Two Stocks to Buy, Six to Avoid as the War Trudges On

VIEW IN BROWSER

By Michael Salvatore, Editor, TradeSmith Daily

In This Digest:

The ceasefire trade that never was – and what it cost investors who followed the news
Airline stocks are getting crushed. Don’t buy the dip until you see this signal.
A fresh Short-Term Health buy signal points to one of AI’s most important behind-the-scenes players

Following the headlines is costing investors money…

For the past week, the dominant story in the financial press has been the prospect of a ceasefire in Iran.

As diplomatic backchannels reportedly opened, oil briefly pulled back from its highs and stocks popped.

But the missiles have kept flying. And Iran is adamant that the U.S. is not prepared to meet its demands.

If you’ve been trying to time a bottom in stocks when it seems like a peace deal is imminent or trying to trade energy when negotiations seem to fall apart, you’re at the whim of all this chaos.

But staying informed is not the same as staying ahead.

Markets don’t reward the most informed readers. They reward the investors with the clearest signals…

That’s what TradeSmith’s tools are built to provide.

And right now, they’re pointing to a clear set of winners and losers – regardless of what happens in the Strait of Hormuz next week.

The world’s strongest businesses don’t care about the news cycle…

When markets get turbulent, the instinct is to look for safety in familiar names – household brands with strong balance sheets and decades of earnings history.

The problem is finding them. You can sort through dozens of metrics, showing you balance sheet growth or valuation ratios.

Those are surface-level qualities that are helpful to understand but difficult to piece together. It’ll take you hours to figure out if an underlying business is truly high quality using this method.

TradeSmith’s Business Quality Score does something different.

It scans more than 21 fundamental factors across four categories – growth, profitability, safety, and payout – and compresses them into a single 0–100 rating. The higher the score, the better the business quality.

Here are the top-rated stocks in the system right now:

The list includes familiar names alongside a few surprises. But one stock stands out for investors watching the financial sector’s recent struggles: Visa (V).

Visa scores a 99 on the Business Quality Score – placing it in the top 1% of all companies we track.

That score reflects a sweep of Strong Bullish ratings across all four categories the system measures. Here are just some of the factors that contribute:

On Growth, Visa has expanded revenue at an average rate of about 12.5% per year over the past five years – consistent, compounding gains that most companies at Visa’s scale can’t sustain.
On Profitability, Visa converts roughly half of every dollar of revenue into net profit – a 50% net margin that puts it among the most efficient businesses on the planet.
On Safety, Visa has a low beta. That’s a measure of how volatile a stock is compared to the S&P 500. Visa’s beta of 0.79 confirms that Visa’s stock moves less than the broader market does – a low-drama business in a high-drama world.
And on Payout, Visa returned $18.3 billion to shareholders through buybacks alone in fiscal 2025 – not a company that hoards cash, but one that consistently puts it back in investors’ pockets.

Now, Visa is trading about 19% below its 52-week high. The broader Financials sector has been one of the weakest groups in the market this year, hit by AI disruption fears, private credit stress, and a wave of Short-Term Health Red signals we’ve covered in recent weeks.

But Visa isn’t a traditional bank or a credit desk with AI exposure risk. It’s a payment network – a toll road that collects a small fee on trillions of dollars of transactions every year, regardless of who’s lending or who’s afraid of an AI agent.

The business quality is still strong even as the price lags. For long-term investors, this is one worth buying on sale.

Recommended Link

Something Strange Is Happening Inside the Federal Reserve’s Headquarters Right Now

Twelve officials are quietly preparing an announcement that could trigger the worst investment crisis in 20 years. But one former $200 million money manager says the same event that wipes out most investors could set off one of the greatest money-making opportunities of his career. See the full story here.

Airline stocks are getting punished – don’t mistake that for a buying opportunity…

Here’s yet another example of the headlines acting like a trap…

Airlines have been hammered this year – and the fuel cost math is brutal.

United Airlines CEO Scott Kirby warned this week that ticket prices may need to rise as much as 20% if elevated jet fuel costs persist. He’s already cut 5% of the airline’s flights on routes that can’t cover higher fuel costs and predicts oil could reach $175 a barrel and stay above $100 through the end of 2027.

That’s a major headwind for the airline business. The cost shock is baking into every flight, every quarter, for the foreseeable future. It’s sure to affect the travel plans for customers of United and other airlines, eating into revenue as expenses mount.

And our Short-Term Health data confirms it. Here’s where every major airline in our system stands right now:

Short-Term Health is TradeSmith’s volatility-based trend indicator. It tracks a stock or index’s normal range of movement and uses that to determine its trend.

Green means buy. Yellow means caution. Red means sell.

Southwest (LUV) is in the best of a bad situation, sitting in Yellow – caution territory. Delta (DAL), JetBlue (JBLU), United (UAL), Alaska Air (ALK), and Frontier (ULCC) have all been in the Red Zone for at least a week, some for two weeks or more. Every one of these companies is down double digits over the past month.

The rule is simple: Don’t stocks in the Short-Term Health Red Zone if you plan on making money in them anytime soon. The data hasn’t told you it’s safe yet. And with fuel costs at these levels, the fundamental picture isn’t helping the technical one.

When airlines flip back to Green – and they will, eventually – that’s the signal to revisit. Until then, stay clear.

A fresh buy signal points to one of AI’s most important manufacturers…

Not every sector is flashing red. And in a market this choppy, a fresh Short-Term Health Green signal is worth paying close attention to.

Yesterday, Flex Ltd. (FLEX) entered a Short-Term Health Green Zone – its first buy signal in several months.

Most investors have never heard of Flex. That’s part of what makes this new signal so interesting.

Flex is a contract electronics manufacturer – it designs, builds, and manages hardware for some of the world’s largest brands across industries from medical devices to industrial equipment to cloud infrastructure.

Think of it as the company that makes the things that make AI work, without anyone outside the industry noticing.

And right now, Flex is squarely in the middle of one of the most important buildouts in the market.

Earlier this month, Flex announced a manufacturing collaboration with AMD to produce AMD’s Instinct AI accelerator platform at Flex’s Austin, Texas, headquarters.

Beyond that partnership, Flex has also launched what it calls an AI Infrastructure Platform – an integrated system combining power, cooling, and compute into modular designs that let data center operators deploy AI-scale infrastructure up to 30% faster.

In a market where the biggest tech spenders – Google, Microsoft, Amazon, Meta – are racing to build out AI data center capacity, Flex is one of the companies that physically makes that happen.

That’s the kind of durable demand that shows up in price momentum before it shows up in headlines. And it’s showing up now in Short-Term Health.

What you’ll notice is that this is a new Green signal after a brief stint in the Yellow – the stock is already in a strong uptrend and is approaching its 1-year high.

Treat it as a stock to watch closely and consider adding on continued strength. Short-Term Health will tell you if and when that momentum breaks down.

Two Stocks to Buy, Six to Avoid as the War Trudges On