The alpha Brief: Insights on Quant Investing and the alpha Brief Portfolio (aBP)

Our three stocks to watch this week capture different stages of the AI value chain. Vertiv addresses one of AI's increasingly important constraints which is power availability while Lam Research supplies the equipment needed to manufacture advanced semiconductors and Microsoft provides the cloud and software layer through which AI can ultimately be monetized.

I am downgrading RTX from STRONG BUY to HOLD. I like the company more after earnings, but I do not see enough valuation support to keep the old rating.The downgrade is not a verdict against the business. In fact, Q1 and Q2 strengthened almost every operating pillar in the original thesis. The problem is expected return.

Lockheed Martin's stock has largely lagged the broader defense sector in 2026, but the underlying business continues to strengthen. Record backlog levels, accelerating missile-defense demand, and raised full-year guidance suggest investor sentiment remains more pessimistic than the fundamentals warrant. With over $7 billion in projected free cash flow, I believe LMT remains an attractive long-term defense holding

Second-quarter revenue increased 92% y/y to $7.8 Bn, while adjusted EBITDA increased 191% to $3.5 Bn. The quarterly net loss narrowed from $1.0 Bn to $541 Mn. More importantly, growth is increasingly diversified across Connectivity, AI and Space.

The rising defense budgets and a recovering aerospace market continue to create attractive opportunities across the sector. In this article, I highlight three aerospace and defense stocks that offer exposure to different growth drivers: next generation military technology, critical industrial capabilities, and industry leading scale. Together, they provide a balanced way to capitalize on some of the strongest trends shaping aerospace and defense today.

I am rating ATI a Strong Buy because the company has successfully transformed itself from a cyclical materials producer into a highly specialized aerospace and defense supplier with record backlog, expanding margins, and growing pricing power. Its exposure to mission critical applications and long term customer relationships provides earnings durability that the market still appears to undervalue.

I rate Argan Inc a Strong Buy because I believe its EPC franchise sits at the center of the accelerating U.S. power infrastructure buildout driven by AI data centers, electrification, manufacturing reshoring, and aging generation replacement. This positioning provides exceptional backlog visibility, strong cash generation, and exposure to one of the most attractive long-term infrastructure themes in the market.

The company's long-term growth will be supported by three primary drivers: continued fiber infrastructure deployment across the United States, expanding exposure to hyperscale data center construction, and disciplined operational execution that is translating into higher margins and stronger cash generation. Management also continues investing in workforce development and strategic acquisitions to strengthen Dycom's competitive position.

I am rating Powell Industries a STRONG BUY because the market continues to value the company like a cyclical industrial business despite record backlog, durable gross margins, and significant exposure to long term electrification and data center infrastructure spending. I believe that these fundamentals support a higher quality earnings profile than investors currently recognize.

DXP Enterprises is a specialty distributor retooling its mix toward higher-margin services and AI-enabled inventory solutions. I see durable free cash flow upside and a valuation gap versus peers that makes DXPE a BUY.

I am rating Kratos a BUY because its key programs are positioned to benefit from the $156Bn defense funding package, with the company specifically citing hypersonics, Valkyrie CCA, solid rocket motors, drone engines, missiles and loitering munitions.

Uber pairs massive transaction scale with new AI-driven efficiencies across rides, Eats and freight. I see sustainable margin expansion and conservative valuation upside — that’s why I’m a Strong Buy.

The company delivered a strong start to 2026, with normalized net revenue growth of 17%, adjusted EBITDA growth of 35%, and expanding margins. Management also raised full-year guidance and increased its long-term margin target.

I rate GE Vernova a Strong Buy since it is directly positioned at the existing AI bottleneck which is power. Data center demand collides with grid limitations, interconnection delays and infrastructure bottlenecks and GE Vernova is directly positioned at the constraint.

AI demand now includes power and cooling infrastructure, which can bottleneck performance. Vertiv offers technologies to optimize efficiency, highlighting the need for robust systems in AI deployments.

I am rating Astec Industies a BUY because the company has entered a structural margin‑expansion phase that is supported by backlog visibility, aftermarket mix shift, and operating leverage rather than cyclical recovery alone.

RTX demonstrates strong financial metrics, outperforming the sector median on key valuation ratios, including FWD non-GAAP P/E and FWD EV/EBITDA, which should reassure investors that its valuation premiums are justified.