AI-Picked Diversified Value Stocks
Quick Takeaways
- Two pharma titans (PFE, MRK) trade near levels from ~30 years ago, despite durable cash generation.
- High income: PFE ~7.2% yield; MRK ~4%.
- Franchise power: MCD around 24× forward earnings.
- Countercyclical ballast: HLI’s restructuring niche shines in downturns.
- Deep value: ALSN at ~8.2× earnings; EV fears look overdone.
Method (High Level)
- Start with quality via Stansberry Score (valuation, efficiency, strength, momentum).
- Filter for top scorers (85+), then let AI enforce cross-sector diversification.
- Mix steady dividend payers with cyclical hedges and durable franchises.
Comparison Table
| Company | Ticker | Sector | Forward P/E | Dividend Yield |
|---|---|---|---|---|
| McDonald’s | MCD | Consumer Staples | 24.0x | — |
| Houlihan Lokey | HLI | Financials | 24.0x | — |
| Pfizer | PFE | Healthcare | 7.7x | 7.2% |
| Merck | MRK | Healthcare | 8.3x | 4.0% |
| Allison Transmission | ALSN | Industrials | 8.2x | — |
Visuals
How to Use This Infographic
- Treat metrics as transcript-based context, not live quotes.
- Blend value + income + countercyclical exposures for resilience.
- Rebalance annually; let dividends and cash flows compound over time.
Beating Wall Street with AI: 5 Diversified Value Stocks Trading Like It’s 1995
Quick Summary
- Pfizer and Merck are still trading around the same levels they were 30 years ago, despite minting billions in cash flow.
- Pfizer’s dividend yield is 7.2%, while Merck pays 4%—rare in today’s market.
- McDonald’s, trading at 24x forward earnings, remains a cash-generating franchise giant.
- Boutique investment bank Houlihan Lokey (HLI) provides a countercyclical hedge with bankruptcy advisory strength.
- Allison Transmission (ALSN) trades at just 8.2x earnings, beating low expectations despite EV disruption fears.
- A Stansberry Research + AI-built portfolio blends growth, value, and defensive picks to target long-term outperformance.
The Market at an All-Time High… and Value Hiding in Plain Sight
With the S&P 500 brushing record levels and AI darlings like Nvidia dominating headlines, you’d think bargains are extinct. Yet Whitney Tilson of Stansberry Research insists that some of the best value plays are hiding in plain sight—even trading where they stood nearly three decades ago.
Tilson and his team recently launched the “New Engine of Wealth” (NEW) system, a portfolio construction tool powered by AI, designed to combine the Stansberry score (valuation, efficiency, financial strength, momentum) with algorithmic diversification. The outcome: a 20-stock basket balancing growth names with forgotten value gems.
From that list, Tilson spotlights five names today—a blend of household brands and under-the-radar winners.
1. McDonald’s (MCD): The Ultimate Cash Franchise
McDonald’s has been a cornerstone of global consumer staples for over 50 years. But its business model often surprises casual observers: McDonald’s doesn’t really run most of its restaurants—it licenses franchises and collects royalties, while holding prime real estate.
At 24x forward earnings, the Golden Arches isn’t cheap. Yet its high margins, steady growth, and iconic brand moat make it a safe long-term compounder. Inflation pressures have forced price hikes, and consumer pushback is real, but McDonald’s consistent ability to “mint money” has made it a hedge fund favorite for decades.
AI application? Automated ordering and efficiency tools may further reduce costs and smooth customer service in years ahead.
2. Houlihan Lokey (HLI): The Countercyclical Banker
Not all investment banks thrive only in bull markets. Houlihan Lokey specializes in restructuring and bankruptcy advisory, making it a countercyclical hedge when downturns strike.
Trading at 24x forward earnings, HLI isn’t bargain basement—but its resilience across cycles makes it invaluable. In roaring bull markets, it wins traditional advisory work; in recessions, it thrives as distressed debt rises.
For investors who think the next five years may bring turbulence, Houlihan Lokey could be a portfolio stabilizer.
3 & 4. Pfizer (PFE) and Merck (MRK): Blue Chips Stuck in Neutral
Here’s the shocker: Pfizer and Merck are trading at roughly the same share price they did nearly 30 years ago. That’s despite steady cash flows and billions in annual sales.
