High signal stocks #8 (Feb 1, 2026)

Hello and happy Sunday!

I added 26 stocks to the High Signal List (13 of them are new).

We had some unfortunate timing as a couple of the good mining-focused funds released their holdings last week, so their stocks got added to the High Signal list, and then all proceeded to fall 20% last week lol.

So the High Signal List was down 1.8% last week, but still outperforming the S&P since we started the list on December 14th.

The Yellowbrick Portfolio got whalloped this week. We are now just slightly outperforming the S&P YTD.

First, our small-cap growth names and precious metal names got hit. This was bound to happen at some point, so no big deal.

But we also own a couple of video game names that were crushed on Friday due to Google’s Genie 3 world AI model release.

I worked at a publicly traded video game company at the start of my career, so this is a rare scenario where I actually have a little bit of insight.

This brings me to my main point for today: the massive dips in gaming stocks like Unity (U) and Take-Two (TTWO) make absolutely no sense at all.

I think the bear cases for each are weak on their own, but both game engine stocks (like Unity) and game developers (like Take-Two) being down at the same time is even more absurd because this would require that AI world models lead to more video games being created (negative for TTWO), but that those games are not being made in Unity.

At least the bear case for Take-Two (TTWO) is semi-reasonable. If there are more games, there is more competition for their game (GTA), which is a negative.

The three counterpoints here are:

1. I’m not sure AI-slop games are really going to cut into the demand for $100M+ AAA games with their own IP (like Battlefield, Call of Duty, Nintendo games, GTA, etc). These AI-slop games are far more likely to eat into the casual mobile gaming market (which is a totally different user base). Middle-aged moms play Words with Friends, young kids at school play the Hyper Casual mobile games, teens/young adults play AAA games for 6 hours on a Friday night. AI-slop games are mostly a threat to the second group.

2. If game development is easier, then it’ll also make Take-Two (TTWO) more efficient

3. Take-Two’s entire valuation hinges on GTA IV (scheduled to release in November of this year). We are years away from these world models being anywhere capable enough to meaningfully compete with AAA titles. If GTA IV actually launches on time, that will cause the stock to pop. Its performance will drive all of the price movement. The AI threat is irrelevant.

However, the much more ridiculous price action happened at Unity (U). If more games are being built, they will be built in Unity.

It’s not just that I believe the dip was unwarranted, it’s that the stock price should’ve moved the other way if anything.

The actual gameplay is a tiny part of making a game. Unity provides the infrastructure for all of the other things that make up 75% of game development:

• Cross-platform support

• Backend infra (database, auth, etc)

• Networking

• Ads/in-app purchases

• LiveOps (events, analytics, A/B testing, etc)

• DevOps (build automation, asset management, etc)

• Performance optimization

In no world is it more feasible that some AI company decides to build all of this infrastructure and then compete with Unity instead of Unity just implementing the newest AI models into its platform.

Why would Google (or any other AI model developer) even want to build out all of this infrastructure? It is totally orthogonal to their business model. They just want to sell access to the AI models.

I think this is one of the stupider reactions I’ve ever seen in the market, but the market is driven by narratives, and the current narrative is that any remotely compelling AI demo also means that the AI will not only not be implemented by the incumbents in that industry, but that new startups will spring up and crush those incumbents instead.

If you disagree with me or have any questions/pushback, I shared this article on X (link). It also includes links to posts about this topic from the CEO at Unity, a former exec at Square Enix, the CEO of Epic Games, and others.

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Thanks for reading!

Connor

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What are high signal stocks?

Yellowbrick tracks thousands of investors and collects 10,000+ stock pitches each year. The stock pitches from the best investors are put in the Elite Investor Feeds on Yellowbrick (link).

However, many stocks owned by great investors are never publicly pitched by those investors. This email (and the corresponding spreadsheet) tracks all stocks that I know are owned by good investors (whether that good investor has pitched them publicly or not).

YB ELITE INVESTOR PITCHES

YB PREMIUM SUBSCRIBERS ONLY

New stock pitches from Yellowbrick Elite Investors that were added to the website this week. Fewer than 5% of the 3,000+ investors we track qualify as an Elite Investor.

This section is locked for Yellowbrick Premium subscribers only. You can upgrade to Yellowbrick Premium here.

HIGH SIGNAL STOCKS

YB PREMIUM SUBSCRIBERS ONLY

AI overviews (with data citations) of new stocks added to the High Signal Stocks list.

This section is locked for Yellowbrick Premium subscribers only. You can upgrade to Yellowbrick Premium here.

YB PORTFOLIO UPDATES

YB PREMIUM SUBSCRIBERS ONLY

Updates to the Yellowbrick Tracking Portfolio, which holds 30-40 positions that are owned by Yellowbrick Elite Investors. Fewer than 5% of the 3,000+ investors we track qualify as an Elite Investor.

This section is locked for Yellowbrick Premium subscribers only. You can upgrade to Yellowbrick Premium here.

THAT’S ALL FOLKS

Thank you so much for reading today’s email!

If you ever have any feedback, suggestions, or questions, you can just reply to this email or email me at [email protected].

Connor

*Follow Yellowbrick on Twitter at @joinyellowbrick