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The AI Equity Update
Issue #12| 10/12/25
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 simple overview of the economy and how it could impact stocks.
How to Understand Our Efficiency Score: An easy guide to our stock rating system.
Stock Evaluations: Clear breakdowns of 4-5 stocks, with stats, background, what might make them go up, and what to do.
Quick Portfolio Overview: A table summing up the stocks for quick checks.
Macro Trends
The US economy is growing steadily, but trade fights are creating some worries. The Treasury yield curve—think of it as a graph showing interest rates on government loans for different time lengths—is mostly sloping up as of October 10, 2025. The 1-year rate is about 3.61%, 2-year at 3.53%, 5-year at 3.66%, 10-year at 4.05%, and 30-year at 4.63%. This "swoosh" shape (a small dip early, then rising) suggests okay growth ahead, but watch the short end for hints of caution. The Federal Reserve (the Fed, which controls US interest rates) cut rates by 25 basis points in September to 4.00%-4.25%. Officials are debating more cuts because inflation and jobs look balanced.
Credit spreads measure extra interest companies pay to borrow compared to safe government bonds. They're staying low and steady: AAA (super safe) at 0.49%, BBB (still good) at 0.85%, and CCC (riskier) at 7.75% as of October 8. This means investors aren't too worried about companies defaulting. GDP growth—the total value of everything made and sold in the US—for Q3 2025 is estimated at 3.8%, showing strong spending by people and businesses. Unemployment in September is around 4.3%, up a bit, meaning the job market is cooling but not crashing. Inflation, how much prices rise, is low: September CPI (a key measure) nowcast is about 0.3% monthly, with yearly around 2.9%—close to the Fed's 2% goal.
Trade policy is getting intense. In early October, President Trump threatened 100% tariffs (extra taxes) on Chinese goods to fight back against China's new limits on exporting rare earth minerals. China says these limits are just smart resource management. Tariffs like this aim to protect US jobs and cut reliance on China, but they can raise prices for everyone. Rare earth minerals are special elements used in tech—they make strong magnets, help in chemical reactions, and create glowing effects. They're key for phones, electric cars, wind turbines, solar panels, weapons, and green energy tech. China makes most of the world's supply, so limits could mess up US supply chains, hike costs for gadgets and renewables, and push for more US mining. This might help energy stocks tied to infrastructure but add price swings for oil and gas.
The US trade deficit (we import more than export) shrank to $85.5 billion in August. The federal budget deficit (government spends more than it takes in) hit $1.8 trillion for FY 2025, with over $1 trillion just on debt interest. This setup likes stocks with steady payouts, like energy pipelines, but add watch for trade effects on fuel demand.
How to Understand Our Efficiency Score
Our Efficiency Score shows how well a stock's price matches its real value, using math like future cash predictions and comparisons to similar companies. Scores go from 0-10:
Score Range | Rating | What It Means |
|---|---|---|
9.0-10.0 | Exceptional | Great deal; lots of potential with little risk. |
7.0-8.9 | Solid | Good balance; worth holding long-term. |
5.0-6.9 | Fair | Okay for now; need good news to improve. |
3.0-4.9 | Weak | Not great; more risks than rewards. |
0-2.9 | Poor | Stay away; too expensive or troubled. |
We base this on deep stock and options checks, but keep it simple.
Stock Evaluations
The Williams Companies (WMB): Natural Gas Pipeline Powerhouse
Key Stats
Q2 2025 revenue hit $2.78 billion, up 19% from last year thanks to more demand for services.
Net income of $546 million, or $0.45 per share.
Yearly dividend of $2.00 per share, giving a 3.1% yield (like interest on your investment).
Efficiency Score: Equity - Fair (6.0/10), LEAP - Fair (5.2/10)
The Story Williams runs big pipelines that carry natural gas across the US—about one-third of what the country uses. They make money from long-term deals that keep cash coming in steady, even if energy prices jump around. Lately, they've grown sales and raised their dividend, showing they're confident in more need for gas in power plants and exports. Good points: Secure contracts and building more pipes. Downsides: Lots of debt ($24.7 billion after cash) and rules on environment or safety could slow them.
In short, Williams has reliable income in a field boosted by clean energy shifts, but they need to handle projects well and watch interest rates.
What Could Spark a Rise
Good work on new pipes and keeping costs down as gas demand grows.
Lower interest rates to make debt cheaper.
Wins on government approvals for pipes and emissions.
Action Plan
Price Range | What to Do with Stocks | Options Idea | Max Portfolio Weight |
|---|---|---|---|
Below $50 | Buy a lot | Buy calls to bet on rises | 8% |
$50-$60 | Add shares on drops | None | 6% |
$60-$65 | Hold what you have | Sell calls on your shares for extra cash | 5% |
$65-$70 | Sell some | Buy puts to protect | 4% |
Above $70 | Sell more | None | 3% |
Fair value range: $55-$65 (middle $61). From current price of $63.66, about -4% to middle, but okay to hold.
