Hey there! Welcome to the second edition of The AI Equity Update. If you're into stocks and investing, this newsletter is here to cut through the noise and give you straightforward ideas that could help you make better decisions. We're keeping things simple—no fancy Wall Street talk without explanations—so even if you're just starting out in college, you can follow along.
What You'll Get Every Week
Professional investors (people who manage money for a living) have tons of data at their fingertips. The real trick? Turning all that info into smart choices without risking too much money or time.
That's where we come in. Every Monday, we'll break it down like this:
Quick Macro Check: A super-fast look at big-picture economic stuff, like interest rates and market trends. Just enough to help you understand the context for trades, without overwhelming you.
Four Stock Ideas: We pick companies where the price seems too low compared to their value, and there's something exciting happening soon that could push the price up. We focus on ideas where we can control the risks carefully.
Our Special Efficiency Score: This is our custom tool (like a smart calculator) that looks at potential profits, risks, how easy it is to buy/sell, and how it fits with other investments. It boils everything down to one easy number, compared to similar stocks over the last 60 days.
Action Plans: Simple charts with price ranges, what to do (buy, sell, or hold), and tips on using options (like insurance for your stocks) to make it easier to act.
If you're busy but want to stay sharp on investing, this is for you. Let's dive in!
Macro Trends in One Quick Graph
Think of the "macro" as the big economic weather report that affects all stocks.
The 2s-10s yield curve (a way to measure interest rates on short vs. long-term government bonds) is now at +54 basis points (uninverted). (Uninverted means long-term rates are higher than short-term ones, which can signal economic growth ahead.) Markets expect about 125 basis points (1.25%) of rate cuts by the end of 2026, based on SOFR futures (tools that predict future interest rates).
Investment-grade credit spreads (the extra interest companies pay to borrow money) are currently around 91 basis points for BBB-rated bonds. This is stable but has narrowed slightly recently, reflecting improved investor confidence without major disruptions.
Fed Minutes Update: From the July 29-30 FOMC meeting, the Federal Reserve held interest rates steady at 4.25%-4.50% for the fifth consecutive time, emphasizing uncertainty in the economic outlook while seeking to balance maximum employment and 2% inflation goals. A healthy debate among members could pave the way for future rate cuts, though full minutes will be released later in August.
Tariffs Developments: Recent modifications to reciprocal tariff rates include keeping the "universal" tariff on incoming US goods at 10%, with new changes to the Harmonized Tariff Schedule set to take effect around August 7, impacting dozens of countries. These tariffs are potentially hitting sectors like clothing hardest.
How to Understand Our Efficiency Score
We rate each idea on a scale that's easy to grasp. It's normalized (adjusted) to compare against similar stocks' average over 60 trading days.
Score Range | What It Means | How We Suggest Handling It |
|---|---|---|
3.0 or higher | Top-tier: Amazing potential return for the risk | Go all in, maybe add options for extra boost |
1.5 – 2.9 | Solid: Better than average | Main stock position, with some options if it fits |
0.8 – 1.4 | Okay: Nothing special | Just stocks, keep positions small |
Below 0.8 | Weak: Steer clear or protect yourself | Don't add new money; hedge if you own it |
This score comes from our Monte-Carlo model—a fancy simulation that runs thousands of "what-if" scenarios to predict outcomes.
Our Top 4 Stock Ideas This Week
Here are four companies we think are worth a look. For each, we'll explain the basics, why it's a good deal now, what could make the price move, and a simple plan to act. We've kept metrics simple: P/E is price-to-earnings (how cheap the stock is based on profits), cash flow is money the company generates, etc. All data updated as of early August 2025.
HCA Healthcare (HCA): A Hospital Operator That's Undervalued Amid Steady Growth
Key Stats:P/E (trailing 12 months): 14.5x (cheaper than peers and historical range)
Trailing 12-month EPS: $22.52 (strong, with Q1 showing $6.45 diluted EPS)
Efficiency Score: 1.8x for stocks (Solid); 1.6x for Jan 2027 $380 call options (Solid)
The Story: HCA operates 192 hospitals and an extensive outpatient network across 20 states and England. The stock has been trading at a discount despite +5.7% y/y revenue growth to $18.3B in Q1, driven by admissions and ED visits. Costs are controlled (salaries at 43.6% of revenue), and the company has a $8.3B buyback authorization remaining after repurchasing 7.8M shares. Leverage is high (total debt $44.6B), but cash flow remains solid at $1.7B CFO in Q1.
What Could Spark a Rise: Strong Q2 earnings with volume growth and cost stabilization; progress on capacity expansions and AI efficiency initiatives; accelerated buybacks as outpatient trends normalize.
Action Plan:
Price Range
What to Do with Stocks
Options Idea
Max Portfolio Weight
Under $320
Buy aggressively
Sell cash-secured Jan 2027 $320 puts
5% in stocks
$321-360
Build position
Buy Jan 2027 $380 calls
5%
$361-420
Hold/Sell 25%
Close out calls
-
Over $420
Hedge or sell
-
-
Fair value: $320-$420 (We believe weighted fair value to be ~$390).
