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The AI Equity Update
Issue #10 | 10/5/25
Welcome
Welcome to this week's edition! We apply fundamental price-valuation methods together with our proprietary efficiency formulas to evaluate how well each stock works for capital. Using AI as a tool we deliver clear, fact-checked insights into companies across sectors. Each issue highlights valuation ranges, risk profiles, and efficiency ratings so you can navigate the market with discipline and precision.
What You'll Get Every Week
Macro Trends: A snapshot of the big economic picture and how it might affect stocks.
How to Understand Our Efficiency Score: A quick guide to our rating system.
Stock Evaluations: In-depth looks at 4-5 stocks, with key stats, stories, and action plans.
Quick Portfolio Overview: A summary table for easy reference.
Important Legal Notices and Disclaimers: The fine print to keep things real.
Macro Trends
The U.S. economy demonstrates resilience. Real GDP growth for Q3 2025 is estimated at 3.8%, while full-year projections are around 1.9%. Unemployment is forecasted at 4.34% for September. Core PCE inflation remained at 2.9% in August, exceeding the Federal Reserve's 2% target.
The Fed funds rate stands at 4.00%-4.25% following the September cut, with potential for further reductions in October. The 10-year Treasury yield is approximately 4.10%. High-yield credit spreads (OAS) are tight at 2.81%, indicating low default concerns.
Tariffs have generated $88 billion in revenue so far in 2025 and contributed to narrowing the goods trade deficit to $85.5 billion in August. This environment may support financial sector stability, whereas consumer discretionary, agriculture, and telecommunications sectors should monitor cost and demand fluctuations.
How to Understand Our Efficiency Score
Our Efficiency Score measures a stock's overall appeal based on liquidity, catalysts, and risk factors. It's scored out of 10 and helps you gauge if a stock is worth your time. Higher scores mean better efficiency for buying, holding, or trading. We adapt it from detailed analysis to keep things straightforward.
Score Range | Rating | What It Means |
|---|---|---|
0–4 | Weak | Risks are bigger than rewards; stay away or use little. |
5–6 | Fair | Okay balance but can be better; good for main investments. |
7–8 | Good | Strong setup; nice for short-term moves. |
9–10 | Excellent | Best kind; put more money here. |
Stock Evaluations
CarMax, Inc. (KMX): Leading Used Car Retailer
Key Stats
Net sales: $6.59 billion (last quarter).
Diluted EPS: $0.64.
Cash: $540 million; Long-term debt: $1.37 billion.
Efficiency Score: Equity: 6.0 (Fair); LEAP: 5.2 (Fair).
The Story CarMax is a big player in selling used cars, with a finance arm that helps buyers get loans. Last quarter, sales were soft due to lower unit sales, but margins held up at 10.9%. Earnings came in at $0.64 per share. Strengths include strong inventory management and omnichannel sales. Weaknesses: It's cyclical, tied to auto demand and credit quality. Overall, it's holding steady in a tough market.
What Could Spark a Rise
Better used-car supply and lower depreciation.
Improved consumer credit and affordability.
Stable securitization spreads for their finance unit.
Action Plan
Price Range | What to Do with Stocks | Options Idea |
|---|---|---|
≤ $45 | Buy | Buy calls |
$45 – $50 | Accumulate | N/A |
$50 – $55 | Hold | Covered calls |
$55 – $60 | Trim | Collar |
≥ $60 | Reduce | N/A |
Fair Value: $48 – $56. Upside from current ($46.42): About 3% to 21% (midpoint 12%).
Corteva, Inc. (CTVA): Ag Science Innovator
Key Stats
Net sales: $6.46 billion (Q2).
Diluted EPS: $1.92 (Q2).
Dividend yield: 1.2%.
Efficiency Score: Equity: 6.3 (Fair); LEAP: 5.6 (Fair).
The Story Corteva makes seeds and crop protection products for farmers. Q2 sales rose on volume and pricing, with margins improving from cost controls. But they're splitting into two companies by mid-2026: one for seeds, one for crop protection. This could unlock value, but there's uncertainty around debt and costs. Strengths: Strong pipeline and diversification. Weaknesses: Ag cycles and FX risks. The split news dropped the stock 9%.
What Could Spark a Rise
Smooth execution of the company separation.
Better farmer incomes boosting demand.
Favorable tax rulings and pro-forma details.
Action Plan
Price Range | What to Do with Stocks | Options Idea |
|---|---|---|
≤ $51 | Buy | Buy calls |
$51 – $57 | Accumulate | N/A |
$57 – $63 | Hold | Covered calls |
$63 – $69 | Trim | Collar |
≥ $69 | Reduce | None |
Fair Value: $54 – $66. Upside from current ($63.37): About -15% to 4% (midpoint -5%).
