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The AI Equity Update
Issue #12| 10/19/25
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 U.S. economy in October 2025 is holding up but faces some challenges. The 10-year Treasury yield is at ~3.99%, which means borrowing costs are steady but growth might slow. The Federal Reserve cut interest rates by 0.25% in September to 4.00%-4.25%, trying to keep inflation (around 2.9%) and jobs (unemployment at ~4.3%) in check. Job growth is slowing (~152,000 new jobs per month), which could mean less spending power for consumers. GDP growth for Q3 is expected around 2.5%, decent but not booming, with housing and government spending dragging.
Globally, things are tense. China’s new rules (starting December 1) limit exports of rare-earth metals, critical for tech and electric vehicles, which could raise prices and hurt companies like those making chips or cars. The U.S. trade deficit dropped to $85.5B in August, but talk of 100% tariffs on Chinese goods could shake things up. High government debt ($1.06T deficit) and conflicts in places like the Indo-Pacific add risks. Banks and everyday brands might stay steady, but tech and manufacturing stocks could get rocky—stick with safe bets or spread your investments.
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. |
Stock Evaluations
PNC Financial Services Group (PNC): Big Regional Bank
Key Stats:
Price: ~$179; Dividend Yield: ~3.8% ($6.80/year).
Return on Equity: 12.2% (good profits); Net Interest Margin: 2.8% (earnings from loans).
Capital Ratio: 10.5% (strong financial cushion).
Efficiency Score: Equity 6.6/10 (Fair); LEAP 5.5/10 (Fair, options available but low volume).
The Story: PNC is a big bank serving people and businesses. In Q2 2025, it earned ~$5.7B and kept loan losses low, showing strength. Its solid capital (10.5%) means it’s stable, but it could struggle if interest rates drop fast or if commercial real estate loans go bad, especially with trade tensions raising costs.
What Could Spark a Rise:
More Fed rate cuts boosting loan demand.
Fewer loan defaults saving money.
Buying smaller banks to grow.
Action Plan:
Price Range | What to Do with Stocks | Options Idea | Max Portfolio Weight |
|---|---|---|---|
≤ $165 | Buy | Long calls | 2.5% |
$165–$180 | Accumulate | Covered calls | 2.0% |
$180–$200 | Hold | None | 1.5% |
$200–$220 | Trim | Collar | 1.0% |
≥ $220 | Reduce | Put spreads | 0.5% |
Fair Value: $190–$210 (mid $200, ~11% gain from ~$179).
Graham Holding Company (GHC): Mix of Businesses
Key Stats:
Price: ~$913; Price/Earnings: ~7.5× (cheap for its profits).
Net Cash: ~$311M; Dividend Yield: ~0.8%.
Operating Margin: 6.0% (decent profits from sales).
Efficiency Score: Equity 7.2/10 (Solid); LEAP 5.2/10 (Fair, options tough to trade).
The Story: GHC runs education, healthcare, and media businesses. In Q2 2025, sales grew 3% to $1.22B, with education and healthcare doing well, though TV ads were weak. Its $311M cash pile and low price make it a bargain, but it’s hard to trade (low volume) and TV ads could stay soft if trade issues cut ad budgets.
What Could Spark a Rise:
2026 election ads boosting TV income.
More students signing up for education programs.
Healthcare running more smoothly.
Action Plan:
Price Range | What to Do with Stocks | Options Idea | Max Portfolio Weight |
|---|---|---|---|
≤ $1,210 | Buy | Long calls | 2.0% |
$1,210–$1,350 | Accumulate | Covered calls | 1.5% |
$1,350–$1,490 | Hold | None | 1.0% |
$1,490–$1,635 | Trim | Collar | 0.5% |
≥ $1,635 | Reduce | Put spreads | 0.0% |
Fair Value: $1,270–$1,570 (mid $1,420, ~55% gain from ~$913).
MP Materials Corp. (MP): Rare Earths for Tech
Key Stats:
Price: ~$81; Q2 Revenue: $57.4M.
Net Debt: ~$155.7M; Cash & Investments: $753.7M.
Beta: 2.08 (very volatile).
Efficiency Score: Equity 6.0/10 (Fair); LEAP 5.6/10 (Fair, options nearly nonexistent).
