Can AI Beat the Market? 10 Stocks to Watch

10. Gilead Sciences

• Market value: $78.4 billion
• AI Score: 10
• Low Risk Score: 10
• AI Risk/Reward Score: 10

Thanks in part to their dividends and defensive characteristics, the best healthcare stocks tend to hold up better in bear markets.

That has certainly been true for Gilead Sciences (GILD (opens in new tab), $62.69) in 2022.

True, GILD is negative for the year-to-date, but it's still outperforming the S&P 500 by a wide margin (more than 6 percentage points). And if Danelfin's algos – which give this biopharmaceutical name perfect scores across the board – are correct, Gilead should be among your stocks to watch if you want to keep adding ballast to a tactical portfolio (with a minimum of risk, to boot).

GILD gets high scores for fundamentals and sentiment, but the stock's perfect 10-out-of-10 score for technicals is the real standout. Indeed, shares haven't graded below 9 for its chart strength on a weekly basis since late March.

Analysts, who typically look out over 12 months, are generally bullish on Gilead, as well. They give the stock a consensus recommendation of Buy, albeit with modest conviction, per S&P Global Market Intelligence.

Although the Street is somewhat split on GILD for the longer term outlook, Danelfin's algos forecast shares to generate superior risk-adjusted returns over the next 30 to 90 trading days.

9. Procter & Gamble

• Market value: $341.2 billion
• AI Score: 10
• Low Risk Score: 10
• AI Risk/Reward Score: 10

The healthcare sector isn't the only place to hide out for dividends and defense. The best consumer staples stocks – and especially those with the blue-chip pedigree of Procter & Gamble (PG (opens in new tab), $142.79) – tend to hold up better when seemingly everything else is selling off.

P&G, a component of the Dow Jones Industrial Average, is down for the year-to-date, but it's beating the broader market by an even wider margin than Gilead (8 points). Perfect scores across the board from Danelfin's AI platform indicate that PG shares will not only continue to insulate investors from the worst that the bear market has to offer, but do so with minimal downside risk.

Procter & Gamble gets a strongly positive mark for sentiment, a high grade for fundamentals, and perfect scores on technicals and risk. Perhaps most encouraging, shares in the dividend stalwart have carried a perfect 10 AI Score for 10 of the past 12 weeks.

The pros have PG on their list of stocks to watch. Analysts give shares a consensus recommendation of Buy, with solid conviction. Their average target price of $164.52 gives the stock implied upside of 15% in the next 12 months or so. Add in the dividend yield, and the implied total return (price plus dividends) tops 18%.

Between the assessments of algos and industry analysts, PG looks like a low-risk, market-beating bet for tacticians and longer term investors alike.

8. Verizon

• Market value: $213.9 billion
• AI Score: 10
• Low Risk Score: 10
• AI Risk/Reward Score: 10

Telecommunications is yet another industry known for dividends and defense. As the Dow's only telco, Verizon (VZ (opens in new tab), $50.90) is an obvious safe harbor for long-term investors.

But traders and tactical investors might want to take a closer look at VZ, too. Perfect scores from Danelfin's AI system predict market-beating performance from Verizon – all with minimal risk of loss – over the next 30 to 90 trading days.

VZ has certainly held up its end of the defensive bargain so far in 2022. This member of the Dogs of the Dow is outperforming the broader market by more than 18 percentage points year-to-date.

Going forward, AI's case for Verizon is based primarily on consistently high readings for technicals and fundamentals. Sentiment grades, although weaker, not only remain positive, but also entered a daily uptrend in late June.

Be forewarned, however, that as bullish as AI is on Verizon's stock over the next few months, the Street is split on the name looking farther ahead. VZ gets a consensus recommendation of Hold, per S&P Global Market Intelligence, with some analysts citing rising costs and increasing competition as reasons to be cautious about this name.

7. Colgate-Palmolive

• Market value: $66.8 billion
• AI Score: 10
• Low Risk Score: 10
• AI Risk/Reward Score: 10

Colgate-Palmolive (CL (opens in new tab), $80.00) is another consumer staples stock beating the broader market this year that Danelfin's AI platform expects to outperform in the third quarter with little risk of loss.