Goldman Sachs BDC (GSBD): Business Development Lender
Key Stats
NAV per share: $13.02.
Dividend: $0.51 (Q2, including specials).
Net investment income: $44.45 million (Q2).
Efficiency Score: Equity: 7.1 (Good); LEAP: 5.2 (Fair).
The Story GSBD lends to mid-sized companies, focusing on first-lien loans. Q2 income fell year-over-year due to yield normalization, but no non-accruals show good credit quality. NAV is $13.02, and it trades at a discount. Strengths: Strong coverage for base dividend, sponsor support. Weaknesses: Sensitive to rates and credit cycles.
What Could Spark a Rise
Sustained NII covering dividends.
Benign credit environment, no non-accruals.
Narrowing discount to NAV.
Action Plan
Price Range | What to Do with Stocks | Options Idea |
|---|---|---|
≤ $12 | Buy | Buy calls |
$12 – $14 | Accumulate | N/A |
$14 – $15 | Hold | Covered calls |
$15 – $17 | Trim | Collar |
≥ $17 | Reduce | N/A |
Fair Value: $13.7 – $15.3. Upside from current ($10.02): About 37% to 53% (midpoint 45%).
Wells Fargo Company (WFC): Major US Bank
Key Stats
Net income: $5.5 billion (Q2).
Diluted EPS: $1.60.
CET1 ratio: 11.1%.
Efficiency Score: Equity: 6.6 - (Fair); LEAP: 5.8 - (Fair).
The Story Wells Fargo is a big bank with consumer, commercial, and wealth services. Q2 earnings were strong at $1.60 EPS, with stable NII. Capital ratios are solid, above requirements. Strengths: Diversified revenues, healthy buffers. Weaknesses: NIM pressure from deposits, regulatory items. It's trading near fair value in a rate-cut environment.
What Could Spark a Rise
Progress on expense controls.
Benign credit losses, especially in CRE.
Easing deposit costs with rate cuts.
Action Plan
Price Range | What to Do with Stocks | Options Idea |
|---|---|---|
≤ $70 | Buy | Buy calls |
$70 – $75 | Accumulate | N/A |
$75 – $85 | Hold | Covered calls |
$85 – $95 | Trim | Collar |
≥ $95 | Reduce | N/A |
Fair Value: $75 – $87. Upside from current ($80.50): About -7% to 8% (midpoint 1%).
Verizon (VZ): Telecom Giant
Key Stats
Total revenues: $34.5 billion (Q2).
Diluted EPS: $1.18.
Dividend yield: 6.3%.
Efficiency Score: Equity: 6.9 (Fair); LEAP: 6.0 (Fair).
The Story Verizon provides wireless and wireline services. Q2 revenues grew 5.2%, driven by equipment and service. FCF guidance raised to $19.5-20.5 billion. Strengths: Low churn, strong FWA adds. Weaknesses: High debt, capex needs. It's a defensive play with a juicy dividend.
What Could Spark a Rise
Continued FWA and fiber growth.
Better churn control amid competition.
Successful debt management.
Action Plan
Price Range | What to Do with Stocks | Options Idea |
|---|---|---|
≤ $42 | Buy | Buy calls |
$42 – $47 | Accumulate | None |
$47 – $52 | Hold | Covered calls |
$52 – $57 | Trim | Collar |
≥ $57 | Reduce | None |
Fair Value: $46 – $54. Upside from current ($43.67): About 5% to 24% (midpoint 15%).
Quick Portfolio Overview
Fair Value: $46 – $54. Upside from current ($43.67): About 5% to 24% (midpoint 15%).
Quick Portfolio Overview
Stock | Efficiency Score | Fair Value Range | Upside Potential (Midpoint) | Current Action |
|---|---|---|---|---|
KMX | Equity: 6.0 - Solid | $48 – $56 | 12% | Accumulate |
CTVA | Equity: 6.3 - Solid | $54 – $66 | -5% | Trim |
GSBD | Equity: 7.1 - Solid | $13.7 – $15.3 | 45% | Buy |
WFC | Equity: 6.6 - Solid | $75 – $87 | 1% | Hold |
VZ | Equity: 6.9 - Solid | $46 – $54 | 15% | Accumulate |
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Important Legal Notices and Disclaimers
The information in this newsletter is for informational purposes only and does not constitute investment advice, financial advice, trading advice, or any other sort of advice. Past performance is not indicative of future results. All investments involve risk, including the possible loss of capital. You should do your own research and consult with a qualified financial advisor before making any investment decisions. We are not responsible for any losses incurred based on this content.
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