The Next Picks-and-Shovels Tech Play Has Arrived

June 13, 2025

The Next Picks-and-Shovels Tech Play Has Arrived

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By Michael Salvatore, Editor, TradeSmith Daily

In This Digest:

Why Apple’s big lag could be a buy…
Laying the groundwork for a post-smartphone future…
The bitcoin/gold ratio signals an imminent new high…
A simple reason to love mid-caps and tech…
And a great way to find the best of both worlds…
How a master trader is playing the chop…

Four of the “Magnificent 7” have completely lost the title…

The days are long past when the Magnificent 7 was such a simple, surefire bet.

In 2023 and 2024, the dawn of the new bull market, the group returned a collective 58%. They were the stocks to own, and also the stocks driving the benchmarks higher.

In 2025, though, there’s nuance… Strengths and weaknesses among the group that make picking and choosing a much better move.

For example, Microsoft (MSFT) is currently running away with the Mag 7 trade. It’s the only one of the anointed 7 to be trading at new highs in 2025. Meta Platforms (META) has it beat, just barely, on year-to-date gains.

Further, only three of the 7 are acting all that magnificent – four of them are lagging the market this year:

Nvidia (NVDA) is up a solid 5%. But Amazon.com (AMZN) and Google (GOOGL) are both down mildly for the year. (Disclosure, I own NVDA, AMZN, and GOOGL.)

What surprised me the most, however, is the state of Apple (AAPL). It’s hanging out with Tesla (TSLA) at the bottom of the pack, down more than -21% this year.

First off, shoutout to Mike Burnick who called for AAPL to be a laggard this year all the way back in December. That was spot on.

But now, with such a major decline at hand… We have to wonder if there’s some opportunity here.

It’s hard not to compare Apple to Tesla, given their similar performance this year. Apple’s annual revenue is just shy of $400 billion. It trades just above 30 times earnings. It is far and away the most popular smartphone maker in the U.S., and macOS is gaining market share as well.

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Meanwhile, Tesla makes about $90 billion in annual revenue and trades at nearly 180 times earnings. Its cars are popular, but they face much stiffer competition not just from other upstart EV-centric brands like Rivian, but also from incumbents like Toyota, Ford, and other major sellers.

While much of the narrative surrounding Apple is that it’s stopped innovating and bringing sea-change products to the world, conversely the narrative with Tesla is that it will inevitably, eventually, change the world with all sorts of big promises.

This kind of narrative on AAPL seems to have peaked in the last week, as its Worldwide Developers Conference (WWDC) announcements seemed to fall flat.

Apart from some small mentions about AI, the key thing shown was a redesign of its software aesthetic to something called Liquid Glass.

At first glance, this seems like a pointless UI redesign that Microsoft covered several generations ago as part of Windows Vista.

But I recently read a take on this design that suddenly has me very excited about Apple’s future.

It comes from Luke Lango over at InvestorPlace. Luke has his finger on the pulse of technology like few analysts I’ve ever seen. And when I read his thoughts about WWDC, and why he’s actually excited about what he saw, my first impulse was to share them with you:

On the surface, Liquid Glass looks like a UI facelift. Everything’s more fluid, layered, and translucent. Buttons now shimmer. Toolbars refract. Menus float and breathe. The whole OS feels like it took a yoga retreat and came back with better posture.

But we’re confident this isn’t just about making iOS look “prettier.”

Liquid Glass seems to be the first mass-market interface built for a world beyond screens.

With this update, Apple is likely laying the groundwork for its next big thing: AI Glasses.

It’s prepping hundreds of millions of users for a future where computing is ambient and intelligent; worn, not held.

The titan may be the maker of the most successful consumer product of all time – the iPhone – but that success is now a golden cage…

Growth has slowed. Replacement cycles are stretching. Regulators are circling. Innovation is incremental at best. Even Apple’s executives know the iPhone isn’t going to carry the company for the next 20 years.

So, what’s it to do? What it always has – build the next platform.

Luke has been preparing his readers for a smart-glasses future over in his free e-letter, Hypergrowth Investing, as well as in his paid subscriptions.

If you ask Luke, we’re at the very start of a whole new picks-and-shovels opportunity with smart glasses like we’re at in AI.

I’d encourage you to follow along with the story in his e-letter. And if you want some direct guidance on stocks to buy, click here to learn more about a subscription to his tech-focused work in Innovation Investor.