Genuine Parts Co. (GPC): An Auto Parts Distributor with Margin Improvement Potential
Key Stats:P/E (trailing 12 months): 23x (higher than average but supported by yield)
Trailing 12-month adjusted EBITDA: $1.9B (with Q2 sales up 3.4% y/y)
Efficiency Score: 1.3x for stocks (Okay); 2.2x for Jan 2027 $150 call options (Solid)
The Story: GPC is a leading distributor of automotive and industrial parts, with Q2 sales at $6.2B (+3.4% y/y) and gross margins expanding 110 bps on better pricing and sourcing. Adjusted EPS was $2.10, down y/y due to interest and inflation, but restructuring ($400-430M through 2025) is on track. Leverage is moderate at 2.3x net debt/EBITDA, with a 3.1% dividend yield. YTD CFO was lower at $169M due to inventory, but FY25 EPS guide is $7.75 midpoint.
What Could Spark a Rise: Restructuring delivering >100 bps margin lift; industrial segment offsetting auto softness; debt reduction and yield appeal in a lower-rate environment.
Action Plan:
Price Range
What to Do with Stocks
Options Idea
Max Portfolio Weight
Under $120
Buy aggressively
Sell Jan 2027 $110 puts
5% in stocks
$120-135
Build position
Buy Jan 2027 $150 calls
5%
$135-150
Hold/Sell 25%
Sell Jan 2027 $155 covered calls
-
Over $150
Hedge or sell
-
-
Fair value: $120-$150 (We believe weighted fair value to be ~$142).
Alphabet Inc. (GOOGL): A Tech Giant with AI-Driven Cloud Growth
Key Stats:P/E (trailing 12 months): 20.6x (below historical averages for growth profile)
Trailing 12-month FCF: $50B (with Q2 revenue up 14% y/y to $96.4B)
Efficiency Score: 3.13x for stocks (Top-tier); 1.92x for Jan 2027 $200 call options (Solid)
The Story: Alphabet's core search and YouTube ads grew 12-13% y/y in Q2, while Cloud surged 32% to positive 20.7% margins and a $106B backlog. Net margin hit 29.3%, with $85B FY25 capex guide for AI data centers. Net cash is strong at $53.5B, but antitrust risks loom (DOJ remedies in August). The dividend is new at 0.43% yield, and shares trade at a discount to peers despite ROE strength.
What Could Spark a Rise: Cloud backlog conversion and AI integrations boosting margins; favorable antitrust outcomes preserving TAC deals; subs and DR ad growth amid macro recovery.
Action Plan:
Price Range
What to Do with Stocks
Options Idea
Max Portfolio Weight
Under $175
Buy aggressively
Buy Jan 2027 $200 calls
5% in stocks
$175-185
Build position
Increase Position
5%
$185-230
Hold
$230-250
Trim
Sell covered calls at $240
-
Over $250
Hedge or sell
-
-
Fair value: $170-$230 (We believe weighted fair value to be ~$209).
Enterprise Products Partners L.P. (EPD): A Midstream MLP with High Yield and Fee-Based Stability
Key Stats:P/E (trailing 12 months): 11.8x (attractive for yield play)
Trailing 12-month DCF: $8B annualized (1.7x coverage)
Efficiency Score: 1.1x for stocks (Okay); 0.12x for Jan 2027 $25 call options (Weak)
The Story: EPD is a fee-based midstream operator with 80% of margins from tariffs/ship-or-pay. Q1 revenue rose 4.4% y/y to $15.4B on NGL volumes, with $2B DCF and $1.1B capex (70% growth). $7.6B project backlog through 2026 focuses on Permian, with leverage at 3.1x net debt/EBITDA. Distributions yield 6.7% at $0.535 quarterly, but liquidity is thin (current ratio 0.66x).
What Could Spark a Rise: Execution on $7.6B growth projects and Permian expansions; widening NGL spreads and hedging gains; policy stability on methane fees and permits.
Action Plan:
Price Range
What to Do with Stocks
Options Idea
Max Portfolio Weight
Under $28
Buy aggressively
Add Jan 2027 $22 calls if cheap
5% in stocks
$28-34
Build position
-
5%
$34-38
Sell 25%
Close calls
-
Over $38
Hedge or sell
-
-
Fair value: $35-$38 (We believe weighted fair value to be ~$37).
Quick Portfolio Overview
If we built a sample portfolio with these ideas, here's how it might look (as a % of total investments):
Ticker | Stocks (% of Portfolio) | Options (% of Portfolio) | Expected Upside* |
|---|---|---|---|
HCA | 4.0 | 0.3 | +9% |
GPC | 3.0 | 0.5 | +6% |
GOOGL | 5.0 | - | +9% |
EPD | 5.0 | - | +14% |
Total | 17% | 0.8% | +9.5% |
*Based on the middle of our fair value ranges.
Important Legal Notices and Disclaimers
This newsletter is for informational and educational purposes only. It does not constitute investment advice, financial advice, trading advice, or any other kind of advice, and you should not treat any of the content as such. We are not registered investment advisors, and nothing here is meant to be a recommendation to buy, sell, or hold any security. All ideas, opinions, and analyses are based on publicly available information and our own views, which may change without notice.
Investing in stocks, options, or other securities involves significant risks, including the potential loss of your entire investment. Past performance is not indicative of future results, and there are no guarantees of profits. Always do your own research, consider your financial situation, and consult with a qualified professional (like a financial advisor or broker) before making any investment decisions.
We may have positions in the securities mentioned, but we disclose no specific affiliations or compensation related to this content. Forward-looking statements (like expected upside or catalysts) are opinions and subject to uncertainties that could cause actual results to differ materially. Use this information at your own risk—we're not liable for any losses or damages from relying on it. If you're unsure about anything, seek independent advice.