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Commentary

Every few weeks, a note that steps back from the single companies and reads the whole list together. It looks at the themes that connect them, which discounts are likely to close and which probably will not, and the dates worth watching next. It is information, not advice (see the disclaimer).

Updated

The list grows to 309 picks, and interest rates now link the most

The list grew from 44 active picks to 309 this week, and it now holds companies with a narrow moat or no moat next to the wide-moat ones. Interest rates, not AI, now link the most picks, and the AI estimates often see a narrower moat than the analysts. Banks, TSMC and UnitedHealth reported this week, and 144 picks report from October 20 to October 30.

From 44 picks to 309

Three groups of companies joined the list this week. On October 15, 63 companies with a wide moat joined, for 107 active picks. On October 16, 59 companies with a narrow moat that trade 25% or more below the analysts' fair value joined (166 picks), and then the other 143 companies of the same list: the narrow-moat ones less than 25% below fair value and the ones with no moat. The list now has 309 active picks: 95 with a wide moat, 146 with a narrow moat and 68 with none. Of the 44 picks a week ago, 32 had a wide moat.

The three groups differ in the size of their discounts. The 59 narrow-moat companies of October 16 have a median discount of 35.7%, against 17.3% for the 63 wide-moat companies of October 15 and 18.1% for the last 143.

The last group also brought whole industries that the list did not have before. 20 of the 22 utilities and 19 of the 20 real estate investment trusts (REITs) on the list came in it, among them NEE, DUK, O and PSA.

Companies: NEE, DUK, O, PSA

Where the AI estimates disagree

The AI estimates and the analysts disagree most about moats. Of the 95 picks the analysts rate Wide, the AI estimate gives a wide moat to only 48. It gives a narrow moat to 39 of the 63 wide-moat companies of October 15, among them all three wide-moat banks (BAC, WFC and USB). Defense companies such as RTX, GD and HII, and drug makers such as AZN, BMY and GSK, also lose their wide moat in the AI estimate. For CPB, the AI estimate sees no moat and a value of $18.91, below the price of $20.08, while the analysts see a wide moat and $41.50.

On fair value, the AI estimate is lower than the analysts' value for 239 of the 306 picks that have both. The gap is largest for the narrow-moat companies of October 16: the AI value is lower for 57 of the 59, and for 17 of them it is 30% or more lower. For LULU, FLUT and TME, the AI value is 44% to 48% below the analysts'. A few go the other way: for AMRZ the AI value is 46.1% above the analysts', and for RCI.B 41.5% above. In all, 121 of the 306 picks differ enough in moat or value that their company page shows the AI estimate as a second opinion.

Companies: BAC, WFC, USB, RTX, GD, HII, AZN, BMY, GSK, CPB, LULU, FLUT, TME, AMRZ, RCI.B

Banks earn more on loans and lose on bonds

Thirteen picks reported third-quarter results from October 13 to October 16, and seven of them were banks or brokers. Most banks earned more from loans, while higher rates cut the value of the bonds they hold. Net interest income rose 8% at Bank of America and 5.6% at U.S. Bancorp from a year earlier, and USB raised its 2026 revenue growth guidance to 8% to 9%. At Wells Fargo, the accumulated loss on its bonds rose to $16.5 billion, from $8.3 billion, and its CET1 ratio fell to 10.0% from 10.3%. Regions' tangible book value per share fell to $12.65 from $13.78 for the same reason, and Truist took a $1.4 billion pre-tax loss when it sold securities. Bank of America also paid a $1.2 billion regulatory penalty.

Credit stayed calm at most banks. USB's net charge-off ratio fell to 0.51%, and Regions' to 0.29%. At PNC, nonperforming loans rose 8% to $2.2 billion, mostly commercial loans.

Schwab reported on October 15 that core net new assets were a record $190.4 billion, 38% more than a year earlier, and net revenues rose 17% to $7.2 billion. Its net interest margin rose to 3.04%, above the 3.00% of the second quarter, so its checkpoint passed. Its adjusted Tier 1 leverage ratio was 7.0%, at the top of its 6.75% to 7.00% target, up from 6.8% at June 30. BlackRock had net inflows of $205.5 billion and revenue 19% higher than a year earlier.

Companies: BAC, USB, WFC, RF, TFC, PNC, SCHW, BLK

Two checkpoints failed, two passed

TSMC sold more than it guided but at a lower margin. Third-quarter revenue was US$46.72 billion, 41.2% more than a year earlier and above its guidance of US$44.6 billion to US$45.8 billion, and it raised its 2026 growth target to about 44%. Gross margin fell to 66.4% from 67.7% in the second quarter, and the fourth-quarter guide of 65% to 67% is lower again, so the site's margin checkpoint now reads failed. ASML's third-quarter sales were EUR 11.7 billion, near the top of its guidance, and its CEO said that supply for 2027 and 2028 will not fully meet demand.

