Our individual stock recommendations are special situations offering a compelling value proposition. We are also recommending liquid electronically traded funds (ETFs) investing in sectors that are bound to benefit in the months and years ahead. Comments in bold reflect news and comments within the past month. All recommendations, as well as their dividend yields and buy/hold/sell recommendations, are summarized in the table on page 7 and sorted by investment
objective categories and then in alphabetical order.
Downside Hedges
We include downside hedges as part of the portfolio to reduce risk and dampen volatility by profiting during market corrections. Minimizing losses, even at the expense of limiting the upside, has been our key strategy for outperforming the market over the long run.
ProShares UltraShort S&P 500 (SDS) is designed to produce two times the daily fluctuations of the traditional S&P 500 Index, only in reverse. For example, a decline of say,1.0 percent in the Index will cause SDS to increase by 2.0 percent. Conversely, an increase in the Index will cause SDS to decline by 2.0 percent. We are including SDS as a hedge because the S&P 500 Index is distorted and inflated.
The stocks of the Magnificent 7 -- Nvidia, Apple, Microsoft, Amazon, Alphabet Class A (Google Class A & C), Tesla, Meta Platforms Class A, and Broadcom – comprise 37 percent of the S&P 500 Index due to their heavy capitalization weighting, and are perched at an astronomical price/earnings (P/E) ratio The AI race is forcing these companies to transform from low-debt, high cash flow Wall Street darlings to spenders of billions, financed by debt and cash flow, no longer deserving of lofty P/E ratios.
Another sign that the S&P 500 Index is inflated is revealed from the Sound Advice Risk Indicator (page 8), which compares the Index to house prices for 130 years. The latest reading is 2.41, which puts the S&P 500 Index above the high-risk watermark of 2.0.
The Russell 2000 Index
The Russell Index is comprised of small and mid-sized domestic companies which tend to be more volatile than the overall market, especially during market corrections because 40 percent of the 2000 companies do not have positive earnings. The following two ETFs below can also be used as a downside hedge because they short sell the Russell 2000 index. They differ in the leverage employed, which you can choose one according to your investment objectives and risk
tolerance.
ProShares UltraShort Russell2000 (TWM) is designed to produce two times the daily fluctuations of the Russell 2000 index (IWM). A decline of say,1.0 percent in the Russell 2000 will cause TWM to increase by 2.0 percent. Conversely, an increase in the Russell 2000 will cause TWM to decline in the same fashion.
ProShares UltraShort Pro Russell2000 (SRTY) is designed to produce three times the daily fluctuations of the Russell 2000 index.
Special Situations
The following stocks are individual companies presenting extraordinary values within their respective industries. Here they are in alphabetical order:
Cisco Systems (CSCO) is a value play in the AI boom because it supplies the backbone of data center networking equipment and software. CSCO is a direct beneficiary of the billions of capital spending slated for data centers and AI related equipment. Cisco’s management is reporting strong AI business and is confident that AI will continue to be a driver of growth. CSCO has climbed 48 percent during the last 12 months.
In April, Cisco released its latest annual industrial research report, the State of Industrial AI Report, examining how critical infrastructure like factories, utilities, and transportation systems are accelerating their direct deployments of AI. The survey shows industrial AI has moved from a future consideration to active deployment, with 61% of organizations now using AI in live industrial operations where performance, reliability, and security have direct physical consequences, and 20% reporting scaled, mature deployments. Across manufacturing, transportation, and utilities, AI is powering machine vision, robotics, mobility, and safety critical operations. Most organizations plan to increase AI spending (83%), and nearly nine in ten expect meaningful outcomes within the next two years (87%).
JP Morgan Chase (JPM) surpassed expectations by reporting strong first quarter earnings in April that were 17 percent higher than the same quarter one year ago. JPM of is a good value for what is considered the world’s highest quality banking enterprise with diversified businesses and prudent underwriting policies. Deregulation of the industry will
continue to be a substantial benefit to JPM. The Company has a long history of growing dividends. Management says that productivity in operations is improving and that AI programs could be scaled further. JPM has risen 19 percent during the past 12 months.
Moderna (MRNA) is a pure investment play on Messenger RNA (mRNA) technology. This revolutionary technology is on a path to provide solutions for not only vaccines, but for cures and treatments for the most deadly and debilitating diseases haunting humanity. MRNA has risen 84 percent during the past 12 months, from $24 to $50 per share.
While the upside is tremendous, risk is above average because earnings are not projected to turn positive for another year or two. Management believes that the company’s cash reserves will be sufficient to sustain the business while it develops vaccines and treatments. Cancer treatments furthest along in phase III trials are for melanoma and lung cancer.
