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.
Interest rates now link the most picks
Interest rates are now the most common theme: 109 of the 309 picks carry it, and 66 of them came in the last group of 143. Regulation and legal cases (104 picks), debt (99) and a weak consumer (98) come next. AI themes link 71 picks, and 21 of them are from the first 44. Power and energy grew from one pick, PCG, to 40, and 35 of them came in the last group, about half of them utilities.
Most gaps on the list can close on a dated event: 229 of the 309 picks have one that can close the gap within about two years. 69 need several years of work, and only 11 gaps are structural, 7 of them among the first 44 picks. The slow gaps are the deepest, with a median discount of 27.9%, against 18.4% for the gaps that a dated event can close.
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.
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%.
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