UnitedHealth's medical care ratio improved to 88.4%, from 89.9% a year earlier, and it raised its 2026 adjusted EPS guidance to at least $20.50. The ratio was still above its guide of about 88.1%, and $610 million of favorable changes to earlier reserves helped, so that checkpoint failed too. UNH said that at least 69% of its Medicare Advantage members are in plans rated 4 stars or more for 2027, a little above the estimate of about 67% from J.P. Morgan and Stephens. Copart's checkpoint passed: the US antitrust waiting period for its ACV Auctions deal ended on October 13 without a second request.

The consumer companies were mixed. Domino's US same-store sales grew only 0.3%, and it lowered its 2026 target to 125 to 150 net new US stores. Kimberly-Clark's early figures show organic sales about 1.3% lower. At American Express, the US consumer card net write-off rate was 1.6%.

Companies: TSM, ASML, UNH, CPRT, DPZ, KMB, AXP

144 picks report in the next two weeks

From October 20 to October 30, 144 of the 309 picks report, and 35 of those dates are still estimates. October 29 is the busiest day, with 37 picks, and October 27 and October 28 have 26 each.

The AI spenders come first: META on October 21, MSFT and GOOGL on October 28, the day the Fed announces its rate decision, and AMZN on October 29, an estimate. The companies that AI tools could hurt report in the same days: SAP and MCO on October 21, RELX on October 22 and NOW on October 28, with the IT service firms CTSH and GIB.A on October 29.

For interest rates, the regional banks KEY (October 20) and HBAN (October 22) open, and the REITs AMT, BXP, EXR and VTR follow on October 27. For the consumer, the consumer lenders ALLY and SYF report on October 20, PG on October 22, CMG on October 28 and HSY on October 29. The utilities NEE (October 21), D and EXC (October 30) report for the power and energy picks. Defense companies report one after another: NOC and RTX on October 20, LMT on October 22, BA on October 27, HII and LHX on October 29, and GD on October 30.

Companies: META, MSFT, GOOGL, AMZN, SAP, MCO, RELX, NOW, CTSH, GIB.A, KEY, HBAN, AMT, BXP, EXR, VTR, ALLY, SYF, PG, CMG, HSY, NEE, D, EXC, NOC, RTX, LMT, BA, HII, LHX, GD

Themes

Interest rates

109 companies

Earnings or valuation move with interest rates and the housing market.

FIS, BN, CNH, KMX, WLK, GPI, PNR, LPLA

Median discount
18.1%
Average LSEG
2.32
Structural gap
2 of 109

High debt

99 companies

Carries a lot of debt, so cash flow goes to lenders first.

FLUT, GIL, FISV, FIS, CPB, SARO, MOS, ESAB

Median discount
23.1%
Average LSEG
2.25
Structural gap
3 of 99

Weak consumer

98 companies

Sales depend on households that are spending less on big or optional purchases.

TME, LULU, GIL, CPB, ABG, KMX, WLK, GPI

Median discount
23.0%
Average LSEG
2.41
Structural gap
1 of 98

New management

71 companies

A new chief executive or a reset plan must prove itself.

LULU, FLUT, FISV, SARO, KMX, CLX, PNR, CMCSA

Median discount
23.0%
Average LSEG
2.43
Structural gap
0 of 71

Tariffs and trade

70 companies

Tariffs or trade rules change its costs or its sales.

LULU, GIL, CPB, GNTX, ABG, ESAB, CNH, TEX

Median discount
22.8%
Average LSEG
2.32
Structural gap
2 of 70

AI disruption risk

40 companies

AI tools could replace part of what customers pay this company for.

APP, ACM, MBGL, LPLA, CSGP, NICE, EXPGY, RELX

Median discount
25.8%
Average LSEG
2.17
Structural gap
1 of 40

Power and energy

40 companies

Earns from electricity, gas or oil demand, including power for data centers.

WLK, PCG, SOLS, CCL, AR, BKR, EQT, POR

Median discount
10.6%
Average LSEG
2.26
Structural gap
2 of 40

China and geopolitics

30 companies

Exposed to China, Taiwan or export rules between governments.

TME, GNTX, BABA, MOS, YUMC, MGM, NTES, TCOM

Median discount
28.5%
Average LSEG
2.05
Structural gap
5 of 30

AI spender

7 companies

Spends heavily on AI data centers; the market asks when that spending pays back.

