Equities
Large and small caps, US and foreign, and the themes we hold in both.
This week's line · Oct 24, 2026
| Asset class | Stage | 3-yr run | Timing | Change | As of |
|---|---|---|---|---|---|
| Large caps SPY $760, above 200d $727 | Normal no sign of excess | +86% 2% below high | Add +5% vs 200d | new | Oct 21 |
| Small caps · descriptive IWM $276, below 200d $278 | Normal no sign of excess | +71% 10% below high | Hold -1% vs 200d -2% vs S&P 12m Less reliable here: the 200-day line has not worked on the Russell 2000 since 1987. | new | n/a |
Our themes
The menu is the themes we would hold for the long run, ten to twenty years, and it changes only at the January and July review. Each month the themes are ranked by Stage and Timing, read from their large-cap stocks, so a theme reads the same in both columns. Each column holds the 5 strongest themes it can fill; a theme with no small-cap version on a side is skipped there and the next one held. A held theme stays until it drops out of the top 7.
Picked 2026-W43, the monthly rebalance.
| # | Theme | Stage | Timing | Large | Small |
|---|---|---|---|---|---|
| 1 | AI compute Chips, memory, chip equipment and the bottlenecks between them. The biggest upside if AI pays off. Funds: SMH, SOXX Large stocks NVDANvidia · Add, Stretched · Gate failed, 2/4 (41) rev +83%, shares -0.8%, FCF 2.5%, margin 64%, 16.8x sales ASMLASML · Hold, Stretched · Below the tiers, 2/4 (51) rev +16%, shares -2.0%, FCF n/a, margin 29% ADIAnalog Devices · Add, Stretched · Below the tiers, 1/4 (53) rev +34%, shares -1.5%, FCF 2.6%, margin 30%, 13.7x sales Small stocks PLABPhotronics · Reduce, Post-peak · Consider, 2/4 rev +3%, shares +1.1%, FCF 6.5%, margin 21%, 2.0x sales KLICKulicke and Soffa Industries · Reduce, Post-peak · Consider, 2/4 rev +123%, shares +1.4%, FCF 1.0%, margin 21%, 4.3x sales MODModine Manufacturing · Reduce, Post-peak · Below the tiers, 1/4 rev +28%, shares +0.6%, FCF 1.4%, margin 9%, 2.1x sales | Building more volatile | Add +14% vs 200d +42% vs S&P 12m | 20% | 20% |
| 2 | Biology as engineering AI floods drug discovery, and the tool makers sell into every experiment. Funds: IBB, XBI Large stocks LLYELI Lilly and · Add, Stretched · Below the tiers, 0/4 (28) rev +50%, shares -0.5%, FCF 2.3%, margin 34%, 15.0x sales REGNRegeneron Pharmaceuticals · Add, Normal · Strong fit, 4/4 (83) rev +9%, shares -2.2%, FCF 4.5%, margin 28%, 5.3x sales ALNYAlnylam Pharmaceuticals · Reduce, Post-peak · Below the tiers, 1/4 (32) rev +95%, shares +2.1%, FCF 2.7%, margin 16%, 6.2x sales Small stocks LNTHLantheus · Add, Normal · Below the tiers, 1/4 rev +3%, shares -4.0%, FCF 5.9%, margin 26%, 4.2x sales AZTAAzenta · Small adds, Normal · Below the tiers, 1/4 rev +12%, shares -1.1%, FCF 0.6%, margin -3%, 2.8x sales SDGRSchrodinger · Hold, Normal · Consider, 2/4 rev +8%, shares +3.2%, FCF negative, margin -71%, 7.7x sales | Early | Add +15% vs 200d +8% vs S&P 12m | 20% | 20% |
| 3 | Robotics and automation Machines that do physical work. The value goes to the chokepoint parts, not the cheap hardware. Funds: BOTZ, ROBO Large stocks CATCaterpillar · Reduce, Stretched · Below the tiers, 2/4 (55) rev +18%, shares -1.9%, FCF 3.4%, margin 12%, 4.2x sales TERTeradyne · Reduce, Late · Below the tiers, 2/4 (53) rev +58%, shares -1.7%, FCF 1.7%, margin 26%, 10.8x sales ISRGIntuitive Surgical · Hold, Normal · Below the tiers, 2/4 (51) rev +20%, shares -2.2%, FCF 2.3%, margin 26%, 13.5x sales Small stocks OMCLOmnicell · Wait, Normal · Strong fit, 3/4 rev +7%, shares -1.5%, FCF 8.5%, margin 10%, 1.3x sales TMDXTransMedics · Reduce, Post-peak · Strong fit, 3/4 rev +21%, shares +0.4%, FCF 3.3%, margin 12%, 3.6x sales TKRTimken · Wait, Normal · Consider, 2/4 rev +7%, shares +0.0%, FCF 4.9%, margin 7%, 1.6x sales | Building more volatile | Hold +1% vs 200d +7% vs S&P 12m | 20% | 20% |
