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The AI Equity Update
Issue #13| 10/26/25
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 late October 2025 shows resilience amid uncertainties. The 10-year Treasury yield closed at 4.02% on October 24, indicating steady borrowing costs but signaling potential growth slowdowns. The Federal Reserve is widely expected to cut rates by 25 basis points to 3.75%-4.00% at its upcoming October 28-29 meeting, aiming to support jobs and curb inflation. Core PCE inflation stood at 2.9% year-over-year in August (latest available), above the 2% target but cooling, while the unemployment rate held at 4.3% in August. Job growth slowed to an average of ~29,000 per month over the summer, reflecting a cooling labor market. Q3 GDP growth estimates vary, with Atlanta Fed at 3.9% and Philadelphia Fed at 1.3%, boosted by consumer spending but pressured by trade. The August trade deficit narrowed to $85.5B, a positive for growth, but proposed tariffs on tech imports (up to 100% on semiconductors) could raise costs for chipmakers. The TWD/USD rate is ~30.80, a strong TWD pressuring exporters. Retail may see higher input costs, while cash-rich firms offer stability.
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
Abercrombie & Fitch (ANF): Trendy Retail with Cash Power
Key Stats
Q2 2025 sales: $1.209B, up 7% from last year.
Net cash: $603.5M, no debt.
Buybacks: $251M in H1 2025.
Efficiency Score: Equity 7.4/10 (Solid); LEAP 5.8/10 (Fair, options limited).
The Story: Abercrombie & Fitch sells trendy clothes through its namesake brand and Hollister. Q2 sales grew 7% to $1.209B, with strong 15% profit margins. Its $603M cash and no debt make it stable, but fashion shifts, tariffs (25% of sales are international), and $1.1B in leases are risks. What Could Spark a Rise:
Big holiday sales, especially online.
Better inventory control boosting profits.
New stores growing the brand.
Action Matrix:
Price Range | What to Do with Stocks | Options Idea | Max Portfolio Weight |
|---|---|---|---|
≤ $90.8 | Buy | Long calls | 2.5% |
$90.8–$101.7 | Accumulate | Covered calls | 2.0% |
$101.7–$112.4 | Hold | None | 1.5% |
$112.4–$122.9 | Trim | Collar | 1.0% |
≥ $122.9 | Reduce | Put spreads | 0.5% |
Fair Value: $102–$112 (mid $107, ~56% gain from $68.48).
Taiwan Semiconductor (TSM): AI Chip Giant with High Price
Key Stats
Q2 2025 revenue: NT$933.8B (~$30B USD), up 38.6%.
Net cash: NT$519B, no major debt.
H1 2025 profit: NT$758.2B (~$24.2B USD).
Efficiency Score: Equity 5.8/10 (Fair); LEAP 5.8/10 (Fair).
The Story: TSMC makes chips for AI, phones, and more, serving giants like NVIDIA and Apple. Q2 revenue jumped 38.6%, driven by AI chip demand. Its Arizona fab adds U.S. capacity, but heavy spending (NT$628B in H1) and a strong Taiwanese dollar hurt profits. Big clients (~50% of sales) are a risk. What Could Spark a Rise:
Growing AI chip orders for 3nm/2nm tech.
Higher factory use improving profits.
Weaker Taiwanese dollar helping USD earnings.
Action Matrix:
Price Range | What to Do with Stocks | Options Idea | Max Portfolio Weight |
|---|---|---|---|
≤ $215 | Buy | Long calls | 2.0% |
$215–$270 | Hold | None | 1.5% |
≥ $270 | Reduce | Put spreads | 0.5% |
Fair Value: $203–$248 (mid $225, ~-24% loss from $295.08).
CoreWeave (CRWV): AI Cloud with Big Potential
Key Stats
Q2 2025 revenue: $1.213B, over 3x last year.
Backlog: $30.1B in future orders.
Net debt: $9.9B, cash $1.15B.
Efficiency Score: Equity 6.1/10 (Fair); LEAP 4.9/10 (Fair, options thin).
