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Nicole Benjamin: Hey everyone. It's Nicole Benjamin, your host here at Seeking Alpha to bring to you another episode of The Weekly Grade with Steven Cress, as we are going to be giving you market insights in minutes. Now, just a quick disclaimer before we get started.

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Steven Cress: Wow! I think that was another world record for reading a disclaimer. Well done.

NB: We did it. Alright. Well, everybody, Steven Cress, VP of Quantitative Strategy here at Seeking Alpha. He is known to be the person behind a lot of the wonderful products you see on-site, our Alpha Picks portfolio, our PRO Quant Portfolio. And now, what else, Steve?

SC: Well, I am happy to announce on back of those products, which have had excellent performance, we are introducing a new product called the Quant Growth & Income product. And the Quant Growth & Income product, it uses the same basic algorithm that we use for Alpha Picks and the PRO Quant Portfolio. Sorry, PQP. And I will say the added feature with this new product is that all the stocks will be paying a dividend.

So, as in the name, Quant Growth & Income, it offers both capital appreciation, but income as well. So, it's a fairly unique product, and we believe that it's really going to help a lot of individuals who are facing maybe uncertain times in terms of the market and the economy. And it's, we're not macro strategists at Seeking Alpha, but we certainly know volatility happens quite a bit, especially over the last few years. And it's great to have a product that's, well, hedge against those difficult and volatile periods, such as we might be running into right now.

NB: Well, that's perfect. I'm sure everybody's going to love that. And I want to jump right in. Steve, I have seen that there's a lot of people that are just in a state of fear by the headlines they're seeing. And with your most recent income picks in the tanker and refining sectors, they're seeing double and triple digit returns this year. So, I guess, how is the Seeking Alpha Quant system identifying these specific stocks that are actually thriving on energy volatility?

SC: Well, you make me sound pretty good, but I have to attribute it to the Quant system. It is a great Quant model. It has selected these stocks, which you could see over the last 52-weeks here, especially year-to-date, have done incredibly well. And the way the Quant model works is we focus on stocks that are collectively strong on value, growth, profitability, momentum, and EPS revisions. And when we do this, we actually compare every company that we follow to the other companies in the sector.

So, each day we refresh those going through a company's balance sheets, income statements, cash flow, and hundreds of financial metrics. We refresh this in the morning about 4:00 AM to 6:00 AM so we could provide all our subscribers with a fresh daily directional recommendation. And that's from the very best companies to the very worst companies. So, it's actually fairly easy with our system to identify these top stocks because we provide that ranking. And we provide a lot of metrics that give our subscribers an instant characterization of how these companies stand on growth and value and profitability to the competitors. So, it's really a very user friendly product.

NB: Wonderful. Now, I have noticed that we're facing the perfect storm, so to speak, of inflation, geopolitical tension, and just this upcoming midterm election. So, when the market sees massive single day drops, what is the one fundamental data point that investors should be focused on to ignore all the scary headlines and all that noise?

SC: Well, I'd say, you definitely want to try to ignore the white noise and the talking heads on CNBC and Bloomberg because that could instill a lot of fear. And many times, people sell-off really good companies with strong fundamentals when we go into these volatile and crisis periods. Now, with the table that you're exhibiting, there is a seasonal pattern that we're showing here. So, on top of everything you mentioned with the war, the sticky inflation, the interest rates higher for longer, we're hitting the midterm elections in November. And you can see historically going into every midterm election, the 12-months previous to it, the market is down. And this goes all the way back to 1926.

So, of course, history may not necessarily repeat itself. We certainly see this as a pattern that does repeat itself. So, it does provide us with a lot of uncertainty, and that's why when you buy stocks that pay dividends, it could often soften the blow to your overall portfolio. And we're early enough at this point where the market is still close to its 52-week highs, whether you're looking at the S&P 500 or the Dow. And we're just getting into another phase where there's a rotation out of some of the stocks that have done incredibly well. We're just at the beginning phase.

So, this really could be a good period to buy some stocks that offer income, lock in the yields here, and prepare for more volatility ahead. And there are a lot of points on the left side of this table that indicate there could be volatility ahead. So, I wouldn't say there's any one data point that would tell me to invest in these stocks. There's a number of data points and historical patterns.

For the stocks themselves, though, if we had a data point, if you just, like, went to our Quant Screen, you could see the top ranking on the stocks, and it couldn't be any more user friendly. We have about 4,800 stocks that we rank, from 1 to 4,800. You can get at any one of the Quant Screens and it provides the ranking right there. That's the easiest way to identify the best companies to own right now.

NB: Well, perfect. Couldn't have said it better myself. Now, Steve, I noticed that you recently identified Canadian Natural Resources, CNQ, as a Strong Buy here in your article. So, with this top tier rating, based on your analysis, how does this stock identify as both a reliable income play and a hedge against high oil?

SC: Yeah. So, it definitely has income. One, I will say the stock is a Quant Strong Buy. It meets the criteria that we're looking at for this core investment characteristics that I mentioned previously. And if you look at the right hand side here for the factor grades, you could see the valuation framework is steady. The growth is steady. They actually excel on profitability with an A+. Momentum grade is a B and the analyst revisions are an A+. And noticeably, if you look at those analyst revisions on the factor grade card that's on the right hand side, you'll see now it's an A+, but six months ago it was a C. So, analysts are increasingly liking this company and they're taking their earnings estimates up. And typically when you see an A+ score there, it means most analysts have revised their estimates up and zero have revised it down. And that is the case with CNQ.

It also offers that dividend that we look for, and the forward dividend yield right now is 3.73%. From a valuation standpoint, even though the overall value grade is a C, on a PEG basis, which is a metric that I really like, it combines both P/E and growth, it's at 0.74 versus the sector at 1.2x. So, it's really inexpensive versus the sector on a PEG ratio. So, there are a number of characteristics that I really like, and the stock year-to-date is up 43%, but people should not step away from that.

As I pointed on the valuation grade, it's a C now, and it was a C six months ago. So, it's just as attractive now as it was six months ago, even when the stock is increasing. And I would say this is really an appropriate stock, and that dividend yield, if we do run into market volatility, it should help offer some downside protection to the portfolio.

NB: Alright. Well, I want to circle back to what we briefly touched on at the top of the episode. Most investors, they feel like they have to choose between high yield and long-term growth. So, how does the new Quant Growth & Income Portfolio solve that trade-off to provide both capital appreciation and competitive income?

SC: Yeah. Absolutely. So, in order to get into the Quant Growth & Income Portfolio, a stock has to have a Quant Strong Buy or Buy. And that means that the company from our Quant perspective is mispriced. And it should offer better upside performance compared to the sector when it has a Quant Strong Buy or a Buy on it.

So, that gives you that capital appreciation perspective, and of course, we have a proven history with the other products that have performed incredibly well, and our Quant System where we measure all Strong Buys every day. So, you're getting that capital appreciation perspective from the Quant Buy or Strong Buy. But as I mentioned, we're also identifying companies that pay a dividend because we want individuals to be able to earn income and we want a steadier portfolio, which income can provide. So, it meets and blends that dual aspect of capital appreciation and income.

NB: Alright. Well, we'll leave it right there. Thank you so much, Steve, for joining us today. And for everybody listening in, go ahead, read Steve's article, check out this ticker symbol, see if it might be right for your portfolio, and get ready for some new products on the site. And we'll see you next time. Thanks so much.

Read Steven Cress' Article on Seeking Alpha

Explore Alpha Picks Today!

Join the Waitlist for the launch of the Quant Income Growth Portfolio!