In August, I wrote about five meme stocks to sell immediately. My MarketMasterAI system was flashing warning signals like a hyperactive lifeguard on duty, telling everyone to get out of risky stocks.
The artificial intelligence-based system was right. Since then, prices of those five stocks have fallen 33% on average, compared to a mild 1.5% decline in the S&P 500. High interest rates and weaker-than-expected jobs reports have turned investors bearish on the riskiest of bets.
AI algorithms, however, are also powerful at finding turnaround moments to jump back in. The same system is now recommending companies like Chipotle Mexican Grill (NYSE:CMG) and Lululemon Athletica (NASDAQ:LULU) along with more conservative picks. Even the highly shorted Tanger Factory Outlet Centers (NYSE:SKT) now earns an A+ rating from MarketMasterAI. This suggests that the worst of the high-risk stock selloff is now behind us.
This week, InvestorPlace Senior Investment Analyst Eric Fry introduces a prediction method that’s even more bullish than MarketMasterAI. He’s calling the system Extreme Alpha 2.0 – a man-and-machine combination that helps investors identify stocks that are set to rise, no matter which way the market is headed.
Today, Extreme Alpha 2.0 is predicting 4%… 6%… even 13% gains in certain risky stocks over the next month. Here’s just a sample of five companies that Eric’s latest system has identified to buy immediately. Click here to learn more about the system… and how to get more stock picks.
5 Risky Stocks to Buy Immediately: Hall of Fame Resorts (HOFV)
Hall of Fame Resort & Entertainment (NASDAQ:HOFV) is the Canton, Ohio-based owner of the Hall of Fame Village, a 100-acre sports and entertainment complex centered around the Pro Football Hall of Fame.
Shares of the holding firm have been volatile. The stock lost 85% of its value during the Covid-19 pandemic and then saw a 275% resurgence after in-person entertainment returned. A series of significant earnings misses then pushed prices back into the single digits, prompting InvestorPlace.com’s Josh Enomoto to issue a contrarian take for HOFV’s extremely high short interest.
These sudden reversals are likely why the Extreme Alpha 2.0 system has turned bullish on Hall of Fame’s stock. HOFV shares now trade under $3, or 0.1-times book value. The firm is also highly leveraged, meaning that small improvements in its outlook will have enormous impact on its valuation. Every $1 increase in Hall of Fame’s enterprise value increases its share price by $13.80, all else equal.
Furthermore, analysts are forecasting high growth. Revenues are expected to rise 50% annually for the next three years, and the company could return to profitability by 2025.
Together, that makes Hall of Fame Resort a potential short squeeze waiting to go off. CEO and Chairman Michael Crawford bought 10,000 shares in the high-$6 range last May. Now that the stock is trading at half that figure, even Extreme Alpha 2.0 thinks it’s finally worth making a bet. The system predicts a 13.2% upside over the next month.
2. Sight Sciences (SGHT)
In September, InvestorPlace.com’s William White wrote how eyecare technology company Sight Sciences (NASDAQ:SGHT) was tumbling on lower Q3 guidance. Shares would finish the day down 33%.
This micro-cap firm is about as risky as they get. Shares have a beta of 2.1x, so every 1% decline in the S&P 500 leads to a 2.1% drop in SGHT’s stock on average. The firm has also has high operating leverage, so small changes in revenue have large impacts on earnings.
A recent earnings miss now puts Sight Sciences squarely in the “buy the dip” territory, according to Extreme Alpha 2.0. The stock-picking system estimates that shares have as much as a 30% upside after Thursday’s price collapse.
The system has a point. Shares of Sight Sciences now trade at 0.9 times price-to-estimated book value, according to data from Thomson Reuters. And once investors include the company’s large cash balance, Sight Sciences is valued at negative $10.5 million. In other words, management could theoretically buy back their entire share count, settle all debts, and still have money left over for shareholders.
These types of companies are known as negative enterprise value (EV) firms, and they perform particularly well during bull markets. According to data from Thomson Reuters, negative EV firms surged 34.4% on average in the first half of 2021, compared to a more modest 27.5% gain in other stocks. As concerns over the economy continue to fade, Extreme Alpha 2.0 suggests that Sight Science’s shares could see a quick comeback.
3. Opal Fuels (OPAL)
In October, Josh Enomoto wrote at InvestorPlace.com about how Opal Fuels (NASDAQ:OPAL) – a maker of renewable natural gas – could be a winner in an era of rapid decarbonization:
As a fully integrated leader in the production and distribution of low-carbon intensity renewable natural gas (RNG), the enterprise enjoys strong forward implications.