BABA, BIDU, GOOGL, SKM, AMZN, META, MSFT

Median discount
20.1%
Average LSEG
1.99
Structural gap
2 of 7

Gap types

Not every discount can close. Tap a company to read why its gap is of its type.

Can close

229

74% of rated picks

A dated event that someone can check can close the gap within about two years.

  • FLUT
    Why FLUT: 59.6%

    The NFL season results, the Brazil decision due within 120 days and the 2027 guidance give dated tests within about two years.

  • GIL
    Why GIL: 56.8%

    The Q3 2026 and full-year 2026 reports show whether sales hold up against the short seller's claim and whether debt falls.

  • FIS
    Why FIS: 53.2%

    Quarterly growth and debt reduction, and the 2027 outlook in February 2027, show within about two years whether the TSYS deal works.

  • DKNG
    Why DKNG: 51.5%

    Court rulings on prediction markets and the 2027 outlook, both expected by mid-2027, can settle the main doubt.

  • SARO
    Why SARO: 49.7%

    The Q3 2026 report and the first 2027 guidance of the new CEO show within about a year whether airline demand and margins hold.

  • AVGO
    Why AVGO: 49.4%

    Each quarterly report checks the FY2027 AI chip revenue target, starting with the December 2026 report.

  • IONS
    Why IONS: 48.9%

    TRYNGOLZA sales each quarter, the bepirovirsen FDA decision on October 26, 2026 and the path to breakeven in 2028 give dated checks.

  • MOS
    Why MOS: 46.2%

    The Q3 2026 report in early November 2026 and the Q4 2026 report in February 2027 show whether sulfur costs fall and phosphate plants restart.

Slow

69

22% of rated picks

The gap can close, but only over several years of execution.

  • TME
    Why TME: 64.0%

    Competition for light users and the China discount change slowly, so stable membership growth must show over several quarters.

  • LULU
    Why LULU: 61.9%

    A brand turnaround under a new CEO and product team needs several years of sales evidence, not one dated event.

  • FISV
    Why FISV: 55.1%

    Fiserv must show several years of growth and margin recovery under new leaders to meet targets that run to 2029.

  • CPB
    Why CPB: 52.1%

    Management does not expect margins to recover before fiscal 2028, and legacy soup and snack demand may keep falling.

  • GNTX
    Why GNTX: 50.0%

    New products ramp with car model launches over several years, so revenue growth above vehicle production takes until about 2028 to prove.

  • CNH
    Why CNH: 44.8%

    The gap closes only as the farm cycle recovers, which depends on crop prices and farm incomes over 2027 and 2028.

  • WLK
    Why WLK: 44.4%

    Chemical cycles are long, so the gap closes only when global PVC and polyethylene supply comes back into balance.

  • CLX
    Why CLX: 43.4%

    Clorox needs a new CEO, an earnings recovery and debt repayment through the end of 2027, so the gap closes only step by step.

Will probably not close

11

4% of rated picks

A lasting reason holds the price below fair value, so the discount overstates the opportunity.

  • BABA
    Why BABA: 47.3%

    The VIE structure, the US military-company listing and US-China tension keep a discount on Alibaba whatever its cloud business does.

  • BN
    Why BN: 45.3% (Management)

    The multi-layer holding structure stays after the merger, so part of the gap to plan value will probably never close.

  • YUMC
    Why YUMC: 41.4%

    US-China tension and a weak Chinese consumer keep a country discount on Yum China that its own results cannot remove.

  • NTES
    Why NTES: 37.0%

    Most of the gap comes from Chinese game regulation and US-China tension, which NetEase cannot control and which have no end date.

  • PCG
    Why PCG: 36.1%

    California has no cap on wildfire liability, the 2026 reform bill failed, and one bad fire can erase years of profit.

  • BIDU
    Why BIDU: 29.1%

    The weighted voting structure, the VIE structure and US-China tension keep a discount on Baidu whatever its AI cloud business does.

  • TSM
    Why TSM: 22.7%

    Strong results can close the execution part, but the market will probably keep a discount for Taiwan-China risk that TSMC cannot control.

  • KVUE
    Why KVUE: 17.8%

    The fixed exchange ratio ties Kenvue's price to Kimberly-Clark's shares, and the deal is expected to close in the fourth quarter of 2026 at the agreed terms, below the standalone value.

Fair value vs analyst ratings

Both see value

48

Discount above the median, and analyst ratings are positive.