Seven straight weeks of perfect AI Scores – boosted by consistently high marks for technicals and sentiment – and a low incidence of negative price fluctuations over the past 500 trading sessions support the algo's bullish call for the next 30 to 90 days.

Colgate's defensive bona fides are backed up by its low beta, which measures how volatile a stock is relative to the broader market. With a five-year beta of 0.55, Shares in Colgate may tend to lag in up markets, but they also hold up better when equities are selling off.

The low-volatility nature of CL stock has surely served investors well so far this year. Shares, while negative for the year-to-date, are still beating the broader market by about 14 percentage points.

Although Danelfin's platform has Colgate among their stocks to watch for tacticians and traders, be forewarned that the Street is more mixed on the name longer term – at least at current levels. Colgate shares are only a couple percentage points shy of their average target price, and analysts' consensus recommendation stands at Hold.

6. PepsiCo

• Market value: $230.5 billion
• AI Score: 10
• Low Risk Score: 10
• AI Risk/Reward Score: 10

Shares in consumer staples giant PepsiCo (PEP (opens in new tab), $166.15) are leading the S&P 500 by about 15 percentage points so far this year and should continue their market-beating ways in the weeks and months to come.

All while letting investors get a decent night's sleep.

Perfect 10 AI Scores in 10 of the past 12 weeks help make AI's bullish case for shares in the fizzy drinks and snacks maker. But it's good to see strength in pretty much every one of the algo's subcategories, as well.

Sentiment, which grades at a near-perfect score of 9, has been in a monthly uptrend since December. The stock's technical grade hasn't budged from 9 for four straight months. And as for fundamentals, PEP's current mark of 8 has been in place for three consecutive months.

Meanwhile, a perfect 10 score for Low Risk means investors are less likely to buy high and sell low.

Analysts are mostly fans of PepsiCo as a longer-term holding, too. The Street's consensus recommendation stands at Buy, with moderate conviction. Analysts' average target price stands at $182.30. Add in the dividend, and they give PEP an implied total return of about 11% in the next year or so.

5. Thomson Reuters

• Market value: $49.9 billion
• AI Score: 10
• Low Risk Score: 10
• AI Risk/Reward Score: 10

Shares in Thomson Reuters (TRI (opens in new tab), $102.90), the information company best known for Reuters news service, have a long history of trading with relatively low volatility. If Danelfin's algos are right, TRI should be among investors' top stocks to watch, as they're expected to continue putting up market-beating gains with minimal risk of loss in the weeks and months to come.

TRI is negative for the year-to-date but well ahead of the S&P 500. Four consecutive weeks of perfect 10 AI Scores – bolstered by pristine marks for technicals, which have been in a monthly uptrend all year, as well as strong marks for fundamentals and sentiment – suggest TRI will continue its outperforming ways.

Analysts, who typically look about 12 months ahead, mostly like the stock at current levels too. Their consensus recommendation stands at Buy, with moderate conviction. Of the 16 analysts covering the TRI tracked by S&P Global Market Intelligence, four call it a Strong Buy, five say Buy, six have it at Hold and one says Strong Sell.

Analysts might be split on Thomson Reuters over the long term, but Danelfin's AI says it's a slam-dunk low-risk market beater for traders and tacticians positioning their holdings for Q3.

4. Duke Energy

• Market value: $81.6 billion
• AI Score: 10
• Low Risk Score: 10
• AI Risk/Reward Score: 10

The best utility stocks offer dividends and defense in down markets. But Danelfin's AI platform singles out Duke Energy (DUK (opens in new tab), $106.48) as stock to watch as we enter the third quarter.

DUK is one of the few stocks on AI's list that's actually in the green for 2022. Shares were up 3% on a price basis for the year-to-date through June 29, beating the broader market by roughly 23 percentage points. Perfect scores across Danelfin's major categories suggest DUK will keep up its run over the next few months, with minimal downside risk.

Duke Energy gets perfect 10 scores for Low Risk and technicals. Its perfect 10 AI Score is supported primarily by a near-pristine reading on fundamentals and a highly positive sentiment grade. Incidentally, the stock has carried a perfect AI Score for 12 consecutive weeks. Moreover, DUK hasn't scored below 9 on technicals for eight straight weeks.

Analysts are mostly bullish on Duke Energy's longer-term prospects, too. Their consensus recommendation stands at Buy, albeit with mixed conviction. Six analysts rate shares at Strong Buy and two say Buy, but 12 have them at Hold.

