The simplest investing strategy in the AI era
Keith Kaplan’s pitch in the TradeSmith presentation is almost shockingly simple. Buy five stocks on the first day of the month. Sell them on the last day. Repeat.
No chart reading. No options Greeks. No earnings analysis. No watching the news or worrying about what the Federal Reserve will do next. Just five stocks, chosen by AI, held for a month.
As we explain in our full review, the simplicity is the marketing. The actual Predictive Alpha product is more complex than the “five stocks on the 1st” framing suggests, with weekly options plays and active position management. But the monthly rotation strategy itself is a legitimate approach with real academic backing.
What is monthly stock rotation?
Monthly rotation is a form of momentum investing. The idea is that stocks that have been performing well recently tend to continue performing well over the short term. A rotation strategy buys the stocks with the strongest recent momentum, holds them for a defined period, and then rotates into a new set of stocks based on updated momentum signals.
The academic literature on momentum investing is extensive. The original momentum paper by Jegadeesh and Titman in 1993 showed that stocks with strong recent performance outperform stocks with weak recent performance over 3- to 12-month holding periods. Subsequent research has refined and extended these findings across markets and timeframes.
What Predictive Alpha adds to the momentum framework is AI-driven stock selection. Instead of using a simple price-momentum ranking, the system uses its Time Series AI model to project which stocks are most likely to move over the next 21 trading days. It then ranks those projections by confidence, using what Kaplan calls the “Historical Accuracy” score, and selects the top five.
The five-year backtest
The presentation cites a five-year backtest showing 1,110% total returns for the Top 5 strategy. Over the same period, $10,000 invested in the Nasdaq Composite would have grown to $28,100, nearly tripling. Following the Top 5 strategy would have produced almost $100,000 more.
The backtest covers a period that includes the AI boom and two major market crashes, which means it is not simply benefiting from a bull market. The system would have been tested through the 2020 COVID crash and the 2022 tech crash, both of which are real stress tests for any rotation strategy.
The comparison to major assets is striking. The Top 5 would have beaten the S&P 500 by nearly $100,000. It would have outperformed Apple, Meta, Amazon, and Microsoft individually. It would have beaten FAANG stocks by 3 times, gold by 4 times, and even Bitcoin.
The Historical Accuracy score
One of the more interesting details in the presentation is the “Historical Accuracy” score. Every prediction the system makes comes with a confidence rating. The higher the score, the more confident the AI is, based on how similar patterns have played out in the past.
The Top 5 is built by selecting the five stocks with the highest Historical Accuracy scores at any given time. Sometimes the system produces fewer than five if market volatility is high and confidence is low. This is a genuine risk management feature, not a marketing flourish. A system that reduces its exposure during uncertain periods is more conservative than one that always issues five buy calls regardless of conditions.
The “ten minutes a month” promise
Kaplan emphasizes the time commitment: “just checking in on the first day of the month means you would have beaten almost everything else out there by a big margin.” He positions the strategy as the “ultimate sleep at night system” for investors who want AI working for them without spending hours glued to a screen.
This is genuinely appealing for a specific type of investor. The person who finds AI exciting but overwhelming, who wants exposure to the AI-driven market without learning to code or reading earnings reports, is the exact audience for the Top 5. The strategy is simple enough that anyone can execute it, and the time commitment is minimal.
The honest caveats
The simplicity of the monthly rotation strategy is both its strength and its limitation. Three caveats are worth noting.
First, the 1,110% backtest is not a live result. As we discuss in our AI stock prediction analysis, backtests are sensitive to methodology, and the presentation does not disclose the specific parameters that produced the number.
Second, the strategy selects from “the biggest, most stable companies in the market,” as Kaplan says. No small caps or microcaps. This limits the universe of stocks the system can choose from, which means the Top 5 is a large-cap momentum strategy, not a small-cap growth strategy. Large-cap momentum has a real academic track record, but it also has periods of underperformance.
Third, the monthly holding period means the strategy is not designed to capture multi-month trends. If a stock goes up 50% over three months, the Top 5 might capture the first month and then rotate out before the full move plays out. The tradeoff is lower risk, since you are not holding through reversals, but also lower upside on any individual position.
Who the Top 5 is for
The monthly rotation strategy is for the investor who wants AI to do the work, does not want to spend more than ten minutes a month, and is comfortable with large-cap exposure. It is not for the investor who wants to trade actively, use options, or chase small-cap moonshots.
At $499 per year with a 60-day cash refund policy, the cost of testing the strategy is low relative to the potential upside. The honest read is that the Top 5 is a genuine, simple, AI-driven approach to monthly stock rotation, and the backtest, while unverified in its specifics, is consistent with what academic research on large-cap momentum would predict over a five-year period that included a strong bull market.
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