Top-3 Select Equity Stock Pick, FIX, Is Nearing a Breakout
The data center adjacent name is poised for gains according to my framework.
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When I write for TheStreet Pro, I usually focus on portfolio construction and getting asset allocation right. Over the next few articles, I’m shifting gears to discuss specific trades within one of my equity strategies I manage for clients — the Select Equity Strategy.
This is a disciplined, long-term, active U.S. equity strategy designed as a satellite allocation within a diversified portfolio. It starts with the S&P 1500 Index and applies my stocks selection driven by my proprietary Quality-Value-Sentiment (QVS) framework (formerly QVT; I updated the “T” to “S” for a broader view beyond just technicals). The framework evaluates companies on:
- Quality — Profitability and efficiency
- Value — Attractive pricing relative to fundamentals
- Sentiment — Positive supply and demand characteristics in the marketplace
Why Share Specific Trades Now?
I want to highlight my top-three picks from the strategy and explain how shorter-term traders (thinking one to six months) could approach them. These ideas come from existing holdings in the Select Equity portfolio. I’ll also share the trading tactics I use for timing entries and exits.
First Up Is Comfort Systems USA (FIX)
(FIX) is a stock that makes real profits from AI infrastructure buildout and has a solid business. They install the mechanical, electrical and cooling systems that power massive data centers. The fundamental backdrop supporting a breakout are:
Fundamentals Supporting the Trade
- Record backlog near $12.5 billion (nearly double year-ago levels), providing excellent revenue visibility even as the company burns through existing work at a high rate.
- Strong recent results, including sharp revenue growth, margin expansion and robust cash flow.
- Management highlights persistent demand and strong pipelines, with modular/prefab capacity expansion helping capture more high-value data center work.
Technical Setup: Applying My TORQ Framework
On the weekly chart over the last three years (with 13-week and 26-week EMAs), FIX shows a clear long-term uptrend well above its moving averages. After a strong rally, the stock has entered a healthy consolidation/basing pattern — digesting gains with sideways action and some profit-taking. This is a classic setup I like for a technical trade.
Using My Trend, Overbought/Oversold, Relative Performance, Quality Patterns (TORQ) Framework
- Trend: Strong prevailing uptrend intact.
- Overbought/Oversold: Not extended from a longer-term view; consolidating nicely.
- Relative Performance: Has been outperforming the broader market.
- Quality Patterns: Positive basing with selling pressure drying up on higher volume and price moving toward the upper end of the range — bullish action.
On the three-month chart, note distribution days around May 18, June 10 and June 26 with profit-taking. However, buyers have stepped in to defend support. The consolidation began around May 14 — we’re only about seven weeks in. As long as the stock holds above key support near $1,705 and demand meets selling at the upper end of the range, the setup remains constructive.
Trading Tactics for Shorter-Term Investors
This is a name I would accumulate on weakness during the base and complete the position on a decisive breakout above resistance with increased volume. Given the strong prior rally (potentially a Wave 5), this trade is geared for a faster move once the base resolves.
Continued Trends in AI infrastructure Should Keep FIX as a Primary Beneficiary
The fundamentals are excellent for my long-term Select Equity holding, while the technical base offers a high-conviction entry for traders. Watch for a breakout to confirm the next leg higher.
Stay tuned for the next two picks from the strategy. As always, manage risk, use stops and align any trade with your own time horizon and risk tolerance.
