns through 10,000 daily indicators. The platform then analyzes that ocean of inputs to predict the future performance of each stock, calculating its probability of beating the market over the next 30 to 90 trading sessions.
Once the algo determines which stocks to watch, it spits out a rating known as an AI Score, which ranges from 1 to 10. Over the past four years, U.S. stocks with the highest AI Score (10/10) have generated an average of 35.2% annualized returns 60 days after being selected, while stocks with the lowest AI Score (1/10) returned just 11.8% on average.
On top of that, Danelfin assesses stocks’ volatility and their potential for nasty drawdowns. Stocks with superior Low Risk Scores should help tactical investors and traders sleep better at night.
The last step is to combine AI Score with Low Risk Score to suss out stocks that offer not only the highest probability for short-term outperformance, but also the lowest risk of loss.
Here are 10 stocks to watch, based on Danelfin’s AI platform awarding them the highest AI Risk/Reward Scores as of Jan. 13. For good measure, we also took a look at what Wall Street analysts had to say about these names’ prospects over the next 12 months or so.
And remember: We’re talking about the probability of a stock beating the market over the next few months or so, not days, and not years. That means the platform is moreso pointing out the best stocks to buy for tactical investors, but not necessarily day traders nor long-term investors.
Share prices as of Jan. 13. AI Scores and rankings courtesy of Danelfin as of Jan. 13. Analysts’ consensus recommendations and other data courtesy of S&P Global Market Intelligence, unless otherwise noted.
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10. Charter Communications Getty Images
Market value: $111.0 billion AI Score: 8.0Low Risk Score: 10.0AI Risk/Reward Score: 9.0Charter Communications (CHTR, $619.08) is poised for market-beating performance over the next 30 to 90 trading sessions, all while delivering comparatively low volatility, Danelfin’s AI platform says.
Charter, which markets cable TV, internet, telephone and other services under the Spectrum brand, is America’s second-largest cable operator behind Comcast (CMCSA).
Shares have been in a downtrend since September and are off about 1% over the past 52 weeks, compared to a gain of 22% for the S&P 500. But a constellation of signals picked up by Danelfin’s algos suggest tactical investors and traders could catch an upswing at current levels.
Wall Street analysts, who typically look 12 months ahead, are mostly optimistic about the name as well. Their consensus recommendation on CHTR comes to Buy, albeit with moderate conviction. Of the 30 analysts issuing opinions on the stock tracked by S&P Global Market Intelligence, 11 rate it at Strong Buy, five say Buy, 12 have it at Hold and two say it’s a Strong Sell – a good consensus that makes Charter one of the most interesting stocks to watch presently.
Credit Suisse counts itself among the CHTR bulls, citing a bargain-basement valuation, among other factors.
“Longer-term investors should see terrific value,” writes CS analyst Douglas Mitchelson, who rates the stock at Outperform (the equivalent of Buy). “Multiple expansion will be challenging until investors can gauge cable growth in a more competitive environment, but we expect continued healthy [operating earnings] growth and aggressive buybacks to help shares grind higher.”
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9. AptarGroup Getty Images
Market value: $8.0 billion AI Score: 8.0Low Risk Score: 10.0AI Risk/Reward Score: 9.0AptarGroup (ATR, $121.67) is another market laggard set for shorter-term outperformance with limited downside risk, according to Danelfin’s algos.
The company, which makes packaging and dispensing products for the pharmaceutical, beauty and food and beverage industries, has seen its stock fall about 12% over the past year. But nimble investors might want to snatch them up now, given the stock’s robust AI Scores.
An 8 out of 10 AI Score suggests market-beating returns in Q1, while a perfect mark for risk indicates ATR can achieve that performance with relatively light volatility. AI’s assessment of AptarGroup’s fundamentals have been in an uptrend since November, and there’s been a notable improvement in sentiment readings as well.
Although supply-chain headaches and inflationary pressures are forecast to remain headwinds for some time, the Street breaks mostly bullish on ATR’s prospects this year. Three analysts rate ATR at Strong Buy, two say Buy and six have it at Hold, per S&P Global Market Intelligence. That works out to a consensus recommendation of Buy.
And with an average price target of $147.50, the Street gives ATR implied upside of about 22% over the next 12 months or so. With many Wall Street pros looking for single-digit returns out of the S&P 500, that makes AptarGroup an intriguing stock to watch.
They way Danelfin’s algos are flashing green at this moment, a good chunk of that implied upside could be coming sooner rather than later.
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8. VerizonGetty Images
Market value: $221.6 billion AI Score: 8.0Low Risk Score: 10.0AI Risk/Reward Score: 9.0Verizon (VZ, $53.52), the only telecommunications stock in the Dow Jones Industrial Average, has always been known more for defense than hot returns. But Danelfin’s AI platform’s reading of current conditions suggests the dividend stalwart will beat the market in Q1 without abandoning its low-beta ways.
An elite AI Score of 8.0 and a near-perfect 9.0 AI Risk/Reward Score suggest VZ’s recent strength is just getting started.
