Finding stocks that will outperform the market is a daunting task in any market. It’s challenging when every sector in the S&P 500 is getting hammered. So I punted and asked the generative AI chatbot that powers Bing chat to make some AI stock recommendations.
To begin with, I’ll say that I agree with the AI stock analysis when it came up with the following suggestions of qualities investors can look for to find outperforming stocks.
These included finding companies with strong balance sheets, competitive advantages, and resilient earnings growth. It also included finding undervalued stocks, looking to tech stocks and considering small-cap stocks.
I’ve recommended all of those at various times. It’s sound advice. I parted company a little bit with the chatbot on specific picks. It gave me five picks and I’ve listed the three that I can get behind above.
It also suggested Blink Charging (NASDAQ:BLNK) and The Lovesac Company (NASDAQ:LOVE). While I see the potential upside in both stocks, I also see some factors that would lead me to pass.
In the case of BLNK stock, there’s a lot of competitors fighting for a piece of the pie. And for LOVE stock, I’m concerned about how the company will fare as discretionary spending eases. And both stocks had high short interest.
It’s all just a reminder that every investor needs to perform their own due diligence before investing in the market. But there nothing wrong with asking a chatbot for some AI stock picks. Now, on to the list!
| EXAS | Exact Sciences | $63.69 |
| LAC | Lithium Americas Corp. | $18.94 |
| RIG | Transocean | $5.65 |
Exact Sciences (EXAS)
The first of my AI stock recommendations is Exact Sciences (NASDAQ:EXAS). Maybe the chatbot knew that Cathie Wood likes the stock. But even if it didn’t, biotechnology (biotech) stocks are a good place to look for stocks that may outperform the market. Typically, look at the company’s pipeline and any drugs or therapeutics that are commercially available.
With Exact Sciences, the company markets several cancer screening tests with perhaps the best known being its Cologuard brand screening for colon cancer.
EXAS stock is already outperforming the market. It’s up approximately 27% in 2023, and 9% in the last 12 months. But the run may have room to continue. A key factor will be if the company meets its forecast for becoming profitable in 2023.
Lithium Americas (LAC)
As AI stock predictions go, I can understand why the chatbot picked the lithium miner, Lithium Americas Corp. (NASDAQ:LAC). I expect demand for lithium to soar as a key component of the lithium-ion batteries that power electric vehicles.
Lithium stocks underperformed in 2022 as investors realized that supply chain concerns were going to delay the EV revolution.
Historically, stocks that underperform one year may overperform in the following year. And considering that LAC stock underperformed some other lithium stocks, it may have the most upside.
If it does, it will be because the company is pivoting to mining its lithium in Argentina and in the United States. The latter will put the company in the good graces of the Biden administration. The administration wants to reward companies that are on-shoring the supply chain for these critical clean energy industries.
However, for LAC stock to move higher it will need to show investors that it continues to make progress on its Thacker Pass project in Nevada.
Transocean (RIG)
Among the AI stock recommendations made by the chatbot, I found Transocean (NYSE:RIG) an intriguing pick.
The company delivers the offshore drilling equipment that the major oil companies need to conduct their drilling operations.
But I thought there was no drilling going on? Tell that to Transocean which announced on its last earnings call it had increased its contract backlog in the last year by $4 billion. And the company also upgraded its fleet of ships.
Transocean is not profitable and won’t be in 2023. But if you believe that oil prices are likely to continue to rise again in 2023 and beyond, then RIG stock looks like a bargain at just under $6 share.
Analysts seem to agree. In April, Morgan Stanley (NYSE:MS) raised its price target for the stock to $8 which would make the stock a huge out-performer in 2023.
On the date of publication, Chris Markoch did not have (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.