Listen to the audio version of this article (generated by AI).
Tom Yeung here with your Sunday Digest.
Last week here, I flagged three compelling companies to buy:
- Reddit Inc. (RDDT)
- Arm Holdings Plc (ARM)
- AeroVironment Inc. (AVAV)
Our colleagues at TradeSmith had just released their most advanced AI-powered stock-selection system yet. And these three picks made the cut into their Signals Master Portfolio, the system’s highest conviction stocks at any given time.
I hope you tuned in.
Since then, the trio has returned 12% on average, buoyed by a 40% surge in Arm.
Not bad for a single week of trading.
Even better, one of these picks is still in the Signals Master Portfolio. That means it’s not too late to buy in.
There’s also still time for you to learn more about TradeSmith’s AI-powered trading system. If you missed out on Keith Kaplan’s AI Signals Trading Event from Wednesday, you can still .
I’ll feature two new top stocks in today’s update. And as a bonus, I’ll let you know (at the end) which of the three picks from last week continues to remain one of the Signals Master Portfolio’s top picks…
The “Safer” Investment
On Wednesday, the Signals Master Portfolio offered a surprisingly safe bet:
Nu Holdings Ltd. (NU).
This holdings company is the parent of Nubank, the largest digital bank in Brazil. Sixty percent of all Brazilian adults have an account with the bank, and the company’s Colombian and Mexican expansions are seeing exponential growth.
There are three fundamental stories to watch.
First, Nubank has an incredible business model. The bank has no physical branches, and its efficiency ratio (a measure of costs) sits at just 27.9% – well below Banco Bradesco’s (BBD) 47% and Itau Unibanco Holding SA’s (ITUB) 53%. (In banking, lower efficiency ratios are better.)
That’s allowed Nubank to offer better rates, landing them an enormous number of new customers in a short stretch. The company now serves at least 112 million Brazilians, and revenues have more than doubled since 2023. Profits are also incredible. The firm earns 30% returns on equity (3X to 4X higher than rivals), and net income is projected to rise another 40% in fiscal 2026. These high returns are crucial, because they allow the bank to plow capital back into the business and generate even more returns.
Second, Nubank has a long growth runway. The company is rapidly expanding across Latin America, and its success in Mexico shows it can compete even against well-entrenched players like BBVA Mexico. In addition, the company currently offers a very narrow line of lending products, giving it room to expand into auto loans and mortgages at home in Brazil.
Most importantly, shares are extremely cheap relative to growth rates. Shares have declined 20% since January, pricing the stock at just 17X forward earnings. 蜜桃传媒s are assuming just two more years of growth, which is clearly too conservative.
Now, it’s important to note that Nu Holdings still owns a bank, which is a risky business by nature. Default rates in Latin America are particularly high, and Nubank had a 9.6% net charge-off rate in 2025. It carries a 15.4% allowance for loan losses – almost 10 times higher than a typical U.S. bank.
Nevertheless, the company has maintained a conservative balance sheet and reminds me greatly of SoFi Technologies Inc. (SOFI) and Dave Inc. (DAVE) – two digital banks in America that have also become wildly successful. Many younger savers no longer want to pay for physical bank branches they never use, and digital options offer a low-cost solution that traditional banks cannot match.
To me, it’s no surprise that NU landed in TradeSmith’s top-stock portfolio.
The “Moonshot” Bet
The Signals Master Portfolio also flagged a far riskier pick this week:
Rocket Lab Corp. (RKLB)
Now, conservative investors might want to stay far away from this one. As its name suggests, Rocket Lab operates a relatively lumpy business that launches things into space. The firm lost $200 million last year, and analysts expect more losses until at least 2027.
As the bankruptcy of Virgin Orbit in 2023 highlighted, rockets are a difficult business.
Yet, Rocket Lab is more than a space launch company.
Since 2020, the Los Angeles area-based firm has made five significant acquisitions that have transformed it from a launch-only firm into a broader “space as a service” company that designs and builds spacecraft components as well. This includes composite structures, star trackers, solar power panels, space-grade batteries, and the occasional fully assembled satellite. In 2025, Rocket Lab generated twice as many sales from its Space Systems segment as from Launch Services.