The Story: MP mines rare earths, key for electric cars and tech gadgets. Q2 sales fell to $57.4M, with a $41.4M loss due to spending on new projects. U.S. government contracts help, and China’s new export limits could push prices up, but it’s risky if they can’t deliver on new factories, especially with tariffs looming.
What Could Spark a Rise:
Higher rare-earth prices from China’s rules.
New factories making money.
More U.S. support for local production.
Action Plan:
Price Range | What to Do with Stocks | Options Idea | Max Portfolio Weight |
|---|---|---|---|
≤ $70 | Buy | Long calls | 2.0% |
$70–$75 | Accumulate | Covered calls | 1.5% |
$75–$85 | Hold | None | 1.0% |
$85–$90 | Trim | Collar | 0.5% |
≥ $90 | Reduce | Put spreads | 0.0% |
Fair Value: $68–$92 (mid $80, ~-1% loss from ~$81).
Conagra Brands Inc. (CAG): Everyday Foods with Income
Key Stats:
Price: ~$18.59; Dividend Yield: ~7.5% ($1.40/year).
Q1 Sales: $2.63B (down 5.8% from last year).
Net Debt: ~$7.54B.
Efficiency Score: Equity 6.6/10 (Fair); LEAP 5.7/10 (Fair, options available but low volume).
The Story: Conagra makes foods like frozen dinners and snacks. Sales dropped 5.8% to $2.63B after selling some brands, but core sales were steady (-0.6%). Its big dividend is great for income, but high debt and rising food costs (worse with tariffs) hurt profits. They’re working to cut debt.
What Could Spark a Rise:
Cheaper food ingredients boosting profits.
Ads and deals bringing back customers.
Selling more assets to pay off debt.
Action Plan:
Price Range | What to Do with Stocks | Options Idea | Max Portfolio Weight |
|---|---|---|---|
≤ $18 | Buy | Long calls | 2.5% |
$18–$20 | Accumulate | Covered calls | 2.0% |
$20–$22 | Hold | None | 1.5% |
$22–$24 | Trim | Collar | 1.0% |
≥ $24 | Reduce | Put spreads | 0.5% |
Fair Value: $19–$23 (mid $21, ~13% gain from ~$18.59).
Smith & Wesson Brands (SWBI): Firearms Maker
Key Stats:
Price: ~$9.92; Q1 Revenue: $85.1M (down 3.7%).
Price/Earnings: ~40.7×; Dividend Yield: ~5.2%.
Net Debt: ~$108M.
Efficiency Score: Equity 3.8/10 (Weak); LEAP 3.1/10 (Weak, options nearly nonexistent).
The Story: SWBI makes guns, but demand goes up and down. Q1 sales fell 3.7% to $85.1M, with a $3.4M loss due to weak sales and too much inventory ($202.8M). New laws or bad press could hurt, and trade issues might raise costs. The dividend helps, but it’s a risky stock.
What Could Spark a Rise:
New gun models driving sales.
Clearing out extra inventory.
No new restrictive laws.
Action Plan:
Price Range | What to Do with Stocks | Options Idea | Max Portfolio Weight |
|---|---|---|---|
≤ $7 | Buy | Long calls | 2.0% |
$7–$8 | Accumulate | Covered calls | 1.5% |
$8–$9 | Hold | None | 1.0% |
$9–$10 | Trim | Collar | 0.5% |
≥ $10 | Reduce | Put spreads | 0.0% |
Fair Value: $7–$9 (mid $7.85, ~-21% loss from ~$9.92).
Quick Portfolio Overview
Ticker | Price | Fair Value Range | Efficiency Score (Equity/LEAP) | Rating | Max Weight |
|---|---|---|---|---|---|
PNC | ~$179 | $190–$210 | 6.6/5.5 | Fair | 1.5% |
GHC | ~$913 | $1,270–$1,570 | 7.2/5.2 | Solid | 1.5% |
MP | ~$81 | $68–$92 | 6.0/5.6 | Fair | 1.0% |
CAG | ~$18.59 | $19–$23 | 6.6/5.7 | Fair | 2.0% |
SWBI | ~$9.92 | $7–$9 | 3.8/3.1 | Weak | 0.5% |
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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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