True, shares are off about 6% over the past 52 weeks, lagging the S&P 500 by roughly 28 percentage points. The new year, however, has been a different story, with investors dumping growth stocks in favor of value names. Indeed, VZ is up 3% for the year-to-date, vs. a loss of almost 3% for the broader market.
Looking farther out, the Street maintains a cautious stance, giving this bluest of blue-chip stocks a consensus recommendation of Hold. Four analysts rate VZ at Strong Buy, three say Buy, 21 have it at Hold and one calls it a Strong Sell.
Increased competition — notably from T-Mobile US (TMUS), which is approaching the two-year anniversary of its acquisition of Sprint — keeps some analysts on the sidelines. Bulls says VZ will power through, nevertheless.
“Despite the increasing competition in the U.S. wireless market, we believe Verizon is still well-positioned to gain share in the wireless market,” writes Truist Securities analyst Greg Miller (Buy).
As for the shorter term, the market’s rotation into value and Danelfin’s AI readings suggest VZ will continue to outperform in Q1.
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7. Allison TransmissionGetty Images
Market value: $4.1 billion AI Score: 9.0Low Risk Score: 9.0AI Risk/Reward Score: 9.0Longer-term investors should know that analysts, who generally operate on a 12-month timeline, give Allison Transmission (ALSN, $39.37) a consensus recommendation of Hold.
Tactical investors and traders, however, should still consider ALSN among the top stocks to watch in the short term, as Danelfin’s AI platform views the stock as a low-risk way to beat the market in Q1.
Shares in the world’s largest manufacturer of fully automatic transmissions for medium- and heavy-duty trucks are off about 10% over the past year. But the next few months should look very different, if Danelfin’s algos are correct. Three consecutive weeks of near-perfect AI Scores suggests a rally is in the offing for this name.
The stock has its fans on the Street longer term, too. Of the 11 analysts covering ALSN, three rate it at Strong Buy and one says Buy. Three more analysts say Hold, three have it at Sell and one calls it a Strong Sell.
Among the bulls, Oppenheimer’s Ian Zaffino rates shares at Outperform (the equivalent of Buy), citing ALSN’s strategic advantages.
“It holds the No. 1 position in several niche markets, boasts industry leading margins and faces limited competition,” the analyst writes. “Further, ALSN boasts favorable tax benefits and holds an enviable position with the industry on the cusp of a multi-year conversion of overseas vehicles to fully automated transmissions.”
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6. Western UnionGetty Images
Market value: $7.4 billion AI Score: 9.0Low Risk Score: 9.0AI Risk/Reward Score: 9.0Long-time market laggard Western Union (WU, $18.47) is at long last in an uptrend, and Danelfin’s AI platform expects more of the same in the months ahead — with limited downside risk to boot.
Near-perfect scores suggest WU stock can continue its recent momentum over the next 30 to 90 trading sessions, even if the Street is somewhat suspect of its longer-term prospects.
A proliferation of competition in the fintech sector is just one reason for analysts’ caution. After all, between entrenched players and startups, the digital payments landscape is littered with well-funded rivals, they say.
“We find the current share price and embedded expectations to be highly dependent on the assumption of WU being able to maintain its competitive position over the next decade or longer,” writes CFRA Research analyst Chris Kuiper (Hold). “While we think this is possible, it will require WU to catch up and defend against nimbler fintech rivals.”
CFRA Research is in the majority on the Street, which gives Western Union a consensus recommendation of Hold. Be that as it may, the stock has started 2022 in fine fashion.
Western Union’s stock is up about 2.6% year-to-date, beating the broader market by more than 5 percentage points. At the same time, it has a long history of being somewhat less volatile than the broader market.
Long-term investors might want to cool their heels on this name, but recent price action and Danelfin’s algos suggest WU could be among the better stocks to watch for tacticians and traders.
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5. KemperGetty Images
Market value: $4.0 billion AI Score: 10.0Low Risk Score: 8.0AI Risk/Reward Score: 9.0Kemper (KMPR, $62.91) stock is off to a fast start this year after a troubled 2021, and Danelfin projects even more market-beating returns in the months ahead — with limited downside risk.
Kemper is one of the largest writers of specialty personal lines of insurance in the U.S., with property casualty insurance accounting for the vast majority of its premiums. The issue with the company these days is that its PC insurance business is predominantly personal auto — and auto losses are rising due to a rebounding economy.
KMPR stock lost about a quarter of its value last year, but it’s up 8% so far in 2022. And with a perfect AI Score, Danelfin’s algos predict that shares are just getting started.
Wall Street is increasingly bullish on the name too, giving KMPR a consensus recommendation of Buy, albeit with somewhat mixed conviction. One analyst rates shares at Strong Buy, two say Buy and two have it at Hold.
“KMPR … is looking to contain losses and improve margins given the uncertain claims severity environment,” writes UBS Global Research analyst Brian Meredith (Buy).