  • FLUT59.6% · LSEG 1.97
  • DKNG51.5% · LSEG 1.98
  • SARO49.7% · LSEG 2.00
  • AVGO49.4% · LSEG 1.76
  • IONS48.9% · LSEG 1.96
  • BABA47.3% · LSEG 1.83
  • ESAB46.0% · LSEG 1.55
  • APP43.4% · LSEG 1.94

Only the fair value sees value

106

Possible value trap: discount above the median, but analyst ratings are not positive.

  • TME64.0% · LSEG 2.39
  • LULU61.9% · LSEG 3.06
  • GIL56.8% · LSEG 2.20
  • FISV55.1% · LSEG 2.85
  • FIS53.2% · LSEG 2.39
  • CPB52.1% · LSEG 3.38
  • GNTX50.0% · LSEG 2.56
  • MOS46.2% · LSEG 2.71

Only analyst ratings are positive

55

Analyst ratings are positive, but the discount is at or below the median.

  • GOOGL21.3% · LSEG 1.80
  • BIRK21.3% · LSEG 1.83
  • GEHC20.9% · LSEG 2.00
  • DD20.9% · LSEG 2.00
  • APH20.7% · LSEG 1.76
  • ASML19.9% · LSEG 1.76
  • NXST19.7% · LSEG 1.75
  • XYL19.3% · LSEG 2.00

Neither

99

Discount at or below the median, and analyst ratings are not positive.

  • POR21.2% · LSEG 2.67
  • TSCO21.0% · LSEG 2.29
  • COLD21.0% · LSEG 2.56
  • FICO20.5% · LSEG 2.39
  • CPRT20.4% · LSEG 2.15
  • RMD20.3% · LSEG 2.52
  • AA20.3% · LSEG 2.21
  • GAP20.3% · LSEG 2.41

How the groups are drawn: the fair value sees value when a pick's discount to fair value is above the median of the picks with both (21.4% today). Fair values are the analysts' unless a source is named next to the discount. The LSEG analysts are positive at a rating of 2.0 or lower (1 is strong buy, 5 is strong sell). An LSEG rating of 2.5 or higher, in red, means the LSEG analysts lean to hold or sell. A large discount that analysts do not share can be a value trap: the market may know something the fair value does not.

Earnings by week

The next 6 weeks of reports, with the themes of the companies that report.

  1. Week of Oct 19: 36 reports — Interest rates ×12, Regulation and courts ×12, Weak consumer ×11, High debt ×11, New management ×9, AI disruption risk ×8, Tariffs and trade ×7, China and geopolitics ×3, Power and energy ×3, AI spender ×1, Weight-loss drugs ×1

    3 of 36 dates are estimated (last report plus three months), not confirmed by the company.

  2. Week of Oct 26: 108 reports — Interest rates ×44, Regulation and courts ×38, Weak consumer ×34, High debt ×31, Tariffs and trade ×28, New management ×26, AI supplier ×13, Power and energy ×13, AI disruption risk ×9, China and geopolitics ×7, AI spender ×3, Weight-loss drugs ×3

    32 of 108 dates are estimated (last report plus three months), not confirmed by the company.

  3. Week of Nov 2: 98 reports — High debt ×40, Interest rates ×36, Regulation and courts ×34, Weak consumer ×24, Power and energy ×21, New management ×20, Tariffs and trade ×18, AI disruption risk ×13, China and geopolitics ×8, AI supplier ×6, Weight-loss drugs ×5, AI spender ×1

    46 of 98 dates are estimated (last report plus three months), not confirmed by the company.

  4. Week of Nov 9: 10 reports — High debt ×5, Regulation and courts ×4, AI disruption risk ×3, Interest rates ×3, Weak consumer ×2, New management ×2, AI supplier ×1, China and geopolitics ×1, Tariffs and trade ×1, Power and energy ×1

    5 of 10 dates are estimated (last report plus three months), not confirmed by the company.

  5. Week of Nov 16: 14 reports — Weak consumer ×6, China and geopolitics ×6, Regulation and courts ×6, AI disruption risk ×3, Tariffs and trade ×3, Interest rates ×2, High debt ×2, New management ×2, AI spender ×1, AI supplier ×1

    9 of 14 dates are estimated (last report plus three months), not confirmed by the company.

  6. Week of Nov 23: 6 reports — Weak consumer ×4, China and geopolitics ×2, New management ×2, Tariffs and trade ×2, AI spender ×1, AI disruption risk ×1, High debt ×1, Regulation and courts ×1

    • BABA Nov 24 (est.)
    • DKS Nov 24 (est.)
    • VIPS Nov 25 (est.)
    • ADSK Nov 27 (est.)
    • GAP Nov 27 (est.)
    • HRL Nov 27 (est.)

    6 of 6 dates are estimated (last report plus three months), not confirmed by the company.

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