Now, there are four investment cases that make Rocket Lab so interesting…
1. Proven Launch Business (Electron). Unlike many competitors, Rocket Lab has an operating launch business with a long history of success. Its flagship “small launch” service, known as Electron, had 75 successful missions and more than 200 spacecraft deployed in 2025. These launch systems focus on research satellites and weather sensors that are too small for larger rockets like SpaceX’s Falcon 9.
2. Proven Systems Business. Rocket Lab is a trusted name in satellite production and design. In December 2025, they signed an $816 million contract with America’s Space Development Agency to build 18 satellites for the military. These will be part of the Tracking Layer Trance 3 (TRKT3) program, an advanced missile warning designed to alert the U.S. military of incoming threats. This enormous project helped increase RKLB’s backlog by 73% to $1.85 billion, and should generate further revenue as the company sells additional payloads, components, and repairs.
3. New Launch Business (Neutron). While Electron is excellent for small satellites, the “medium lift” market has quickly become far more important. These are the kind of payloads that Starlink and the U.S. military need. In this area, Rocket Lab is making substantial progress in its Neutron class of rockets. Its partially reusable rocket is due to be tested in late 2026 and would provide a compelling alternative to SpaceX’s Falcon 9. The project was delayed earlier this year, but it appears to be due to a manufacturing defect, rather than a design problem.
4. New Systems Business. RKLB’s defense exposure is increasing right as the U.S. military is rearming itself for 21st-century conflict. Earlier this week, the Pentagon proposed a $1.5 trillion 2027 defense budget (a 42% annual increase) that more than doubles allocation to the U.S. Space Force to $71.2 billion. It also includes $1.5 billion for a space data network. This spending lands squarely in Rocket Lab’s backyard, given the firm’s history of building the type of sensors and materials needed for threat detection and data transfers.
There’s also a tactical reason to buy shares:
SpaceX is going public.
Highly publicized blockbuster listings often generate a stampede of retail investors seeking a piece of the pie. For instance, the $4.4 billion listing of Lucid Group Inc. (LCID) in 2021 created a frenzy in electric vehicle stocks. Robinhood 蜜桃传媒s Inc. (HOOD), Beyond Meat Inc. (BYND), and Coinbase Global Inc. (COIN) made similar waves during their listings.
SpaceX’s IPO could create the largest tsunami yet. Its owner, Elon Musk, is a master at stealing headlines. And as the billionaire drums up attention for the upcoming IPO – and his attempt to reach trillionaire status – don’t be surprised if Rocket Lab gets swept up in the mania as well.
And One to Hold
As promised, here’s the pick from last Sunday’s Digest that the Signals Master Portfolio held onto this week:
AeroVironment Inc. (AVAV)
According to the system, shares of the drone maker still have significant upside after its 6% rally.
Since last Sunday, AeroVironment has announced another $14.6 million production contract with the U.S. Army and said it had successfully demonstrated its LOCUST Laser Weapons System aboard the USS George H.W. Bush, a Nimitz-class aircraft supercarrier. During the live fire event, the high-energy laser “tracked, engaged and neutralized multiple target drones,” according to AeroVironment’s press release.
This achievement validates that the LOCUST LWS is truly platform-agnostic, seamlessly transitioning from fixed-site and land-based mobile platforms, such as the Joint Light Tactical Vehicle (JLTV) and Infantry Squad Vehicle (ISV), to the dynamic and demanding environment of a maneuvering aircraft carrier.
In plain English, it’s a system that the Navy can use on both land and sea – reducing complexity and training for these anti-drone weapons.
More gains could be on the way. The $1.5 trillion Pentagon budget mentioned earlier also included “drone dominance” in addition to “space superiority” as goals, and it earmarked $53.6 billion for autonomous drone platforms alone.
Once again, I encourage you to if you haven’t yet. In it, he explains how the system came together, how it’s helping investors turn overwhelming amounts of data into a simple, actionable strategy – and how you can access it too and start using it for yourself.
Until next week,
Thomas Yeung, CFA
蜜桃传媒 Analyst, InvestorPlace