Willis Towers Watson (WTW): Global Insurance Broker and Advisor
Key Stats
Q2 2025 revenue $2.26 billion, with 5% real growth (ignoring sales of parts).
Earnings per share $3.32, profit margin up to 16.3%.
Yearly dividend $3.64, 1.1% yield.
Efficiency Score: Equity - Fair (6.9/10), LEAP - Fair (6.0/10)
The Story WTW helps companies with insurance, risks, employee benefits, and hiring advice around the world. They earn from fees and commissions. Recent numbers show better profits from cost cuts, even if total sales were flat after selling a unit. Strengths: Mix of services and loyal customers help in tough times. Weak spots: Lower insurance prices or buying other firms could cause issues.
They're set for growth as companies deal with risks like hacks or weather, but keeping high profits is key.
What Could Spark a Rise
More savings from efficiency plans.
Steady insurance prices and keeping clients.
Smart small buys in main areas.
Action Plan
Price Range | What to Do with Stocks | Options Idea | Max Portfolio Weight |
|---|---|---|---|
Below $315 | Buy a lot | Buy calls for growth | 8% |
$315-$350 | Add shares | None | 6% |
$350-$390 | Hold | Sell calls on shares | 5% |
$390-$425 | Sell some | Use collars to hedge | 4% |
Above $425 | Sell more | None | 3% |
Fair value range: $355-$385 (middle $370). From current price of $349.93, about 6% up to middle.
Exxon Mobil (XOM): Integrated Energy Giant
Key Stats
Q2 2025 sales $81.5 billion.
Earnings per share $1.64 in Q2, net income $7.1 billion.
Dividend yield 3.55%, plus big share buybacks.
Efficiency Score: Equity - Fair (6.7/10), LEAP - Fair (6.0/10)
The Story Exxon does it all in oil: finding, refining, and chemicals. They have cheap sources like Permian Basin and Guyana, balancing price ups and downs. Lately, strong cash ($24.5 billion year-to-date) and $13.5 billion savings since 2019 fund dividends and buying back stock. Strengths: Huge size and project skills. Weaknesses: Oil price changes and green rules like carbon limits.
They're ready for ongoing energy needs with smart investments, but watch refining profits.
What Could Spark a Rise
Higher oil/gas prices from world events or more demand.
Good starts on big projects in key areas.
Keep paying dividends and buying back shares.
Action Plan
Price Range | What to Do with Stocks | Options Idea | Max Portfolio Weight |
|---|---|---|---|
Below $105 | Buy a lot | Buy calls on price jumps | 8% |
$105-$115 | Add shares | None | 6% |
$115-$130 | Hold | Sell calls on shares | 5% |
$130-$140 | Sell some | Use collars to protect | 4% |
Above $140 | Sell more | None | 3% |
Fair value range: $110-$135 (middle $122). From current price of $110.73, about 10% up to middle.
Occidental Petroleum (OXY): Oil and Gas Exploration Leader
Key Stats
Q2 2025 sales $6.41 billion.
Earnings per share $0.26 (adjusted $0.39).
Dividend yield about 2.1%.
Efficiency Score: Equity - Fair (6.8/10), LEAP - Fair (5.9/10)
The Story Oxy drills for oil and gas, strong in Permian after buying CrownRock. They also have pipes and chemicals, but selling OxyChem for $9.7 billion will cut debt and focus on drilling. Q2 had lower prices but more output. Strengths: Cost control and price hedges. Weaknesses: High debt ($21.4 billion net) and more risk after sale makes them oil-heavy.
Cutting debt below $15 billion could help in good oil markets, but price drops hurt.
What Could Spark a Rise
Finish debt cut from chemical sale.
Oil stays over $60 a barrel.
Strong returns on main drilling projects.
Action Plan
Price Range | What to Do with Stocks | Options Idea | Max Portfolio Weight |
|---|---|---|---|
Below $45 | Buy a lot | Buy calls on oil rises | 8% |
$45-$50 | Add shares | None | 6% |
$50-$56 | Hold | Sell calls on shares | 5% |
$56-$58 | Sell some | Use collars to protect | 4% |
Above $61 | Sell more | None | 3% |
Fair value range: $45-$62 (middle $53). From current price of $42.15, about 26% up to middle.
Quick Portfolio Overview
Ticker | Current Price | Fair Value Range | Upside to Midpoint | Efficiency Score |
|---|---|---|---|---|
WMB | $63.66 | $55-$65 | -4% | Equity - Fair (6.0), LEAP - Fair (5.2) |
WTW | $349.93 | $355-$385 | 6% | Equity - Fair (6.9), LEAP - Fair (6.0) |
XOM | $110.73 | $110-$135 | 10% | Equity - Fair (6.7), LEAP - Fair (6.0) |
OXY | $42.15 | $45-$62 | 26% | Equity - Fair (6.8), LEAP - Fair (5.9) |
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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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