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Nicole Benjamin: Hey everybody. It's Nicole Benjamin, your host here at Seeking Alpha to bring to you a new series, The Weekly Grade with Steven Cress, where we are going to be giving you key market signals in minutes. Now, some housekeeping before we get started.

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All right. Well, with that out of the way Steven Cress, everyone.

Steven Cress: Good disclaimer.

NB: Thank you. Steven Cress, everyone, VP of Quantitative Strategy here at Seeking Alpha. He is known for some really great products we have on the site, Alpha Picks, PRO Quant Portfolio, and if either of those things sound like something that might be right for you, a more simplified way of investing, go ahead, take a look, see if that's something right.

Alright. Now, to jump right in here, Steve, I have my first question that I want to ask you. With the current war in Iran that's causing so much fear, there's many investors that see this as a time where they need to sell everything and hide in cash. So, with that in mind, how do you use the data to ignore all the scary headlines?

SC: Yeah. I actually try to encourage people to pay attention to the data and ignore the scary headlines. And you're absolutely right. A lot of fear and concern is generated. You have a lot of talking heads on Wall Street, on various TV stations or the newspapers, and they're instilling quite an amount of fear into individuals who actually do act on what they hear and they sell. And typically when they sell, they sell at the bottom. And having done this for a very long time, being in the world of finance for over 35 years and having really much of my career revolve around quantitative analysis and strategies, I'm able to really keep my finger on the pulse of markets during these periods.

And what I have found is that during these periods, during these pullbacks and corrections, you should always continue to add to stocks that have really strong fundamentals because what happens is you will find early during these corrections, people sell-off those stocks and they move into cash, they move into gold, they move into utilities, consumer staples, and they do it because of fear. So, they end up selling really good positions just to make – be in a safe haven. And that's a big mistake. If you can maintain a discipline and continue to look for stocks with good fundamentals and ignore all the white noise around you, that will help build generational wealth over time. And we have many examples in some of our other webinars and articles where we point to that. So, the key is, is to stay disciplined, ignore the talking heads, and follow the data.

NB: Alright. Now, for my next question, you've identified unstoppable stocks like Celestica and Sterling that have crushed the market over the last five years. But what is the one fundamental trait that keeps them resilient? And what do you say to those investors that feel like they've missed a boat because these stocks are trading at just all-time highs?

SC: Yeah. I would say, if you see a Quant Strong Buy recommendation, you have not missed the boat, that is our directional signal that the security is still mispriced. And typically, the common thread that these stocks have, especially over this five year period, is that they consistently have beat both top and bottom line being revenue and earnings per share growth expectations. So, analysts will have estimates on companies for their upcoming quarters, the company's report, and they beat those analyst’s expectations.

And these companies have done it very consistently over a five year period, and they all possess really stellar growth rates. And that's what helps them move ahead whether we're in a bull market or a bear market. Sometimes you'll find in a bull market, they may pull back a lot. Again, we’re talking about fear. People often sell stocks where they made money, but as soon as that fear fades and fundamentals are normalized again, people jump right back into these stocks and they roar right back up.

NB: Now, a big concern for a lot of investors is buying stocks at the top. So, with stocks like Fabrinet, they have great momentum, but they're trading at a premium. So, how does the Quant system decide when a high price is actually a bargain versus it being a Hold when a stock may just be – just too expensive to touch?

SC: Yeah. Fabrinet and the stock that you're showing here, Celestica, they share that. They're both trading in your all-time highs. Our system will tell you when the stock is a Sell. So, the directional Buy, the Strong Buy that you see should, by example, that valuation grade change to a D-, it would automatically default to a Hold. So, even on our system, it gets to the point where it says, okay, the valuation is just too high. So, if you own the shares, just Hold them. We would not recommend continuing to Buy. And in fact, if you see our directional recommendation go to a Sell, a Strong Sell, that would be the time to Sell it.

And, typically, when we see that, the valuation is too high, the growth picture has changed, and perhaps analysts have lowered their estimates on it. So, it's usually a combination of events that could lead it to go from a Strong Buy to Sell. If it goes from a Strong Buy to a Hold, it's usually just on the valuation line, but our system will tell you, it gets refreshed on a daily basis.

NB: So, is there any one trigger that would change it from a Strong Buy to a Hold in the model during just times of global uncertainty?

SC: Yeah. The valuation grade is a telltale. If that goes for – the stock could be a Strong Buy with valuation grade of a D. But if it goes from a valuation grade of a D to D-, that means that it's just triggered enough that we're saying, okay, let's take a step back and just put a Hold on this stock because maybe the P/E's gotten too expensive or the PEG ratio or the price-to-book or price-to-sales. One of those has been triggered, and it's time to take a step back. And what we're looking at in this chart here is this actually shows Celestica and why we like it so much.

And if you look at the growth, and we have a number of growth metrics from revenue growth to EBITDA growth to earnings per share growth to levered free cash flow growth , you could see it's almost a straight A report card. The only area where it's a little bit lower would be free cash flow per share and operating cash flow per share, but on all the other metrics, it is an A. So, those grades, again, they're sector relative. It tells you, it gives you an instant characterization looking at the top line revenue growth. A-, this is way better than the sector. If you look at earnings per share, A, much better than the sector. And we, really, this is very intuitive because we tell you what the growth point is for the stock, and we tell you what the growth rate is for the sector. So, you could see why those grades are A- because for the stock, it's so much stronger versus the sector. Very intuitive.

NB: Alright. Well, we will leave it right there. Thank you so much Steve for joining us today on The Weekly Grade. And for everybody that's listening in, go ahead, see if these stocks might be right for your portfolio. See if Alpha Picks or PRO Quant Portfolio might be the easier way of investing for you. And click the follow button on Steve's page so you can just stay up to date on all the things he's talking about, and we'll see you here next time. Thanks so much.

SC: Thank you.

Read Steven Cress' Article on Seeking Alpha

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