While the Media Obsesses Over AI, Bulls Are Focused on These Stocks
This is a true stock picker's market. Here are two names I like.
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Disappointing earnings from Oracle (ORCL) undermined Fed Chair Jerome Powell's dovish comments, but the good news is that it is triggering more decisive rotational action that may benefit stock pickers looking for new themes and ideas.
The AI sector is no longer the market leader as cutthroat competition takes hold. The latest development is a deal between Disney (DIS) and OpenAI to provide content for Sora, which is OpenAI’s short-form generative AI Video platform. There will very likely be more of these deals as attention shifts from infrastructure and chips to practical applications.
It is going to take a while for the AI sector to digest these changes, but the good news is that talk of a bubble is being replaced by talk of competition, which means there will be much more focus on fundamentals rather than just the buzzword "AI."
While the dovish Fed does set the stage for some good seasonal action in the last few weeks of the year, there will be a premium on good stock selection. This is a true stock picker's market with small-caps leading. Breadth is running about 57% positive, and the Russell 2000 (IWM) is up 0.4%, while the Nasdaq 100 (QQQ) is down 0.8%.
I have a fair amount of cash on hand to put to work, but I’m staying very selective with my buys and starting with smaller positions.
The other day, I mentioned Alto Neuroscience (ANRO). This is a good example of the sort of chart that I like to see. It has a very solid base of support around $12.50, and after a little volatility, it is inching higher. The stock should test recent closing highs around $15.50, and then it will be a question of pressing in anticipation of a breakout or taking some profits.
Another name I’ve discussed is PureCycle Technologies (PCT) . It finally bounced back after a deep pullback and has support around the $9 area. It is the sort of stock that should attract interest if there is continued strength in the small-cap sector.
Most of the business media is focused on the negatives in the AI sector and more weakness in the cryptocurrency group. What they are missing is the positive action in individual stocks. The list of stocks moving up more than 10% Thursday was quick and short initially, but it is expanding now.
This is a good market for aggressive trading, but make sure you are focusing on good charts and fundamentals, and not the same old stocks that receive endless coverage in the media.
At the time of publication, Rev Shark was long ANRO and PCT.