Moderna is working on personal cancer vaccines by analyzing fragments of cancer cells in a blood draw, allowing the detection of cancer in early stages, before it graduates into more serious later stages. Data will be transmitted through the cloud to Moderna’s IT system, and AI algorithms will be used to compare an individual’s particular cancer cell mutation to the hundreds of thousands of possibilities and to the treatments that are currently effective. Management says Moderna will be able to analyze and develop a treatment customized for an individual patient within 30 days of the blood draw, and over time with more and more data, the process will become more efficient and accurate.
RLJ Lodging Trust (RLJ) remains a solid BUY. At $8 per share, the annual dividend of 60 cents is a yield of 7.5 percent, and the dividend is well-covered by the company’s cash flow. The net asset value is more than double the price of the stock. RLJ has risen 10 percent during the past 12 months in addition to the dividends.
RLJ has a large and diversified portfolio of hotel properties, with 96 premium-branded, high-margin, focused-service and compact full-service hotels located in 23 states and Washington DC. This is a low-leveraged REIT because the company’s debt is only 46 percent of its (book value) assets.
The portfolio’s net operating income (NOI) for the trailing four quarters was $361 million. Using a conservatively high cap rate of 7.5 percent produces a portfolio value of $4.82 billion. Adding other assets and subtracting liabilities leaves the company equity of $2.84 billion. After subtracting the liquidation value of the company’s only preferred stock of $328
million leaves equity for the common shareholders of $2.5 billion. Dividing that equity by the 149 million shares of RLJ outstanding translates to a net asset value of $16.81 per share – more than double the current price of the stock price.
RLJ’s $1.95 Series A Cumulative Convertible Preferred (RLJPRA) is RLJ’s only preferred stock, with a liquidation preference of $25 per share, which is the maximum value that would be received from an acquisition of the company. Use limit orders on dips below $25 to accumulate this preferred stock for a safe annual yield close to 8 percent.
The dividends for this preferred only consumed 11.7 percent of the company’s cash income and must be paid before common dividends, making the yield highly secure.
Special Situations in Energy
Last month our energy selections were moved from a “BUY” to a “HOLD” because they had risen substantially as geopolitical events unfolded in Venezuela and Iran. The rise was so steep that the risk/reward ratio became no longer favorable. Stock prices have settled back from their peaks but still remain elevated. Our energy selections remain on HOLD because prices are bound to fall as events in Iran subside. When that happens and our energy selections correct back to reasonable prices, they will be moved back to “Buy” recommendations.
Considering the longer term, as oil-rich parts of the world open up, there will be new sources of demand for the services and resources of US energy companies. Production and revenue is bound to increase even without high energy prices.
Energy providers also stand to benefit from the AI boom in two ways: Power needs from data centers is expected to double by 2030 after decades of stagnant demand in the US, and AI is a promising tool for finding, producing, and servicing natural resources.
Chevron (CVX) has a strong balance sheet with low debt, which along with plenty of free cash flow, gives it staying power during adverse conditions with the ability to make timely accretive acquisitions. Future dividend increases are bound to be supported by production growth from assets in the Permian Basin. The acquisition of Hess Corporation (HES) in July 2025 gave the company a 30% share in the Guyana Stabroek block which holds the equivalent of 11 billion barrels with a low production cost. Chevron’s daily production has risen above 4 million barrels.
CVX has climbed 36 percent during the past 12 months. Earnings will be benefiting from high oil prices because 85 percent of profits come from oil production.
Exxon Mobil (XOM) has low production costs. Production from its immense Guyana field it shares with Chevron is boosting earnings. The benefits are also appearing from the 2023 acquisition of Pioneer National Resources, evidenced by new production growth in the Permian Basin. XOM also has an attractive dividend yield with a history of dividend increases. The dividend was increased again in 2025 for a solid string of 43 annual dividend increases. XOM has 42 percent during the past 12 months.
On April 22, Golden Pass LNG, a joint venture between Exxon Mobil and Qatar Energy, launched its inaugural shipment of liquefied natural gas (LNG) to Europe from Texas. Construction on the $10B LNG plant began seven years ago and expects to export 18 million tons a year when it is fully operational.
Halliburton (HAL) is a premier oil field services company. The world’s accessible oil reservoirs have been developed, even in the Middle-East. Now it takes more sophisticated equipment and technology, which is what Haliburton provides. That trend puts HAL on an inexorable growth path.