| 4 | Scarce physical networks Railroads, pipelines, quarries and land. Nobody can build new ones quickly. Funds: IYT, AMLP Large stocks UNPUnion Pacific · Add, Normal · Below the tiers, 2/4 (70) rev +7%, shares +0.2%, FCF 3.8%, margin 29%, 6.6x sales VCISYVinci · Wait, Normal · Consider, 3/4 (72) rev +4%, shares -1.0%, FCF 13.4%, margin 6%, 0.8x sales MLMMartin Marietta Materials · Wait, Normal · Below the tiers, 1/4 (51) rev +0%, shares -0.4%, FCF 2.7%, margin 37%, 4.6x sales Small stocks JOEThe St Joe · Add, Normal · Consider, 2/4 rev +23%, shares -1.5%, FCF 5.5%, margin 34%, 7.1x sales USLMUnited States Lime & Minerals · Reduce, Normal · Consider, 2/4 rev +8%, shares +0.2%, FCF 2.9%, margin 41%, 8.4x sales TRCTejon Ranch · Wait, Normal · Below the tiers, 1/4 rev +72%, shares +0.7%, FCF n/a, margin 2%, 7.8x sales | Early | Hold +2% vs 200d +3% vs S&P 12m | 20% | 20% |
| 5 | Intelligence owners The companies most likely to own AI's profits, if politics lets them keep them. Funds: QQQ No small-cap version: this theme is the large platforms. Large stocks MSFTMicrosoft · Hold, Normal · Below the tiers, 2/4 (48) rev +18%, shares -0.1%, FCF 1.7%, margin 40%, 11.7x sales METAMeta Platforms · Hold, Normal · Consider, 3/4 (51) rev +35%, shares +1.4%, FCF 1.7%, margin 31%, 6.8x sales TCEHYTencent · Reduce, Post-peak · Consider, 3/4 (74) rev +14%, shares -0.9%, FCF n/a, margin 30% | Building more volatile | Hold +6% vs 200d -3% vs S&P 12m | 20% | none |
| 6 | Care economy As AI makes most things cheaper, in-person care takes a bigger share of what people spend. Funds: IHF Small stocks PNTGThe Pennant · Add, Stretched · Consider, 2/4 rev +36%, shares +1.7%, FCF 2.4%, margin 6%, 1.3x sales ADUSAddus HomeCare · Hold, Normal · Below the tiers, 1/4 rev +8%, shares +0.8%, FCF 6.8%, margin 10%, 1.5x sales INNVInnovAge · Add, Stretched · Consider, 2/4 rev +18%, shares +0.2%, FCF 4.1%, margin 4%, 1.3x sales | Early | Hold +4% vs 200d -12% vs S&P 12m | 0% | 20% |
| 7 | Space Launch and satellites, now with the leader public. Young listings, so the signals start cautious. Funds: UFO, ARKX | Early | n/a | 0% | 0% |
| 8 | Critical materials Copper and the minerals a build-out runs on. New mines take a decade to open. Funds: COPX, PICK | Early | Wait -11% vs 200d +11% vs S&P 12m | 0% | 0% |
| 9 | Defense Budgets rise in a fragmented world, and governments are steady customers. Funds: ITA | Building more volatile | Wait -5% vs 200d -16% vs S&P 12m | 0% | 0% |
| 10 | Hard money Gold royalties and miners. A hedge on government debt that doesn't depend on AI. Funds: GDX, RING | Building more volatile | Reduce -13% vs 200d -4% vs S&P 12m | 0% | 0% |
| 11 | Power and grid Electricity is the binding limit on AI. Includes nuclear fuel. Funds: GRID, XLU, URA | Early | Reduce -11% vs 200d -14% vs S&P 12m | 0% | 0% |
Paper record since 2026-10-24: the stocks +0.9%, the theme funds +1.1%, the S&P 500 +0.7%, through 2026-10-26. Logged each month and never edited, so in a year it shows whether picking stocks beat owning the funds. Too early to mean anything yet.