Shorter term, though, the outlook on shares is more certain – at least as far as Danelfin's algos are concerned. DUK looks like a sure thing as a low-risk market-beater for the next 30 to 90 trading days.

3. Southern Co.

• Market value: $75.1 billion
• AI Score: 10
• Low Risk Score: 10
• AI Risk/Reward Score: 10

As attractive as Danelfin's AI finds Duke Energy over the shorter term, fellow utility stock Southern Co. (SO (opens in new tab), $70.50) scores even higher. Although both names get perfect scores across major categories, SO's subcategory grades are better.

For starters, Southern Co. has notched a perfect 10 AI Score in seven of the past eight weeks. As for fundamentals, shares have scored no lower than 9 in 14 of the past 15 weeks. Meanwhile, SO's technical AI subscore has ranged between 8 and 10 since April 11. The only blemish on Southern's artificial intelligence record is its sentiment score of 6, which is essentially a shade above neutral.

The bottom line is that SO's perfect 10 AI/Low Risk Score means the algos expect market-beating performance and downside protection as we head through Q3.

Which is just the sort of performance Southern Co.'s shareholders have come to expect in 2022. SO stock was up 4% for the year-to-date through June 29, beating the S&P 500 by 21 percentage points. Danelfin's algos simply expect Southern to remain a stock to watch going forward.

At least in the short term. Remember: Danelfin's AI makes predictions for the next 30 to 90 trading days. Beyond that, we have to turn to the Street, which has a consensus recommendation of Hold on the name.

2. Waste Management

• Market value: $62.8 billion
• AI Score: 10
• Low Risk Score: 10
• AI Risk/Reward Score: 10

Waste Management (WM (opens in new tab), $151.82) is leading the broader market by about 12 percentage points so far this year, and Danelfin's AI platform expects that outperformance to continue through Q3, with little risk of loss.

The sanitation company's stock's perfect scores are buttressed by top marks for fundamentals and technicals. The sentiment reading, at 8, is no slouch either.

Encouragingly, high grades are par for the course for this name. WM boasts a perfect 10 AI Score in 13 of the past 15 weeks. And on the two occasions WM fell short of top grades, it still managed to notch a 9. The stock's technical subscore hasn't fallen below 9 for seven weeks, while sentiment readings have been steady at 8 for three straight weeks.

The Street, which tends to look about 12 months ahead, gives WM a consensus recommendation of Buy, with mixed conviction. Analysts who are more cautious on the name at current levels cite valuation as a concern. And, indeed, with WM trading at 27 times the Street's 2022 earnings per share (EPS) estimate, it does look a bit pricey.

Happily for tacticians and traders, valuation doesn't much matter in the short run. Danelfin's algos say WM should be among your top stocks to watch, expecting it to maintain its market-beating ways in the weeks and months ahead.

1. Consolidated Edison

• Market value: $33.6 billion
• AI Score: 10
• Low Risk Score: 10
• AI Risk/Reward Score: 10

Analysts have been collectively bearish on Consolidated Edison (ED (opens in new tab), $94.47) for ages. That's understandable. After all, this utility stock is a longtime market laggard.

And so the Street's consensus recommendation of Hold is business as usual for ED. Indeed, only one analyst rates Edison at Buy. Seven call it a Hold, five say Sell and four rate it at Strong Sell.

Sell calls are rare on the Street. Suffice to say that analysts, collectively, really don't like this stock as a long-term holding.

Traders and tacticians, however, might have a mighty momentum play on their hands. Shares in Consolidated Edison are up a whopping 12% for the year-to-date. Danelfin's AI assessment sees even more outperformance ahead, with minimal downside risk.

What ED lacks in strong sentiment readings (which stand just above neutral at 6), it more than makes up for in technicals and fundamentals.

As a result, Edison has carried a perfect 10 AI Score for eight straight weeks. Moreover, its AI Score hasn't fallen below 9 since mid-February. Six consecutive weeks of grades of 9 and 10 for fundamentals, and three weeks of near-perfect technical subscores, only bolster the algo's bull case for ED stock.

So while utility stocks aren't typically the most scintillating companies out there, artificial intelligence says they're among the most exciting stocks to watch for now.