- Pfizer: Just 7.7x forward earnings, with a 7.2% dividend yield.
- Merck: 8.3x forward earnings, with a 4% dividend yield.
Both are facing pricing pressures and patent cliffs, which explains market skepticism. But as Tilson notes, these businesses don’t need much growth to reward shareholders. At single-digit earnings multiples with high, stable dividends, Pfizer and Merck provide ballast to a growth-heavy portfolio.
In a world chasing the next 100% tech pop, pharma’s forgotten giants may quietly deliver decades of reliable income.
5. Allison Transmission (ALSN): Value in the EV Age
At first glance, Allison Transmission looks like a legacy auto parts maker doomed by EV adoption. After all, EVs don’t use transmissions.
Yet reality diverged from the narrative. Subsidy rollbacks have slowed EV adoption, particularly in Allison’s heavy-duty trucking core market. Meanwhile, Allison has continued to generate strong profits and cash flows, selling globally and defending its niche.
Today, ALSN trades at just 8.2x forward earnings—a valuation more akin to a fading steel mill than a market leader. For contrarian investors, this may be the value play of the decade.
The AI Edge: Portfolio Construction
Tilson emphasizes that stock-picking is only half the battle. A portfolio must be balanced across growth, value, defensive, and cyclical sectors.
Here’s how AI helped refine his list:
- Start with Stansberry score (0–100 scale, focusing on valuation, momentum, capital efficiency, and balance sheet strength).
- Filter for companies scoring 85+—high-quality outliers.
- Use AI to build diversification across sectors (consumer staples, healthcare, industrials, financials).
The result? A portfolio where tech titans like Nvidia can coexist with stalwart dividend payers like Pfizer, reducing concentration risk.
Historical Echoes: Buffett, Value, and Diversification
The philosophy echoes Warren Buffett’s strategy: buy great businesses at fair prices and hold forever. The twist is that AI enforces discipline—ensuring that investors don’t overweight shiny tech at the expense of dull-but-profitable value names.
Backtests show the AI-assisted portfolio construction outperforms both random baskets and sector-skewed portfolios, particularly in volatile periods.
Investment Implications
For investors today:
- Don’t chase only growth—Pfizer and Merck prove value still exists.
- Countercyclical plays matter—Houlihan Lokey could shine if markets stumble.
- Income matters in uncertain times—7.2% yields are hard to ignore.
- AI can aid discipline, but fundamentals remain the foundation.
With rates easing and volatility ahead, a balanced AI-guided portfolio may be the most rational defense against overexposure.
Conclusion: Diversification Is the New Alpha
In an era when the Nasdaq dominates headlines, it’s easy to forget that boring businesses can be brilliant investments. Tilson’s five picks—McDonald’s, Houlihan Lokey, Pfizer, Merck, and Allison Transmission—form a cross-sector shield against overconcentration risk.
The fact that some are trading at the same levels as 30 years ago is both a warning and an opportunity: markets reward growth, but value still pays handsomely when bought right.
For investors seeking balance, cash flow, and resilience, these AI-selected value plays may be the perfect antidote to bubble risk.
AI-Powered Value Investing: Building a Diversified Portfolio to Outpace Wall Street in 2025
In an era where the S&P 500 has surged to all-time highs, driven by megacap tech giants like Nvidia and Apple, many investors are left wondering: Where are the hidden gems? The ones trading at bargain prices, generating rivers of cash, and offering real diversification beyond the AI hype? Enter Whitney Tilson, the veteran value investor and lead analyst at Stansberry Research, who has harnessed artificial intelligence not to chase trendy stocks, but to unearth undervalued powerhouses.
Tilson’s latest brainchild, the “New Engine of Wealth” (NEW) system, blends his time-tested Stansberry Score—a proprietary metric evaluating capital efficiency, financial strength, valuation, and momentum—with AI’s computational prowess. The result? A model portfolio of 20 stocks, each allocated 5%, designed to weather economic storms, balance growth and income, and potentially crush benchmarks like the S&P 500, gold, or even Bitcoin. Backtested rigorously, this approach prioritizes high-quality companies scoring 85 or above on the Stansberry Scale, then uses AI to optimize diversification across sectors.
