Overview
The July 2026 ProPicks AI Investor Letter highlights a structural market shift driven by Federal Reserve policy that has pushed rates higher for longer, prompting a broad‑based rebalance in June. Capital‑intensive giants such as Microsoft, Oracle and Meta posted double‑digit declines, while mid‑cap companies with strong balance sheets and expanding margins outperformed across sectors, notably in AI infrastructure and healthcare.
Strategy Performance
The AI‑driven Mid‑Cap Movers strategy has generated a 92.9% total return since its inception, delivering an outperformance of 30.9 percentage points versus the S&P Midcap 400. In June 2026 the strategy returned 10.4%, beating its benchmark by 6.9 percentage points. Across the ProPicks AI suite, other strategies posted notable results: Tech Titans returned 247.7% since launch (170.9pp over the S&P 500), Energy Elite 34.5% (11.3pp over S&P 500 Energy), while Financial Fortresses lagged with a –15.2% return since launch.
June Exits
The model systematically profit‑took Allegro MicroSystems after a 47.7% gain in June, ending a roughly 164% year‑to‑date rally that had pushed the stock near all‑time highs and above its ~$57 analyst consensus target. Despite solid fundamentals such as expanding margins and quadrupled data‑center sales, valuation pressure and early cost concerns narrowed the margin of safety. Molina Healthcare was also rotated out after a 24.8% gain; although Q1 2026 beat expectations and the company secured a new Illinois Medicaid contract, extreme price swings and a guidance cut to roughly $5 per share inflated its multiple to about 63× forward earnings, prompting reallocation to higher‑conviction alternatives.
July New Picks
The July rebalance introduced two new mid‑cap names. Diodes Inc, classified under Information Technology, is up approximately 122% year‑to‑date. The company has delivered six consecutive quarters of double‑digit revenue growth, with Q1 revenue jumping 22% year‑over‑year. Automotive and industrial demand have risen 32% and 31% respectively, supporting pricing power and product shortages. Management targets $2 billion in revenue and over $4 earnings per share by 2028, while a PEG ratio of 0.25 underscores significant undervaluation.
Oscar Health, listed under Financials/Healthcare, entered with a year‑to‑date gain of about 119% and a 143% increase over the last 90 days. The insurer posted a Q1 earnings beat of $2.07 versus the $1.06 consensus, driven by a 53% top‑line expansion to $4.6 billion and a 56% year‑over‑year rise in membership to 3.2 million customers. Operating margins expanded beyond 15.2%. A recent court ruling removed ACA enrollment restrictions, and Barclays upgraded the stock with a $35 price target, supporting a full‑year revenue outlook near $19 billion.
Market Context
The letter attributes the mid‑cap rally to a reassessment of the cost of capital following the Fed’s higher‑for‑longer stance, which compressed valuations for large‑cap, capital‑intensive firms and redirected capital toward mid‑cap companies with disciplined financials. The AI model’s systematic rotation and rebalancing aim to capture this shift by exiting over‑valued positions near peaks and allocating to stocks exhibiting strong growth, solid fundamentals, and attractive valuation metrics.