Utility firms and other industrial users are rapidly discovering the vast opportunities of RNG. Further, as political and social winds pressure policymakers, RNG may become an important component of both energy security and net-zero emissions directives. [Opal] is worth putting on your radar, even though it’s inking a 9% loss year-to-date.
Enomoto also notes how OPAL trades at 9x earnings – a low price for a firm expected to grow revenues at 11% this year and 53% the next. Earnings could hit $180 million by 2025, up from $3.4 million last year.
Together, that’s likely why Extreme Alpha 2.0 suggests investors take a closer look at this moonshot pick. Opal Fuels is a vertically integrated company with one of the most technologically optimized biogas conversion project portfolios in the RNG industry. Earnings are also rising fast as management inks deals with major partners.
Most importantly, demand for RNG is expected to surge over the next decade. Opal’s management foresees a 25% annual growth rate through 2030, driven by ESG mandates to reduce net carbon emissions. California’s utility mandate alone could add roughly 70 million MMBtu of demand.
Together, that means shares of Opal Fuels could quickly recover from a broader clean-tech selloff. Extreme Alpha 2.0 projects a 5% upside over the next 30 days.
4. & 5. Chevron (CVX) and Exxon Mobil (XOM)
Finally, Extreme Alpha 2.0 is making an intriguing “buy the dip” call on traditional energy stocks – an industry that has just seen oil prices drop from $95 in September to roughly $78 today.
At the top of this list are Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM), the two U.S.-based oil majors. Together, these energy giants pump roughly 6.7 million barrels of oil-equivalents per day and make up 42% of the S&P 500 energy index.
A bet on these two firms is a wager on higher energy prices, since every permanent $1 increase in oil-equivalent prices per barrel adds $11.1 billion of value to Chevron and $17.7 billion to Exxon. Extreme Alpha 2.0 expects these two companies to rise 1.5% each over the next month.
Tyrik Torres writes positively at InvestorPlace.com about these two companies in a recent report of three oil stocks with strong free cash flow:
Exxon Mobil has generated large sums of free cash flow this year. On a year-to-date basis, the company reported more than $28 billion in non-GAAP free cash flow, driven by higher crude prices and a larger volume of refining throughput…
[Meanwhile], Chevron has reported a cumulative $19 billion net income and $15.9 billion free cash flow. Despite lower Y/Y revenue figures, the strong cash flow generation was driven by the company’s operational efficiency. Chevron has committed to paying a quarterly dividend of $1.51/share in December.
Torres also notes how war in the Middle East has raised the risks of disruption of transit routes, which could lead to higher oil prices. This week, Louis Navellier, another top analyst at InvestorPlace, additionally agrees, during a new podcast (subscription required), that energy stocks still have upside.
Together, that means shares of Exxon and Chevron could rise 10% to 20% in the near term. Both currently trade near 52-week lows.
Man and Machine
Ancient Greek mythology tells stories about centaurs, a hybrid half-human and half-horse that roamed the divine world. One centaur was even a tutor to Achilles, Theseus, and Perseus.
Of course, no one’s ever seen a centaur before. They only exist in myths. But the “hybrid” concept of humans is as real as day.
During the first Industrial Revolution, in the late 1700s, British inventor Edmund Cartwright introduced the power loom, a mechanized weaving machine that sped the production of textiles. And rather than entirely replace workers, these new looms shifted people into garment-making. Today, roughly 430 million people around the world are thought to work in fashion and textile production alongside these machines.
The second and third Industrial Revolutions saw similar “hybrid” human-and-machine models. Mechanized tools would take certain jobs and leave the rest to humans. Assembly-line production, for instance, still needs mechanics and production staff.
Today, the fourth Industrial Revolution is underway. And the same centaur approach is happening again. Artificial intelligence might be able to crunch data and produce conclusions, but it’s up to humans to analyze, edit, and act on these findings.
That’s what makes Extreme Alpha 2.0 so noteworthy. By combining AI’s ability to analyze millions of data points with Eric’s decades of investment experience, this dual system provides the best of both worlds.
That’s why, on Nov. 14, Eric will reveal our new AI-enhanced system that predicts the exact stocks that are poised to rally 1,000% or more… no matter which way the market is headed. Click here for the full details.
On the date of publication, Tom Yeung did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tom Yeung is a market analyst and portfolio manager of the Omnia Portfolio, the highest-tier subscription at InvestorPlace. He is the former editor of Tom Yeung’s Profit & Protection, a free e-letter about investing to profit in good times and protecting gains during the bad.