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4. Encompass HealthGetty Images
Market value: $6.4 billion AI Score: 10.0Low Risk Score: 9.0AI Risk/Reward Score: 9.5Staffing shortages and wage pressures have weighed on shares in Encompass Health (EHC, $64.75) over the past year. Indeed, the provider of inpatient rehabilitation, home health and hospice care services has seen its stock lose more than 20% of its value over the past 52 weeks.
Happily for shareholders, Danelfin’s platform sees a reversal in the works. High AI scores across the board have EHC set up for market-beating returns over the next few months — all while serving up lower-than-average risk for tactical investors and traders.
Encompass gets its most favorable grades for technical strength, putting it among the best stocks to watch in the short term. Fundamental and sentiment scores, while positive, are somewhat more muted, but still point to upside ahead.
The Street is bullish on the name over the longer term, too. Easier year-over-year comparisons and a compelling valuation help make the investment thesis for EHC, which gets a consensus recommendation of Strong Buy, per S&P Global Market Intelligence.
Raymond James analyst John Ransom, for one, counts himself among the Street’s bulls.
“Encompass remains a leading player in the Inpatient Rehabilitation Facilities (IRF) and Home Health & Hospice segments, and is on the brink of unlocking value in the Home Health & Hospice segment amid its strategic review that is expected to conclude in the first half of 2022,” writes Ransom (Strong Buy).
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3. Activision BlizzardGetty Images
Market value: $50.0 billion AI Score: 10.0Low Risk Score: 9.0AI Risk/Reward Score: 9.5Shares in video game studio Activision Blizzard (ATVI, $64.17) have tumbled nearly 30% over the past year amid a workplace misconduct scandal, a disappointing launch for Call of Duty: Vanguard and other woes.
And yet Danelfin’s AI platform and Wall Street analysts alike see market-beating upside for ATVI in the months and year ahead.
With near-perfect scores for potential outperformance and low risk, Danelfin singles out Activision Blizzard as a top risk-reward play vs. the S&P 500 over the next 30 to 90 trading days. Consistently positive fundamental scores and a recent month-over-month improvement in sentiment indicators have ATVI poised to regain some of its 2021 losses, per Danelfin.
Meanwhile, the Street gives the stock a consensus recommendation of Buy, with fairly high conviction. Fifteen analysts rate ATVI at Strong Buy, eight say Buy, five have it at Hold and one says Strong Sell.
Whether you’re going by AI or analyst research, a beaten-down share price figures prominently in ATVI’s placement among the market’s top stocks to watch.
“Our Buy rating on the shares of Activision Blizzard is based on a positive industry outlook over the intermediate term, and valuations that are inexpensive relative to historical averages,” writes Stifel analyst Drew Crum.
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2. Barrick GoldGetty Images
Market value: $33.5 billion AI Score: 10.0Low Risk Score: 9.0AI Risk/Reward Score: 9.5Barrick Gold (GOLD, $18.83) gets a perfect AI Score — suggesting market-beating returns over the next 30 to 90 trading sessions — and a near-perfect Low Risk Score, which should allow tacticians and traders to sleep well at night.
Fundamental and technical strength more than offset more middling marks for sentiment, which sits at neutral rating of 5. Meanwhile, a Low Risk Score of 9.0 promises muted volatility relative to the broader market in the months ahead.
The Street is likewise bullish on the name, and that goes for well beyond Q1. GOLD snags a consensus recommendation of Buy, with fairly high conviction. Eleven analysts rate shares at Strong Buy, nine say Buy and five call them a Hold. Their average target price of $25.63 gives GOLD implied upside of about 35% in the next 12 months or so.
“We are maintaining our Buy rating on Barrick Gold based on our expectations for sustained strong gold prices in the coming quarters,” writes Argus Research analyst David Coleman. “As long as global economic uncertainty and virus fears are part of the market conversation, gold is likely to remain in demand.”
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1. AT&TGetty Images
Market value: $191.4 billion AI Score: 10.0Low Risk Score: 10.0AI Risk/Reward Score: 10.0There are not one but two stodgy ol’ telecommunication giants on Danelfin’s list of the top stocks to watch. AT&T (T, $26.80) gets perfect AI Scores across the board, making it Danelfin’s best stock for short-term outperformance with a minimum of risk.
The Street is coming around to the name too. Indeed, Morgan Stanley equity researchers recently added AT&T to their Fresh Money Buy List with an Overweight rating (the equivalent of Buy).
MS analyst Simon Flannery cites the telco’s “solid financial and operating outlook, attractive absolute and relative valuations and the Warner Media transaction to serve as a key catalyst to re-rate the stock as AT&T plans to provide more details on the deal structure in early 2022.”
AT&T sold its DirecTV business in August and is in the process of spinning off WarnerMedia, which is expected to be completed in the first half of this year.
Getting back to AI’s assessment of the stock, T has notched a perfect 10 AI Score for two consecutive months. It also scores high for technical strength, which has been in an uptrend for months. Those more than offset negative sentiment indicators, which currently score 2 out of 10 possible points.
Looking farther out, analysts have become incrementally more bullish on the name over the past three months, but still give AT&T’s stock a consensus recommendation of Hold.