As of September 2025, with markets jittery amid inflation whispers and recession fears, Tilson’s strategy feels timely. It’s a nod to Warren Buffett’s timeless wisdom: Buy wonderful businesses at fair prices and hold them forever. But with AI’s help, it’s smarter, faster, and more balanced. In this post, we’ll dissect five standout picks from the NEW portfolio—McDonald’s (MCD), Houlihan Lokey (HLI), Pfizer (PFE), Merck (MRK), and Allison Transmission (ALSN)—exploring their stories, valuations, and why they fit a resilient lineup. We’ll back it with data, including a table of key metrics and a bar chart visualizing forward P/E ratios against the S&P 500’s 22.5 average. These aren’t speculative moonshots; they’re cash machines trading at discounts, perfect for business leaders eyeing long-term stability and policymakers pondering economic resilience.
McDonald’s: The Golden Arches of Steady Growth
Start with the icon everyone knows: McDonald’s, the franchising behemoth that’s fed generations while printing money for shareholders. Founded in 1940, McDonald’s doesn’t flip burgers itself—its franchisees do the heavy lifting. The company collects royalties on its unbeatable brand and real estate empire, boasting operating margins north of 40%. In fiscal 2024, it generated $25.5 billion in revenue, with free cash flow exceeding $7 billion.
Yet, at a forward P/E of 24.5—below its 10-year average of 25.8—the stock trades near all-time highs without the froth of tech peers. Why the value? Inflation has squeezed consumers, prompting price hikes that briefly dented traffic. But as Tilson notes, McDonald’s thrives on value: A Big Mac meal remains a budget-friendly family option. AI integration, like automated kiosks and drive-thru voice tech, is already boosting efficiency, countering naysayers who decry order errors.
This pick anchors the portfolio’s consumer staples slice, offering 2.4% dividend yield and 3-5% annual growth. It’s the “tuck away and forget” stock Buffett would love—resilient through recessions, as evidenced by its 1,200% total return over the past 30 years, dividends reinvested.
Houlihan Lokey: The Bankruptcy Specialist in a Bull Market
For a dash of counter-cyclical spice, enter Houlihan Lokey (HLI), a boutique investment bank few retail investors know but Wall Street insiders swear by. Trading at $178 per share with a forward P/E of 24—higher than the portfolio average but justified by 15% earnings growth—HLI specializes in mergers, acquisitions, and, crucially, bankruptcies.
In a market at peaks, where economists peg recession odds at 25%, HLI’s restructuring arm shines. During the 2008 crisis, its financial advisory fees soared; today, with corporate debt at $13 trillion, it’s primed. The firm advised on 300+ deals last year, including high-profile Chapter 11 filings, while its core M&A business hums in good times. Revenue hit $2.1 billion in 2024, up 20%, with net margins at 25%.
Tilson’s AI flagged HLI for its niche moat and volatility hedge—perfect diversification from tech-heavy portfolios. At a 1.4% yield, it’s not income-focused, but its steady climb (up 500% since IPO in 2015) makes it a growth stalwart. In a diversified setup, it balances MCD’s predictability with upside if markets tip.
Pfizer and Merck: Pharma Giants Frozen in Time
Now, the bargains: Pfizer (PFE) and Merck (MRK), trading at prices eerily similar to 1995 levels, despite decades of dividends. Pfizer, at $24 per share, boasts a forward P/E of 7.7 and a juicy 7.1% yield—paying out $1.71 annually. Merck, at $83, mirrors with an 8.3 P/E and 3.8% yield ($3.24 DPS). Together, they represent 10% of the NEW portfolio, heavy on healthcare’s 30% weighting.
Why the stagnation? Post-COVID blues: Pfizer’s vaccine sales plummeted 70% in 2024, while both face patent cliffs and pricing scrutiny. U.S. drug prices, the world’s highest, draw fire from policymakers like those pushing the Inflation Reduction Act. Yet, cash flows endure—Pfizer’s $18 billion free cash flow funds R&D ($10 billion annually) and buybacks. Blockbusters like Eliquis ($7 billion sales) and Keytruda (Merck’s $25 billion oncology star) provide stability.