The Story: CoreWeave provides cloud computing for AI, with Q2 sales soaring to $1.213B. A $30.1B order backlog shows strong demand, but a $290.5M loss and $11B debt from heavy spending are concerns. One client makes up 71% of sales, adding risk, though its OpenAI deal is a plus. What Could Spark a Rise:
Turning $30.1B backlog into steady sales.
Lower debt costs from refinancing.
Adding new clients to reduce reliance.
Action Matrix:
Price Range | What to Do with Stocks | Options Idea | Max Portfolio Weight |
|---|---|---|---|
≤ $120 | Buy | Long calls | 2.0% |
$120–$135 | Accumulate | Covered calls | 1.5% |
$135–$145 | Hold | None | 1.0% |
$145–$160 | Trim | Collar | 0.5% |
≥ $160 | Reduce | Put spreads | 0.0% |
Fair Value: $125–$150 (mid $140, ~3.7% gain from $135).
Blue Owl Capital (OWL): Cash Machine in Asset Management
Key Stats
Q2 2025 fees: $623.4M, up 34% from last year.
Assets under management: $284.1B.
Cash flow (H1): $440.1M.
Efficiency Score: Equity 6.8/10 (Solid); LEAP 5.9/10 (Fair).
The Story: Blue Owl manages private credit and real estate, earning $623.4M in Q2 fees, up 34%. Its $284B in assets and low spending make it a cash machine, but profits dipped from taxes and amortization. Regulatory changes or weaker fee growth could hurt. What Could Spark a Rise:
Turning $28.6B non-fee assets into income.
Growing demand for private credit.
New acquisitions adding assets.
Action Matrix:
Price Range | What to Do with Stocks | Options Idea | Max Portfolio Weight |
|---|---|---|---|
≤ $18 | Buy | Long calls | 2.5% |
$19–$20 | Accumulate | Covered calls | 2.0% |
$21–$23 | Hold | None | 1.5% |
$24–$25 | Trim | Collar | 1.0% |
≥ $25 | Reduce | Put spreads | 0.5% |
Fair Value: $21–$24 (mid $22, ~36% gain from $16.18).
FutureFuel (FF): Biofuel Bargain with Risks
Key Stats
Q2 2025 revenue: $35.7M, down 51% from last year.
Cash: $95M, no debt.
Dividend yield: 6.0% ($0.24/year).
Efficiency Score: Equity 6.4/10 (Fair); LEAP 5.2/10 (Fair).
The Story: FutureFuel makes biofuels and chemicals, but Q2 sales fell 51% to $35.7M, with a $10.4M loss due to weak biofuel margins. Its $95M cash (54% of market cap) and no debt offer safety, but volatile raw material costs and policy changes are risks. What Could Spark a Rise:
Better biofuel profits from policy credits.
Stronger chemical sales.
Using $25M buyback to boost value.
Action Matrix:
Price Range | What to Do with Stocks | Options Idea | Max Portfolio Weight |
|---|---|---|---|
≤ $3.88 | Buy | Long calls | 2.0% |
$3.88–$4.33 | Accumulate | Covered calls | 1.5% |
$4.33–$4.79 | Hold | None | 1.0% |
$4.79–$5.24 | Trim | Collar | 0.5% |
≥ $5.24 | Reduce | Put spreads | 0.0% |
Fair Value: $4.10–$5.01 (mid $4.55, ~12.9% gain from $4.03).
Quick Portfolio Overview
Ticker | Price | Fair Value Range | Efficiency Score (Equity/LEAP) | Max Weight |
|---|---|---|---|---|
ANF | $68.48 | $102–$112 | 7.4/5.8 | 2.5% |
TSM | $295.08 | $203–$248 | 5.8/5.8 | 0.5% |
CRWV | $135 | $125–$150 | 6.1/4.9 | 1.0% |
OWL | $16.18 | $21–$24 | 6.8/5.9 | 2.5% |
FF | $4.03 | $4.10–$5.01 | 6.4/5.2 | 1.0% |
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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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