HAL reported first quarter earnings in late April results that beat expectations. Revenues came in at $5.4 billion, 4% lower than the prior quarter and close to the same quarter last year. HAL has doubled during the past 12 months.
Halliburton has technological innovations that are tailor made for the unconventional reservoirs in the US, including its directional drilling system, the iCruise CX system, which is a rotary steerable tool, and the LOGIX drilling automation platform that makes it possible to reliably drill in curves and laterally in a single run. This new technology has been
rapidly deployed in the Permian Basin.
Other relatively new Halliburton technologies include the Zeus platform, electric pumping units, Octiv Auto Frac, and Sensori subsurface measurement. These systems increase efficiency and replace outdated and costly diesel generators as power sources for onsite drilling with generators capable of using natural gas, LNG, and a variety of other fuels that are available on the drilling site.
In Alaska, where some of the nation’s largest oil and gas reserves reside, Halliburton’s EarthStar ultra-deep resistivity tool and reservoir mapping service delivers unmatched performance on the North Slope. Exploring in Alaska was curtailed by the Biden Administration, but that is now expanding under the Trump Administration.
Valero Energy (VLO) was added to the portfolio several years ago at $60.41 per share. As earnings have grown, VLO is still a bargain with a relatively low P/E and attractive dividend yield. Valero makes its money from the “crack spread”, which is the profit margin derived from purchasing crude oil, turning it into refined products such as gasoline and jet fuel, and selling those refined products.
VLO has climbed from 133 percent during the past 12 months on the prospects of expanding margins from higher prices for gasoline, jet fuel, and other refined products.
Valero has the unique ability to refine both light crude oil coming from fracking in the US Permian basin as well as the sticky heavy crude coming from Venezuela. Light crude oil is great for refining into gasoline but not much else. Heavy crude is sought by refiners because it refines into many other products at high profit margins, ranging from diesel fuel to asphalt. Access to Venezuelan crude will benefit VLO over the longer term when production there increases.
Valero’s ability to refine a variety of crude oil types also gives it the ability to achieve discounts for its crude oil feedstocks. This flexibility and access allow Valero to capture the highest margins among its competitors because it can take advantage of the temporary gluts of crude, whether it’s low or high-quality crude or light sweet (low sulfur) or heavy sour (high sulfur) crude, to obtain the best available discounts for its feedstocks. The company’s refineries also have access to the US pipeline network from its gulf coast locations.
Valero’s “green energy” joint venture with Diamond Green Diesel is producing renewable diesel at large profit margins. Renewable diesel is made from animal or plant waste material which reduces greenhouse gas emissions up to 80 percent because it only releases as much carbon dioxide as the material originally contained. Renewable diesel does not congeal at low temperatures which means it can be easily transported through pipelines.
Equal Weight S&P 500 ETF
Invesco S&P 500 Equal Weight ETF (RSP) invests in all the S&P 500 stocks but on an equally weighted basis and rebalances its portfolio each quarter to maintain its equal weights. This preservation of value is behind the superior performance over the traditional S&P 500 Index over the long-term. This ETF is bound to benefit from the broadening out of the bull market.
The Magnificent 7 stocks only represent 2.2 percent of this ETF. In 2025, RSP grew by 9.3 percent. The Magnificent 7 stocks only accounted for 0.7 percentage points of that growth.
From the beginning of 2000, RSP has outperformed all the major indexes, with an annual percentage rate (APR) of 6.99%. This compares to the Dow Jones Industrials with an APR of 5.4%; the Russell 2000 with an APR of 5.1%; the Nasdaq Composite with an APR of 6.4%; as well as the traditional S&P 500 Index with an APR of 6.3%. These returns compare to the APR of 8.9% from the Sound Advice recommendations over the same period.
Comparing RSP to the S&P 500 is a way of keeping an eye on the breadth of the market. If the evenly-weighted RSP is out-pacing the capitalization-weighted S&P 500, then the breadth is expanding which is a healthy sign. So far this year, RSP has risen 6.2 percent, more than the 5.3 percent rise of the S&P 500.
Sector ETFs
Included in the Sound Advice model portfolio are the following electronically traded funds (ETFs) investing in sectors that are bound to benefit in the months and years ahead from fundamental changes in geopolitical, medical, and economic landscapes. These ETFs contain a portfolio of stocks, much like a mutual fund but, ETFs are liquid and trade like stocks with their own ticker symbols. Their prices are determined by the value of the portfolio of stocks they hold.