Tilson calls them “blue-chip cash mints”—no growth needed when yields beat bonds. AI’s role? It de-risked by pairing them, offsetting pharma’s regulatory headwinds with mutual patent protections. For global audiences, they’re hedges against currency swings; for leaders, proof that innovation (AI-driven drug discovery) revives dinosaurs.
| Stock Ticker | Company Name | Current Price (Sep 2025) | Forward P/E Ratio | Dividend Yield | Sector | 1-Year Return |
|---|---|---|---|---|---|---|
| MCD | McDonald’s | $314 | 24.5 | 2.4% | Consumer Staples | 12% |
| HLI | Houlihan Lokey | $178 | 24.0 | 1.4% | Financials | 25% |
| PFE | Pfizer | $24 | 7.7 | 7.1% | Healthcare | -10% |
| MRK | Merck | $83 | 8.3 | 3.8% | Healthcare | -15% |
| ALSN | Allison Transmission | $92 | 8.2 | 1.2% | Industrials | 35% |
| SPY | S&P 500 ETF (Benchmark) | $580 | 22.5 | 1.3% | Broad Market | 28% |
Data sourced from Yahoo Finance, MacroTrends, and FullRatio as of September 26, 2025. Returns include dividends. Figures aligned across analysis for consistency.
This table highlights the portfolio’s value tilt: Average forward P/E of 14.5 versus the S&P’s 22.5, with yields averaging 3.2%—double the benchmark.
As the chart illustrates, PFE, MRK, and ALSN anchor the value end, while MCD and HLI provide growth balance— a visual testament to AI’s diversification magic.
Allison Transmission: Revving Up Amid EV Hype
Rounding out the quintet: Allison Transmission (ALSN), the unsung hero of heavy-duty drivetrains. At $92 per share and a forward P/E of 8.2, it’s up 35% yearly, vindicating Tilson’s 2023 call at $40. Fears of electric vehicles (EVs) obsoleting transmissions proved overblown—EVs need them for hybrids, and U.S. subsidies are waning, stalling pure-EV adoption.
Allison dominates 80% of the global market for automatic transmissions in trucks, buses, and military vehicles. 2024 revenue topped $2.9 billion, with $1 billion free cash flow funding a 1.2% yield and expansions into electrification. It’s cyclical but moated—decades of engineering edge—and AI spotlighted it for industrials exposure, countering healthcare’s weight.
The AI Edge: Why This Portfolio Could Beat Buffett’s Playbook
Tilson’s NEW isn’t just picks; it’s a system. The Stansberry Score filters 4,800+ stocks, then AI simulates scenarios—recessions, booms, sector rotations—to build resilience. Healthcare (30%), consumer staples (15%), and financials (10%) dominate, with out-of-favor plays like tobacco (Philip Morris, Altria) adding yield.
Backtests show 15% annualized returns versus the S&P’s 10%, with half the drawdowns. Like Buffett’s Berkshire Hathaway (up 20% annually since 1965 via value compounding), it bets on quality. But AI adds foresight: Portfolio optimization minimizes overlap, unlike the “Magnificent Seven” trap where five tech stocks masquerade as diversity.
For business leaders, this means lower volatility for treasury allocations; for policymakers, it underscores how undervalued sectors like pharma drive innovation. Globally, in emerging markets facing U.S. tariffs, these multinationals offer stability.
Navigating 2025: Lessons from Vegas and Beyond
Tilson will unpack more at Stansberry’s October 20-22 conference in Las Vegas—three days of pitches, panels, and mingling. Past gems like Joby Aviation (up 200%) highlight its edge. Virtual access ensures worldwide participation.
In sum, amid 2025’s uncertainties—tariffs, elections, AI disruptions—this AI-forged portfolio reminds us: True wealth builds on cash flows, not hype. With an average 3.2% yield and 14.5 P/E, these five stocks (part of 20) could deliver 12-15% returns, per models. Diversify wisely, hold long, and let compounding—and a dash of AI—do the rest. As Tilson says, it’s not just picking winners; it’s constructing an unbreakable lineup.