The bitcoin/gold ratio has some big clues about what’s coming…

The chart below shows us how many ounces of gold it would take to buy one bitcoin. When the ratio goes up, “digital gold” is stronger than physical gold. I’ve also added the 50- and 200-day moving averages… which we can use to look for “golden crosses” in this ratio:

While “death crosses” seem to, counterintuitively, be the long-term buy signal for stocks (as we explored Wednesday), those “golden crosses” are what you want to see on the bitcoin/gold chart.

The first one I circled above came back in October. Back then, you could buy a bitcoin with about 24 ounces of gold. Then came the November election and bitcoin’s price really took off, pushing the ratio chart up to a peak of about 40. This was when bitcoin’s price was at about the same level it is now, just over $100,000. Importantly, this price action caused a “golden cross” in the two moving averages.

Now, a second one looks to be forming today. Even as bitcoin has reclaimed its recent highs, the ratio remains lower at 32 due to gold’s gains this year. However, the moving averages are set up for another golden cross.

From the last time bitcoin made a new high, it took about nine days for the moving averages to cross and fuel a sustained rally in the bitcoin/gold ratio. We’ve yet to see that new high in bitcoin as I write. But the price is consolidating just below a new high… And bitcoin’s price itself made a “golden cross” a couple weeks back:

Two things could happen here to drive the first chart higher: Either bitcoin goes up or gold goes down. Given that we’re in the second and more powerful half of the traditional crypto cycle… and in a time where we’re all sternly reexamining the U.S. fiscal picture and the importance of durable assets… For me, it seems more likely that we’ll see the former than the latter.

Bitcoin hasn’t put on much of a show so far in 2025, owing to the recent broader risk-on volatility. But it can’t be ignored just how quickly investors bought the bitcoin dip in the aftermath of the tariff debacle. There’s strength behind this asset that will power it through the year, and could make it one of the year’s best performers yet again.

I still love mid-cap stocks and so should you…

Here’s a little-known fact about mid-cap stocks (stocks with a market cap between $2 billion and $10 billion)…

Since June of 1991, when the S&P MidCap 400 Index launched, it’s returned 2,427% – about 25 times your money. That beats out both the return of the S&P SmallCap 600 (1,958%) and the S&P 500 large caps (1,448%):

The primary small-cap benchmark, the Russell 2000, has returned even less, at 1,099%. The key difference between the Russell 2000 and the S&P small- and mid-cap benchmarks is that S&P-tracked companies must be profitable.

To be fair, all of these benchmarks are dwarfed by the Nasdaq 100, which has returned 7,762% in that same span. So, if you’re not afraid of some concentration and high valuations, tech is where you want to be.

But for those seeking profitability and diversification, mid-caps are the market-cap class to focus on.

Or…

You can take it a step further and find the best of both worlds…

If we want to buy stocks that have the best bet at outperforming the market…

And we know that tech stocks have great returns, and that mid-cap stocks also have great returns…

And we’re prudent investors with a bias toward profitable companies with strong fundamentals…

That filters down the universe of strong stocks from thousands to just a few.

And we can make that universe manifest with the TradeSmith screener.

Here’s a screen I set up a few weeks back that looks for strong, quality, trending mid-cap companies from any industry:

We’re pulling stocks in the Green Zone – TradeSmith’s proprietary measure of positive momentum based on a stock’s unique volatility profile.
We’re looking in the S&P 400 index to make sure we’re pulling profitable mid-caps as a baseline filter.
We’re looking for stocks that have gone up 50% or more in the last year – showing recent and significant investor interest.
And finally, we’re looking for stocks with a Quantum Edge Fundamental Score above 60 – indicating outlier strength in revenue, earnings, and profit margins.

That gets us down to just 11 stocks… and among these, three that we class “Technology” in our database.

There’s lots of great names to look at here, but ExlService Holdings (EXLS) catches my eye for multiple reasons.

It’s a data consulting business that uses AI to help its enterprise clients improve their business. It’s also relatively inexpensive compared to other AI firms, trading at an expensive but not nosebleed 36 times earnings. And it rates a 75 on Jason Bodner’s Quantum Edge Fundamental Score.

But most significant of all is the fact that Jason recommended this stock eight months ago to readers of his Quantum Edge Pro newsletter… And although those months were a rough ride for the market, the EXLS position is up more than 23% at writing.

The fact of the matter is, a lot of larger stocks were already played out by the time the market ran into serious volatility in 2025.

Jason believes that mid-caps will continue to be the best home for your money – you can hear all about why these money flows could soon become a flood at this link.

The Next Picks-and-Shovels Tech Play Has Arrived