Core Viewpoint - The AI sector remains promising, with significant growth potential and opportunities for investment despite recent volatility in stock prices [7][40][67]. Market Overview - The AI stocks experienced a sell-off similar to previous market declines, with the S&P 500 dropping approximately 15% during a recent period [8]. - The current market is characterized by confusion, with geopolitical events influencing investor behavior and leading to volatility in both tech and safe haven sectors [17][22]. AI Sector Insights - The global AI market is projected to grow from $539 billion in 2026 to over $3 trillion by 2033, driven by investments from major tech companies and increasing demand for data centers [40][42]. - Adoption of AI technologies is expanding across various sectors, including healthcare and manufacturing, indicating a long-term trend rather than a temporary phase [15][20]. Stock Recommendations - The top 10 AI stocks recommended show an average revenue growth rate of 38% and an EPS growth rate of 99%, significantly outperforming the S&P 500 and the Magnificent Seven stocks [66][67]. - Specific stocks highlighted include: - **Lumentum Holdings (LITE)**: Up 402% in the last year, with a long-term growth rate of 61% [70]. - **Micron Technology (MU)**: Up 387% in the last year, with a long-term growth rate of 51% [72]. - **Ciena (CIEN)**: Up 215% in the last year, with a long-term EPS growth CAGR of 44% [74]. - **General Motors (GM)**: Up 76% in the last year, utilizing AI for enhanced vehicle connectivity [79]. - **Taiwan Semiconductor Manufacturing (TSM)**: Up 71% in the last year, with strong growth metrics [80]. - **Credo Technology (CRDO)**: Despite recent declines, it has strong growth potential with a forward EPS growth rate of 248% [97]. - **AppLovin (APP)**: Up almost 1000% within Alpha Picks, with a long-term growth rate of 48% [98]. - **Globus Medical (GMED)**: In the healthcare sector, showing strong growth metrics [100]. Investment Strategy - The strategy emphasizes buying on dips, particularly for stocks with strong fundamentals that have recently experienced price declines [35][106]. - The quant model used for stock selection focuses on multiple factors, including growth, value, and profitability, ensuring a diversified approach to investment [51][60].

Core Viewpoint - The Vanguard Information Technology ETF has significantly outperformed the market over the past decade, primarily driven by the AI boom, but it lacks exposure to key companies in the AI sector, making it potentially less attractive for investors seeking broad AI stock exposure [1][2]. Group 1: ETF Performance and Composition - The Vanguard Information Technology ETF (VGT) has increased by approximately 670% over the past decade, compared to a 270% gain for the S&P 500 [1]. - The ETF tracks the MSCI US IMI Information Technology 25/50 index and holds stakes in 320 companies, with nearly 59% of its value concentrated in the top 10 holdings [3]. - The top three holdings—Nvidia, Apple, and Microsoft—account for nearly 45% of the ETF's assets, indicating a high concentration risk [4]. Group 2: Missing Key Companies - The ETF does not include major players in the AI ecosystem such as Alphabet, Amazon, and Meta Platforms, which are classified in different sectors [5][6]. - Alphabet and Meta are categorized under the communication services sector, while Amazon falls under consumer discretionary, thus excluding them from the ETF's holdings [6]. - The absence of these companies is significant as Amazon and Alphabet are two of the largest cloud infrastructure providers, holding market shares of 29% and 13%, respectively, which are crucial for AI model training and operation [7]. Group 3: Implications of Missing Companies - The exclusion of Amazon, Alphabet, and Meta from the ETF limits its exposure to the AI megatrend, as these companies play vital roles in cloud services and AI development [8].

Paycom Software, Inc. (NYSE:PAYC) is one of the Best Long-Term Tech Stocks to Buy According to Analysts. On January 15, BMO Capital reduced its price objective on the company’s stock to $175.00 from $190.00, while maintaining a “Market Perform” rating. The research firm highlighted the contraction in broader software multiples as the main reason for the reduction in price target. BMO Capital Reduces PT on Paycom Software (PAYC) Stock The firm opines that the likelihood of further multiple compression is ...