Artificial Intelligence
Global Robotics and Automation Index ETF (ROBO) is investing in the key to making the world’s companies more efficient -- robotics and automation. Approximately half of the portfolio is in robotics technologies, and the other half is in the technology controlling the robots – sensing, computing actuation, and artificial intelligence (AI). This is a diverse way of investing in AI which is the next technological frontier and will be playing an increasingly greater role in the way companies operate around the world. ROBO has risen 46 percent during the past 12 months, exemplifying the expanding use of AI.
Biotech ETFs
Biotech companies offer explosive profits because they are the source of the world’s top breakthrough vaccines and treatments. Their stocks are often volatile, making diversification essential. This can be accomplished by investing in a diversified electronically traded fund (ETF) investing exclusively in a portfolio of biotech companies.
ARK Genomic Revolution Multi-Sector (ARKG) is an actively managed biotech ETF investing in companies expected to benefit by incorporating technological and scientific developments, along with advancements stemming from mapping the human genome. Technological breakthroughs in artificial intelligence and other high-tech advancements have cut the cost substantially of opening new opportunities and putting this sector on the cutting edge of many new innovations. ARKG has risen 42 percent during the past 12 months.
Balanced Sector ETFs
The following ETFs rebalance their holdings quarterly to equalize the values, which offers a greater degree of evenly weighted diversification and adds stability as well as safety to a portfolio. This practice often provides a superior performance because it offers upside from stocks that are often under-weighted in the portfolios of other ETFs and mutual funds.
Virtus LifeSci Biotech Products (BBP) is a passively managed biotech ETF that weighs the portfolio selections essentially equally, as opposed to the more typical practice of weighing selections according to market capitalization. This is an important aspect because biotech ETFs who weigh their portfolio selections essentially equally have been the best performers because they have larger investments in smaller biotechnology companies which have become acquisition targets for large pharmaceutical companies looking for ways to expand. BBP has risen 52 percent during the past 12 months.
Health Care
Health care stocks have several traits that make them desirable long-term investments. They are well-suited for an aging population, which exerts disproportionate demands on the health care industry. As the world’s population continues to age, this trend is inexorable, making the health care sector defensive in nature and more insulated from economic cycles than other sectors. Health care companies are also prime candidates for new AI technologies that
are bound to improve efficiency and accelerate growth.
One of the main criticisms of most health care ETFs is that they are dominated by a relatively small number of large companies, such as Johnson & Johnson, which distort the performance of the typical health care ETF portfolio.
Invesco’s S&P 500 Equal Weight Health Care ETF (RSPH) tracks the S&P 500 Equal Weight Health Care Index, which tracks 65 health care stocks represented in the S&P 500, but weights each holding evenly. Both the Index and RSPH are rebalanced quarterly. This approach has given RSPH a superior performance to the large health care ETFs. RSPH has risen 52 percent during the past 12 months.
Consumer Staples
Invesco S&P 500 Equal Weight Consumer Staples ETF (RSPS) invests in consumer staple stocks within the S&P 500 Index. Consumer staples are those unexciting products we use every day without much thought, ranging from food, beverages (including alcohol), household goods (including cleaning supplies), and hygiene products.
These are products that people are unable (or unwilling) to remove from their budgets regardless of their financial situation. The nature of these products makes this sector defensive and much less vulnerable to periods of soft or negative economic growth. RSPS is flat during the past 12 months, after spiking 10 percent in February as the Iran war broke out.
Infrastructure and Cap EX
Trillions are going into capital expenditures. Hundreds of billions alone are slated this year to build the brains of AI – data centers and the related infrastructure. Outside of the AI boom, trillions are planned for new production facilities in a wide range of industries, from critical minerals and materials to Pharmaceuticals, to move production onto the safe and reliable shores of the US. These ETFs are bound to be primary beneficiaries.
Invesco S&P SmallCap Industrials ETF (PSCI) is based on the S&P SmallCap 600 Capped Industrials Index which is designed to measure the overall performance of the securities of US industrial companies with small capitalizations (caps). These domestic companies are engaged in the business of providing domestic industrial products and services, including engineering, heavy machinery, construction, electrical equipment, aerospace, and defense,
as well as general manufacturing. They will reflect the positive impacts more strongly than larger companies from an increase in domestic capital spending. Small cap construction companies typically operate inside the US on local construction projects that tend to employ local companies as subcontractors, even when general contractors may be national companies. PSCI has risen 33 percent during the past 12 months.
Invesco S&P 500 Equal Weight Materials ETF (RSPM) invests in the companies that comprise the S&P 500 Equal Weight Materials Index. The portfolio contains prime examples of basic materials companies outside of the oil and gas industries. Increased capital expenditures will translate into demand for basic materials. RSPM has risen 23 percent during the past 12 months.
