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Nicole Benjamin: Hey everybody. It’s Nicole Benjamin, your host here at Seeking Alpha to bring to you another episode of The Weekly Grade with Steven Cress, and we’re bringing to you market insights in minutes. And of course joining us again for another episode is Steven Cress, VP of Quantitative Strategy here at Seeking Alpha. He is the amazing guy behind a lot of the products here that you see on the site, Alpha Picks, PRO Quant Portfolio, and our newest product, our Growth & Income Portfolio. So, if you haven’t checked it out yet, do take a look. Steve, thank you so much for joining us today.
Steven Cress: Yeah. Thank you so much for organizing it. I really appreciate it.
NB: Absolutely. Now, I want to jump right in. I see here, on Slide 3, that the chip stocks have taken a dip following a massive rotation out of tech. So, for investors who are watching the major semiconductor indexes drop, what helps determine whether this pullback is just a short-term speed bump or if it’s going to be another buying opportunity?
SC: Well, I think market sentiment has a lot to do with that. Obviously, the geopolitical environment has been very, very volatile, and that has had an impact on many technology stocks and semiconductor stocks. In addition, with the run up that we’ve seen in a lot of AI stocks, there is nervousness about valuation, and obviously semiconductor companies are a key component suppliers to many of the AI stocks. So, I think having a combination of volatile geopolitical events and a bit of an overextended valuation in many AI stocks. In recent weeks, there’s been a bit of a pullback, and that to me is more or less responsible for the pullback, much more so than fundamentals because many of these companies on fundamentals on the back of their recent results have beaten both top and bottom line expectations. So, for the most part, a lot of these chip companies look really good.
NB: Alright. Well, you recently highlighted Credo Technology Group Holdings as a Strong Buy. So, when we look at the factor grades, what in the data tells us that this chip is going to be worth considering despite this broader tech sell-off?
SC: Well, this company did have a sell-off, but I feel like it’s on fire coming back. There’s just really a lot of potential for the company. It’s been one of our top performing stocks in Alpha Picks as well. We put it in Alpha Picks back in February 2025, so we’ve had it for a little bit more than a year, and I think in that brief period, just a little over a year, it’s up, I believe, 275%, but despite that rally in the last 52-weeks, if you look at the table that we have on the right hand side, you’ll see the factor grades and in those factor grades, you’ll see valuation growth and profitability. These are metrics that we score and when we score them, we actually do it on a sector relative basis.
So, when you look at the value grade or the growth grade, you could see instantly how it compares to the rest of the sector and the valuation is in-line with the sector, you could see it’s a C-, but more importantly as I mentioned the stock is up about 270% over the last year and over the last six months it’s up a solid amount, but the valuation is almost exactly the same now as it was six months ago and when I look for the six month performance I could see the stock is up 82%, but the valuation framework is exactly the same and the growth for the company as you could see it’s an A+ relative to the sector and the growth is just as strong now as it was six months ago.
So, I would say, really ignore the price performance and how well the stock has done and just look at it for the growth that the company has to have and that the valuation framework is very fair. And also, I will mention the profitability has actually improved. You could see the profitability grade is an A- now, six months ago it was a B. So, the company has actually become more profitable in that timeframe.
So, I think there’s a lot of positives out there. Within the IT sector, it ranks 30 out of 532 stocks that we cover. And within semiconductors, it ranks 12 out of 69. This company has had explosive growth. It’s had triple digit revenue growth from its high connectivity AI data center solutions business, and that has also experienced rapid growth from their electrical cables, which are Ethernet cables and also optical cables. The revenue growth, I mentioned what the one-year return was for the stock, but the revenue growth year-over-year is even more impressive. It’s up 206% in terms of its revenue growth versus the sector at only 11.3%.
So, it’s absolutely crushing it in terms of revenue growth and the EPS forward growth rate, the three to five year estimated growth rate from analysts is 39% versus 18% for the sector. So, on both the top and bottom line, it is absolutely crushing the sector in terms of its growth. And as I said, the valuation framework is very fair being that it has a C grade.
NB: Well, that’s perfect. And speaking of Credo being a part of Alpha Picks, we’ve seen that this portfolio has been outperforming the broader market for some time now. So, what should investors know about this specific data rules? Like, what data rules are behind Alpha Picks model that allows it to capture these massive triple digit returns?
SC: So, with Alpha Picks, this is a portfolio product that we introduce two ideas a month. So, it’s not a lot of ideas. We’re just taking our two top favorite Quant ideas every month, but you could see it’s had a very good track record. And what we do is, we focus on companies that are collectively strong on value, growth, profitability, momentum, and positive EPS revisions. And when we identify those stocks that are strong in those fundamental metrics, the ones that come at the top of our screens get recommended for Alpha Picks, and you could see it’s worked out really well.
So, in a nutshell, we’re looking for companies that have really strong fundamentals. That’s what our Quant system does. It isolates companies that have good fundamentals, and Alpha Picks is a product where we bring forward the two best stocks every month. And you could see for the last four years since we’ve introduced it, it’s got a great track record. It’s up over 400% for the last four years versus the S&P 500, up 95%. But you could see on all time periods, whether you’re looking at one-year or three months or year-to-date, year-to-date the returns is still amazing. It’s up almost 40% year-to-date versus the S&P up 8%. But again, what we’re doing is, we’re identifying stocks that have really strong fundamentals.
NB: Alright. Well, I think we’ll leave it there, Steve. Thank you so much for joining us today. And for everybody listening in, go ahead, click the follow button on Steve’s page if you haven’t already. And take a look into Alpha Picks. Take a look into Credo. See if that might be right for your portfolio. And if you haven’t already heard, we are doing our site wide summer sale, 20% off on all products between now and June 30th. And we’ll catch you here next time. Thanks so much.
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Read Steven Cress’ Article on Seeking Alpha
Explore Alpha Picks Today!
Sign Up for the new Quant Growth & Income Portfolio!