Summary of Conference Call Notes Industry Overview - **Industry**: Application Software, specifically focusing on Software as a Service (SaaS) in North America - **2025 Performance**: Application SaaS underperformed due to muted revenue growth, limited upward estimate revisions, and multiple compression driven by AI-related concerns. The valuation discount on application SaaS relative to broader software increased to approximately 37% from 20% a year ago [3][7][21]. Key Insights - **AI Concerns**: Peak AI fears were noted in 2025, leading to a shift in investor sentiment. Companies emphasized competitive advantages such as proprietary data and large installed bases but struggled to improve investor confidence [3][23]. - **Bull Case for 2026**: The bull case hinges on application software becoming the primary delivery mechanism for AI capabilities, potentially expanding the total addressable market and improving growth trajectories. However, the lack of clear growth inflection in 2025 left many vendors perceived as disrupted by AI [3][23][35]. - **CIO Survey Insights**: A survey indicated that 19% of CIOs operationalizing AI/ML technologies view application vendors as primary partners, an increase from 13% in the previous quarter. This suggests a shift in perception towards application software as a vehicle for AI functionalities [26][29]. Investment Recommendations - **Selective Approach**: A selective investment strategy is recommended, favoring companies with strong positioning in the "AI Success Framework" and idiosyncratic growth stories. Preferred companies include HUBS, KVYO, WIX, AMPL, BL, DSGX, and NAVN [2][7][52]. - **Price Target Adjustments**: Price targets for several companies were updated, reflecting changes in growth outlooks and market conditions. For example, HUBS was adjusted to $577, while KVYO was set at $42 [5][54]. Risks and Considerations - **AI Risks**: The report outlines three core areas of AI-related risks: DIY risk, start-up risk, and seat-based model risk. Evidence suggests that fears regarding these risks may be overstated, but ongoing monitoring is necessary [24][26][27]. - **Cyclical Headwinds**: The optimization cycle that began in 2022 is largely digested, with stabilization in key performance indicators like ARR and billings growth. However, broad-based positive spending revisions remain absent, necessitating a cautious approach [35][36]. - **2026 Spending Growth**: Software is expected to see modest growth in spending, projected at 3.8%, compared to declines in hardware and communications sectors. This indicates a relatively healthier positioning for software in IT spending plans [43][44]. Conclusion - **Outlook for 2026**: The outlook for application SaaS in 2026 is cautiously optimistic, with potential for improved sentiment as AI risks are reassessed and growth trajectories begin to stabilize. However, the absence of broad-based positive revisions in spending necessitates a selective investment approach [2][35][52].

Group 1 - OneStream Inc. is considered one of the best low-priced technology stocks to buy, with analysts providing mixed ratings and price targets [1][2][3] - Citi analyst lowered the price target on OneStream to $24 from $25 while maintaining a Neutral rating, citing uncertain demand but noting the reopening of the US government as a positive factor [1] - BTIG analyst initiated coverage with a Buy rating and a $25 price target, forecasting over 20% growth by 2025, supported by a large market for modernization of legacy systems [2] Group 2 - Mizuho cut its price target on OneStream to $25 from $30 while maintaining an Outperform rating, identifying AI and data modernization as key growth drivers for the software sector [3] - The projected median revenue growth for the software sector in 2026 is in the low teens, which is seen as conservative and potentially beatable, presenting an attractive risk-reward profile [3] - OneStream delivers a unified, AI-enabled software platform, but there are concerns that other AI stocks may offer greater upside potential with less downside risk [4]

Group 1 - Citi lowered the price target on Paycom (PAYC) to $185 from $191 while maintaining a Neutral rating on the shares [1] - The firm adjusted its models in the application software group after discussions with management [1] - Companies are experiencing a stable but uncertain demand environment, with some relief from the reopening of the U.S. government [1] Group 2 - Citi has named Pegasystems (PEGA) as its new top pick, highlighting the company's leadership in artificial intelligence monetization [1] - The firm also sees growth opportunities at Blackline (BL) and Workiva (WK) [1]

Group 1 - Citi analyst Steven Enders raised the price target on Paylocity (PCTY) to $179 from $175 while maintaining a Buy rating on the shares [1] - The firm adjusted models in the application software group after discussions with management, indicating a stable but uncertain demand environment [1] - The reopening of the U.S. government is providing some relief to companies in the sector [1] Group 2 - Citi has named Pegasystems (PEGA) as its new top pick, highlighting the company's leadership in artificial intelligence monetization [1] - The firm also sees growth opportunities at Blackline (BL) and Workiva (WK) [1]

