Artificial Intelligence (AI) is making waves in the world of stock picking, but can it really outperform human analysts? We take a closer look at three stocks that have been identified by the AI-driven analytics platform Danelfin as having a high probability of beating the market over the next three months.
As we approach the midpoint of 2023, the stock market is facing rising interest rates, stubbornly elevated inflation, and mounting fears of recession. Despite these challenges, the S&P 500 is on track to deliver high-double-digit percent returns this year. However, with the ongoing bear market, investors are in a wait-and-see mode, looking for clear indicators to give them confidence about the future direction of the market.
Enter AI-powered stock picking. AI, machine learning, and big data have been used in stock picking for some time, but traditionally only by institutional investors with deep pockets. Danelfin, a financial technology firm, is trying to change that. Their AI-driven analytics platform aims to level the playing field, giving regular investors access to institutional-level technology.
The AI platform analyzes more than 900 fundamental, technical, and sentiment data points per day for all U.S.-listed shares and 600 stocks listed in Europe. After processing 10,000 daily indicators, the platform produces an AI Score, which ranges from 1 to 10, indicating a stock’s probability of beating the market over the next three months. The platform also assesses the stocks’ volatility and their potential for significant drawdowns. The final step is to combine the AI Score with the Low-Risk Score to identify stocks that offer the highest probability for short-term outperformance with the lowest risk of loss.
Three stocks to watch
Based on Danelfin’s AI platform, here are three stocks to watch, awarded the highest AI Risk/Reward Scores as of May 30, 2023:
1. Amdocs (DOX)
– Market value: $11.5 billion
– AI Score: 9.0
– Low Risk Score: 10
– AI Risk/Reward Score: 9.5
Amdocs, a software and services provider well-known in the telecommunications sector, has an AI Score of 9.0 and a Low-Risk Score of 10. The AI platform suggests that DOX is poised for outperformance over the next three months, with little chance of suffering a significant drawdown. Analysts are also bullish on the stock, giving it a consensus recommendation of Buy with high conviction.
2. McDonald’s (MCD)
– Market value: $208.0 billion
– AI Score: 9.0
– Low Risk Score: 10
– AI Risk/Reward Score: 9.5
McDonald’s, a fast-food chain with a long history of trading with much less volatility than the broader market, has an AI Score of 9.0 and a Low Risk Score of 10. The AI platform has identified MCD as a stock with potential for market-beating returns over the next three months. Analysts are also bullish on the stock, giving it a consensus recommendation of Buy with high conviction.
3. PepsiCo (PEP)
– Market value: $250.0 billion
– AI Score: 9.0
– Low Risk Score: 10
– AI Risk/Reward Score: 9.5
PepsiCo, one of the largest makers of carbonated beverages and other soft drinks, has an AI Score of 9.0 and a Low-Risk Score of 10. The AI platform suggests that PEP is likely to outperform the market over the next few months. Analysts also give the stock a consensus recommendation of Buy, albeit with somewhat moderate conviction.
It is important to note that the AI platform is focused on short-term outperformance over the next few months, not days or years. Therefore, the platform is more suitable for tactical investors and traders rather than long-term investors. Additionally, the AI Scores and rankings mentioned in this article are based on data as of May 30, 2023, and market conditions may have changed since then.
As AI continues to evolve and improve, it will be interesting to see how it impacts the world of stock picking and whether it can consistently outperform human analysts. For now, investors should consider AI as just one tool in their investment toolbox and continue to do their own research and analysis before making investment decisions.