Stocks under a held theme are its first three ranked by the shape of a business we like: revenue up 15% or more in a year, the share count flat or shrinking, free cash flow positive, and cheap on sales, with profit margin also in the score. Stocks with all of it and our checks passed come first, then those passing our checks, then the rest; the same order as the top lists below. Our checks: profitable or holding cash for 18 months of losses, net debt at most three years of EBITDA, shares up no more than 5% a year. Small caps leave out heavy diluters and companies over $10 billion. Each shows its own Timing and Stage (against the S&P for large caps, the Russell 2000 for small caps) and the screener's tier. Foreign companies sit beside US ones and show the US ticker most brokers trade, usually an ADR. Green tickers are the screener's Strong fits. Held themes are equal shares of a side. This month the large-cap themes are 38.5% of the model book (base 29.5%). In the model book the large-cap themes are one line, sized as a whole by the sleeve's own Stage and Timing; in a backtest since 2015 the book made 23.0% a year with it against 21.7% with the S&P 500 in its place, with a slightly smaller worst fall. The menu was chosen in 2026, so that history flatters it. A screen, not a recommendation. Not advice.
Top 10 large caps
| # | Ticker | Theme | Business | Screener | Stage | Timing | Our checks |
|---|---|---|---|---|---|---|---|
| 1 | NVDA Nvidia | AI compute | rev +83%, shares -0.8%, FCF 2.5%, margin 64%, 16.8x sales | Gate failed, 2/4 (41) | Stretched | Add | Pass |
| 2 | CAT Caterpillar | Robotics and automation | rev +18%, shares -1.9%, FCF 3.4%, margin 12%, 4.2x sales | Below the tiers, 2/4 (55) | Stretched | Reduce | Pass |
| 3 | ASML ASML | AI compute | rev +16%, shares -2.0%, FCF n/a, margin 29% | Below the tiers, 2/4 (51) | Stretched | Hold | Pass |
| 4 | ADI Analog Devices | AI compute | rev +34%, shares -1.5%, FCF 2.6%, margin 30%, 13.7x sales | Below the tiers, 1/4 (53) | Stretched | Add | Pass |
| 5 | LLY ELI Lilly and | Biology as engineering | rev +50%, shares -0.5%, FCF 2.3%, margin 34%, 15.0x sales | Below the tiers, 0/4 (28) | Stretched | Add | Pass |
| 6 | LRCX Lam Research | AI compute | rev +33%, shares -0.6%, FCF 2.3%, margin 32%, 11.0x sales | Consider, 3/4 (53) | Post-peak | Reduce | Pass |
| 7 | BESIY BE Semiconductor Industries | AI compute | rev +46%, shares +0.0%, FCF 2.1%, margin 33%, 14.4x sales | Below the tiers, 2/4 (51) | Post-peak | Reduce | Pass |
| 8 | ATEYY Advantest | AI compute | rev +58%, shares -1.1%, FCF 1.5%, margin 37%, 20.5x sales | Below the tiers, 2/4 (49) | Late | Add | Pass |
| 9 | TER Teradyne | Robotics and automation | rev +58%, shares -1.7%, FCF 1.7%, margin 26%, 10.8x sales | Below the tiers, 2/4 (53) | Late | Reduce | Pass |
| 10 | MSFT Microsoft | Intelligence owners | rev +18%, shares -0.1%, FCF 1.7%, margin 40%, 11.7x sales | Below the tiers, 2/4 (48) | Normal | Hold | Pass |
Highlighted: the screener's Strong fits, all four traits. Foreign companies show the US ticker most brokers trade, usually an ADR; several trade over the counter, which some apps do not offer and which can carry small custody fees.
