Our HX Trader strategy is a TRADING strategy.

This means we are looking to identify high probability profitable trades where we can make good returns (high single-digit to low double-digit) in a short period (less than 3 months).

Over time, this strategy – and its predecessor strategy at Empire Financial – has met and exceeded these expectations.

One way we can generate these consistent returns is by going back to the same themes in the stock market over and over.

Remember, our core trading strategy is to buy a materially oversold dip in the price of "winning" stocks. Often, stocks don't just move as an individual company but as a larger group based on a big idea or theme.

Last week’s “news” about Chinese artificial intelligence (AI) company DeepSeek and their new product sent a shudder through what has been the most powerful theme in the markets in the last two years.

This crushed many winning stocks and has given us a lot of great ideas for our strategy. Today's HX Trader idea is one of these!

Here is the idea…

The company is infrastructure solutions provider Vertiv Holdings Co (NYSE: VRT).

This Westerville, Ohio, company was initially founded as Capital Refrigeration Industries in 1946. The founder developed the first precision air conditioner prototype in his garage.

Eventually, IBM became an anchor customer, and the company was renamed Liebert Corporation after the founder. As Liebert, the company went public in 1983 and was eventually acquired by Emerson Electric. It was then sold to private equity firm Platinum Equity in 2016 and came public again via a Goldman Sachs-led SPAC in early 2020.

They are a leader in providing power and cooling solutions for communications networks, commercial and industrial environments, and – most importantly – DATA CENTERS.

As you probably know, the data center business has experienced an enormous explosion in demand as the major hyperscalers ramp up their infrastructure to serve the growth in AI.

This growth has been a big boost for the earnings growth at VRT.

Here is a table showing their growth in earnings per share or “EPS” at VRT since they came public…

They got an initial boost in growth (to profitability) in the COVID period before experiencing a downturn in demand. This aligns well with the earnings of all the major technology companies.

Since then, earnings have exploded, and they have seen significant growth.

You can see the same pattern in their results relative to Wall Street analysts' expectations. Remember that companies that beat those expectations usually see good stock price performance.

Here is a table showing their results versus those expectations since they came public…

They have beat every estimate for the last two years.

When companies consistently beat numbers like this, they also will see analysts having to take their estimates higher. This is referred to as "positive earnings revisions" and is the best predictor of stock prices in the near term.

If estimates are moving higher, stock prices almost always follow.

Here is a chart showing the estimates for 2025 EPS for VRT (green line) along with the share price (black line) …

Numbers have gone straight up and more than doubled in the last year. As we mentioned, you can see that the stock price has followed.

This combination of growth, beating numbers, and rising estimates has led to a decisive move higher in the stock.

Here is the chart of the stock price since it came public…

The start of the period is unusual because it was a SPAC and traded right around the $10 net asset value for that period. After they bought the VRT assets, the stock had a nice run up to about $30 per share before pulling back with the earnings estimates.

The estimates bottomed in 2023, and since then, the stock has increased tenfold in just about two years. That is a fantastic performance!

Looking at the chart, though, you can see a sharp pullback in the shares recently.

Here is a chart showing the stock price in the last year along with our favorite technical indicator to determine the attractiveness of an entry point – the relative strength index or “RSI” …

While the stock did not hit the 30 RSI level we use for our "buy" signal, it came close.

Why is the stock down so much?

As we mentioned, it was based on concerns about the Chinese AI engine called "DeepSeek.”

We think that these concerns are overblown. 

We won't do a deep dive into our perspective in this note, but you can read our thoughts here in our new e-letter with Paradigm Press called Truth & Trends.

The company reports a week from today, and we think they will report another strong number. With the shares still down almost -30% from the recent highs, we believe strong results will rally the shares.

We want to add more POWER to your profits and think we should buy the shares.