Group 1 - Citi lowered the price target on Monday.com (MNDY) to $293 from $319 while maintaining a Buy rating on the shares [1] - The firm adjusted models in the application software group after discussions with management, indicating a stable but uncertain demand environment [1] - Citi identified Pegasystems (PEGA) as its new top pick, highlighting the company's leadership in artificial intelligence monetization [1] Group 2 - Citi expressed positive sentiment towards the growth opportunities at Blackline (BL) and Workiva (WK) [1]

Core Insights - The top 10 stock picks for 2025 yielded a return of 45.6%, significantly outperforming the S&P 500's return of 17.6% [34] - The market has experienced volatility due to various factors, including trade disputes and shifts in investor sentiment towards safe havens like gold and silver [8][15] - The performance of stocks is heavily influenced by market sentiment, with a notable shift back to fundamentals following a truce in U.S.-China trade relations [37] Market Overview - The U.S. Dollar Index has decreased by approximately 9.5% year-to-date, indicating a shift away from the U.S. dollar [9] - Technology sector stocks have seen a year-to-date increase of 27%, while consumer staples and healthcare sectors have shown mixed performance [12] - The S&P 500 experienced a maximum pullback of 15% earlier in the year, which historically presents a buying opportunity for long-term investors [19] Stock Performance - The top 10 stocks included companies like Celestica and Credo, which have shown substantial growth, with Celestica up 240% since January 9 [54] - OppFi, initially performing well, faced challenges due to market sentiment but has recently returned to a Buy rating [56] - Stride has been downgraded to a Sell due to poor momentum and analyst revisions, reflecting a significant decline in performance [91] Economic Indicators - The Federal Reserve has cut interest rates three times in the latter half of the year, indicating concerns about the labor market [23] - Major brokerage firms have reduced recession odds following a truce in trade disputes, which has positively impacted market sentiment [24] - Inflation remains a concern, complicating the Fed's decision-making regarding interest rates [25] Future Outlook - The upcoming webinar on January 6 will present the top stock picks for 2026, with expectations of continued focus on companies with strong fundamentals [98] - Analysts are optimistic about the growth potential of companies like Credo, which has a projected earnings growth rate of 78% over the next three to five years [51] - The market remains top-heavy, with 35% of the total market cap attributed to the Magnificent 7 stocks, raising questions about valuation sustainability [30]

Core Insights - The discussion focuses on the performance of the Top 10 stocks for 2025, highlighting the effectiveness of a quantitative (Quant) investment strategy that combines fundamental analysis with algorithmic processing to identify strong investment opportunities. Group 1: Quantitative Investment Strategy - The Quant system utilizes mathematical algorithms to identify investment opportunities, reflecting the work of traditional fundamental analysts while covering a broader range of stocks [10][12]. - The GARP (Growth At a Reasonable Price) strategy is emphasized, focusing on companies that exhibit strong value, profitability, growth, momentum, and analyst EPS revisions [10][11]. - The Quant system has shown significant performance, with a five-year return of 228% compared to Wall Street Strong Buys at 32% and the S&P 500 at 65% [14]. Group 2: Market Recap and Sentiment Analysis - The year 2025 has been characterized by volatility, with the CNN Fear & Greed Index showing sharp movements between extreme greed and fear, influenced by trade policy changes, labor data, and economic uncertainties [16][18]. - Key catalysts affecting market sentiment include U.S.-China trade disputes, conflicting labor data, a credit downgrade, and concerns over tech valuations and the AI bubble [17][18]. - The market has seen a rotation towards safe-haven assets like gold and consumer staples during periods of fear, while technology and cryptocurrency sectors have experienced risk-on sentiment [20][21]. Group 3: Performance of Top Stocks - The Top 10 stocks for 2025 have collectively outperformed the S&P 500, with an average return of 45.68% since January 9, compared to the S&P's 17.6% [43]. - Notable performers include Credo Technology, up 116%, and Celestica, up 240%, both benefiting from strong demand in AI-related sectors [55][60]. - The performance of stocks can fluctuate significantly due to market sentiment, with strong fundamentals often overlooked during periods of fear, leading to substantial upside potential when sentiment shifts back to fundamentals [44][46]. Group 4: Economic Indicators and Future Outlook - Economic data has been mixed, with the Federal Reserve cutting rates three times in the latter half of the year due to labor market concerns and inflation remaining sticky [31][32]. - Major brokerage firms have reduced recession odds following a truce in trade disputes, indicating a potential stabilization in market conditions [32]. - The upcoming Top 10 stocks for 2026 will be announced on January 6, with expectations that the market may present buying opportunities during any pullbacks [30].