- GLD +1.02% NVDA -1.44% DT -3.38% UTHR -0.24% OMC +3.44%
- Getty Images/iStockphoto Stock-newsletter writers are the market’s unsung heroes. They don’t grab the attention that legendary investors such as Warren Buffett or Bill Ackman do. But they should, because many of them post excellent returns.
So, each year around this time I check in with three of the best for a market outlook and favorite stock positions.
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A few caveats: All three editors are reluctant to make market calls, given how tough it is to predict. But with a little cajoling, they relented. Next, while editors singled out two stock investments each, they all stress the need for broad diversification to reduce single-stock risk.
The 20-year annualized returns cited below compare to 11% gains for the S&P 500 SPX over the same period. All performance data come from the Hulbert Financial Digest managed by Mark Hulbert, who is also a MarketWatch columnist.
1. Nate’s Notes —15-year annualized return: 14.67%
Investment approach: Editor Nate Pile uses a “common sense” approach to find companies with long-term growth potential in large markets. He trims or adds to positions over time, depending on valuations and technical analysis. But long term is the key. His letter first suggested Apple AAPL in 1998 and Nvidia NVDA in 2002.
Market call: Pile says the overall U.S. market trend is up, but he has some concerns. One is investor complacency about inflation, the economy, tariffs and geopolitical tensions. “The consensus opinion is almost always ‘the market doesn’t seem to care, so there is no need to worry about it for now,’” Pile said in a recent interview.
Complacency makes markets vulnerable. Pile is especially cautious about artificial intelligence stocks. “I am absolutely certain we are still in the early stages of AI adoption, but we are late in the market cycle for the stocks,” he says. “The enthusiasm for the sector is too high. There is clearly more downside risk than upside potential in many of the stocks.” One risk is that continuous big spending on AI infrastructure might slow if companies can’t show a solid return on investments.
The upshot is that Pile has an unusually high cash position, above 20%, in part the result of selling AI-related chip stocks like Nvidia. Says Pile: “I would rather have fewer chips on the table while we wait to see what happens next.”
Favorite positions: Pile singles out MannKind MNKD in biotech and SPDR Gold Shares GLD for exposure to gold.
Story ContinuesMannKind shares have run up on investor enthusiasm about its partnership with United Therapeutics UTHR. MannKind makes an inhalable version of its Tyvaso DPI drug for pulmonary hypertension. United Therapeutics wants to expand the drug’s label, which could boost sales. The two companies also have deal to co-develop an inhalable version of an undisclosed drug.
As for gold, Pile acknowledges it might be due for a correction. But he thinks gold is still in the early stages of a multiyear bull run. He cites central-bank buying and investor use of gold as a hedge against “the chaos that is breaking out around the world.” He rejects the theory that crypto might replace gold as a store of value for investors.
2. Investor Advisory Service: 20-year annualized return: 11.27%
Investment approach: Editor Doug Gerlach and his team look for companies with durable competitive advantages, strong balance sheets and the ability to generate cash flow throughout the economic cycle.
Market call: Gerlach believes investors overall are cautious. This bodes well for the market, in a contrarian sense. Key bullish drivers remain in place, he says, pointing to AI spending, economic strength, a reasonably strong labor market, consumer spending, manageable inflation and the promise of further Federal Reserve interest-rate cuts.
Favorite positions: Gerlach singles out two AI-related stocks, Nvidia and Dynatrace DT.
Gerlach says Nvidia can continue to post robust profit and cash-flow growth, yet the stock’s valuation is still reasonable. He projects 25% five-year annual sales growth for the company, against the stock’s recent forward P/E of 25. So, Nvidia has a price-earnings-to-growth ratio of 1.0. That’s reasonable for this Peter Lynch valuation metric, which considers PEG ratios below 1.5 attractive at high-growth companies.
Dynatrace helps customers manage their network of myriad software systems, apps and AI tools residing on multiple cloud platforms, internal networks and mainframes. Dynatrace uses AI to help clients monitor, analyze and integrate their “digital ecosystems.” The company has more than 4,000 customers in over 100 countries, in various sectors including banking, insurance, retail, transportation and government. Gerlach expects 15% long-term annual earnings growth.
3. Investment Quality Trends: 20-year annualized return: 9.7%
Investment approach: Editor Kelley Wright uses dividend yield to identify when stocks trade at attractive valuations. This makes sense, because yields go up when stocks decline, and stocks often bottom when yields hit historically high levels. He favors stocks trading at repetitive high-dividend yields. This helps investors identify stocks with attractive yields and appreciation potential.
Market call: Wright expects 10%-15% returns this year for the S&P 500, supported by earnings growth. He expects at least 3.25% U.S. GDP growth, driven by tax cuts that support consumer spending, and capital spending incentives in last summer’s One Big Beautiful Bill Act.
Favorite positions: Wright singles out Omnicom Group OMC and Ituran Location and Control ITRN.
The holding company Omnicom Group houses a collection of advertising and public-relations heavyweights including Omnicom Advertising Group, the DAS Group of Companies, BBDO (Batten, Barton, Durstine & Osborn) and DDB (Doyle Dane Bernbach).
Omnicom Group has balance-sheet strength to support growth via more acquisitions, like its recent purchase of Interpublic Group, Wright says.
Ituran Location and Control offers GPS- and radio frequency-based devices that help drivers and companies recover stolen vehicles and track fleets of vehicles. It has a big presence in Brazil and Israel, and more than 2.5 million subscribers use its devices in over 20 countries, including the U.S. Third-quarter sales advanced 11% — healthy growth that could continue as the company rolls out new products. The company pays a 4.6% dividend yield.
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More: This winning fund manager spills 4 secrets about smart ways to buy non-U.S. stocks
Also read: Tax-related selling could set up these 11 stocks for big gains early in 2026
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