Can Stocks Picked by Artificial Intelligence Beat the Market? 3 Stocks to Watch

Coca-Cola

• Market value: $278.7 billion
• AI Score: 10
• Low Risk Score: 9
• AI Risk/Reward Score: 9.5

Coca-Cola (KO (opens in new tab)) is a case study in how the best dividend stocks never go out of style. Or at least that's been true for the top-rated Dow dividend stocks thus far in 2022. 

Just look at shares in this soft drinks juggernaut. KO stock is up nearly 9% for the year-to-date on a price basis alone. Not only does that beat the broader market by a whopping 24 percentage points, but both industry analysts and Danelfin's AI platform say Coca-Cola stock has more room to run.

KO stock gets a perfect 10 AI Score, bolstered by near-perfect readings for fundamentals, sentiment and technical strength. Combine that with a Low Risk score of 9, and Coca-Cola stock should outperform the broader market over the next 30 to 90 trading sessions with minimal downside risk.

The Street, which typically looks 12 to 18 months ahead, is bullish on the fizzy drinks maker over the longer term too. Of the 26 analysts covering KO tracked by S&P Global Market Intelligence, 12 rate it at Strong Buy, seven say Buy and seven have it at Hold. That works out to a consensus recommendation of Buy, with high conviction.

The bottom line is that whether you're a trader, tactician or long-term investor, analysts and AI agree that Coca-Cola stock is a buy at current levels.

Verizon Communications

• Market value: $158.7 billion
• AI Score: 10
• Low Risk Score: 9
• AI Risk/Reward Score: 9.5

Verizon Communications (VZ (opens in new tab)) is having a bad year. On a price basis alone, the only telecommunications stock in the Dow Jones Industrial Average is down about 28% for the year-to-date. That lags the broader market by around 13 percentage points. 

Danelfin's AI platform, however, believes VZ stock is a beaten-down buy – at least for those looking to generate some multi-month alpha.

Verizon's perfect 10 AI score is supported by a long series of blemish-free readings on fundamentals. Indeed, VZ stock has notched a perfect 10 score for fundamentals for more than six straight months. Reliably high assessments of sentiment and technical strength also suggest VZ stock is ready for a breakout.

And as for risk? Telcos are known for nothing if not for their dividends, defensive characteristics and low volatility. With a Low Risk score of 9, Verizon stock should let investors sleep well at night.

Wall Street, which looks further ahead, is mixed on the name heading into 2023. Five analysts call VZ a Strong Buy, one says Buy, 21 have it at Hold and one slaps a rare Strong Sell rating on shares. That works out to a consensus recommendation of Hold. 

Incidentally, after its dreadful performance this year, Verizon is very much a stock to watch for investors who ascribe to the popular Dogs of the Dow investing strategy for 2023. 

PepsiCo

• Market value: $255.2 billion
• AI Score: 10
• Low Risk Score: 10
• AI Risk/Reward Score: 10

That two of the largest makers of carbonated beverages and other soft drinks should make the list of top stocks picked by AI shouldn't really come as a surprise.

As we noted some time ago, PepsiCo (PEP (opens in new tab)), Coca-Cola and other industry peers are great stocks to own when markets are volatile and inflation is running hot. Indeed, dividends, defense and inflation protection have helped PEP stock gain more than 6% on a price basis so far this year.

That leads the broader market by more than 20 percentage points. And AI says Pepsi stock isn't done generating alpha just yet. 

PEP stock gets perfect 10 scores across the board from Danelfin's algos, making it the runaway top stock to watch for outperformance over the next few months. Consistently high readings for fundamental, technical and sentiment indicators inform PEP's perfect score for projected outperformance. 

Meanwhile, PEP has always been a low volatility stalwart. With a five-year beta of 0.59, PepsiCo stock can sort of be thought of as being about 40% less volatile than the broader market. 

Just know that PEP is more popular with AI for short-term outperformance than it is with the Street as a market-beater looking 12 to 18 months out. Of the 23 analysts issuing opinions on PEP, six rate it at Strong Buy, five say Buy, nine have it at Hold, two say Sell and one calls it a Strong Sell. That works out to a consensus recommendation of Buy with only modest conviction.