How this list is built
The stocks in the five themes we hold, ranked by the shape of a business we like: revenue up 15% or more in a year, the share count flat or shrinking, free cash flow positive, and cheap. Stocks with all of it come first, then those passing our checks, then the rest; inside each group, the mean of their growth, free cash flow yield, cheapness on sales and profit margin. Our checks: profitable or holding cash for 18 months of losses, net debt at most three years of EBITDA, shares up no more than 5% a year. On every US company from 2011 to 2025 the top 10 by this shape made about 22% a year against 15% for a quality ranking and 13% for all of them, helped by one big year (2024); it did not find more 10x stocks than the market. Requiring a flat or shrinking share count and adding profit margin tested better again, mostly by halving the worst year.
From the screener’s list of 2026-10-28. An ordering, not a forecast. Not a recommendation to buy.
Top small caps
| # | Ticker | Theme | Business | Screener | Stage | Timing | Our checks |
|---|---|---|---|---|---|---|---|
| 1 | JOE $3.9B | Scarce physical networks | rev +23%, shares -1.5%, FCF 5.5%, margin 34%, 7.1x sales | Consider, 2/4 | Normal | Add | Pass |
| 2 | PNTG $1.5B | Care economy | rev +36%, shares +1.7%, FCF 2.4%, margin 6%, 1.3x sales | Consider, 2/4 | Stretched | Add | Pass |
| 3 | OMCL $1.7B | Robotics and automation | rev +7%, shares -1.5%, FCF 8.5%, margin 10%, 1.3x sales | Strong fit, 3/4 | Normal | Wait | Pass |
| 4 | PLAB $1.7B | AI compute | rev +3%, shares +1.1%, FCF 6.5%, margin 21%, 2.0x sales | Consider, 2/4 | Post-peak | Reduce | Pass |
| 5 | KLIC $4.1B | AI compute | rev +123%, shares +1.4%, FCF 1.0%, margin 21%, 4.3x sales | Consider, 2/4 | Post-peak | Reduce | Pass |
| 6 | ADUS $2.3B | Care economy | rev +8%, shares +0.8%, FCF 6.8%, margin 10%, 1.5x sales | Below the tiers, 1/4 | Normal | Hold | Pass |
| 7 | TMDX $2.4B | Robotics and automation | rev +21%, shares +0.4%, FCF 3.3%, margin 12%, 3.6x sales | Strong fit, 3/4 | Post-peak | Reduce | Pass |
| 8 | INNV $1.2B | Care economy | rev +18%, shares +0.2%, FCF 4.1%, margin 4%, 1.3x sales | Consider, 2/4 | Stretched | Add | Pass |
| 9 | NHC $3.3B | Care economy | rev +9%, shares +1.7%, FCF 4.4%, margin 12%, 2.1x sales | Below the tiers, 1/4 | Stretched | Small adds | Pass |
| 10 | LNTH $6.5B | Biology as engineering | rev +3%, shares -4.0%, FCF 5.9%, margin 26%, 4.2x sales | Below the tiers, 1/4 | Normal | Add | Pass |
Left out for heavy dilution (over 10% new shares a year): VECO +11%, NOVT +14%, OUST +21%, AAOI +44%, RYN +67%, AEVA +17%, NVTS +21%, LWLG +23%, RXRX +28%, SERV +40%, KYTX +41%, CABA +144%, NTLA +29%, CATX +63%, CRSP +11%, ABSI +23%, CAMT +12%, LAND +19%. Left out as too large for small caps: ONTO ($10.5B), ISRG ($157.5B), TXG ($10.2B), MEDP ($18.8B), CRL ($17.3B), FN ($12.3B), CRDO ($31.5B), TWST ($10.6B), ALAB ($49.7B). Highlighted: the screener's Strong fits.
How this list is built
The small-cap stocks in the themes we hold, ranked by the shape of a business we like: revenue up 15% or more, the share count flat or shrinking, free cash flow positive, and cheap, on the small-cap screener's numbers (operating margin as the fourth part of the score). Stocks with all of it come first, then those passing our checks, then the rest. Our checks: profitable or holding cash for 18 months of losses, net debt at most three years of EBITDA, shares up no more than 5% a year. Each theme is held for the same reasons as on the Large caps page; each stock's own Stage and Timing are measured against the Russell 2000. The 200-day has a poor record on small caps, so read Timing here as context.
From the screener’s list of 2026-10-27. An ordering, not a forecast. Not a recommendation to buy.