11 Undervalued Stocks To Buy Today

Key Concepts

• Core-Satellite Strategy: A portfolio management approach balancing stable, broad-market ETFs (Core) with high-conviction individual stocks (Satellite).
• Hyperscalers: Large-scale cloud infrastructure providers (Microsoft, Amazon, Meta, Google) currently driving massive capital expenditure (CapEx) in AI.
• Bottleneck Stocks: Companies that control critical infrastructure or components (e.g., ASML’s lithography machines, memory chip manufacturers) essential to the AI and semiconductor supply chain.
• Leveraged ETFs: Financial instruments (e.g., ProShares’ 2x SpaceX ETF) designed to provide multiples of an underlying asset's daily performance, often criticized as speculative gambling.
• Valuation Metrics: Price-to-Earnings (P/E) ratio and Price-to-Free Cash Flow (P/FCF) yield used to determine if a stock is trading at a discount relative to its historical range.

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1. Market Overview and Investment Strategy

Despite the S&P 500 rising 7% and the QQQ rising 14%, the rally is narrow, driven primarily by a handful of semiconductor and AI-related companies. Many high-quality "compounders" have been left behind, creating buying opportunities for selective investors. The speaker advocates for a 50/50 Core-Satellite strategy, where 50% of the portfolio is held in broad ETFs (e.g., SPY, VOO, SCHG) and 50% in individual, market-beating stocks.

2. Stock Analysis: Buys vs. Holds/Passes

The speaker evaluates 11 companies based on their 52-week trading ranges and 5-year historical valuation metrics:

• Buys:

  • S&P Global: Trading at the bottom of its 5-year P/E and P/FCF range; considered highly durable.
  • MasterCard: 18% off highs; historically cheap with strong double-digit earnings growth.
  • Texas Roadhouse: Reasonable valuation; benefits from declining beef prices and organic expansion.
  • Microsoft: 27% off highs; despite heavy CapEx, the speaker argues the spend is predictable and monetizable.
  • Moody’s: Undervalued; provides essential services resistant to AI disruption.
  • Meta: 27% off highs; high profitability despite heavy AI infrastructure investment.
  • Amazon: 14% off highs; viewed as a "less expensive SpaceX" due to its diverse business levers (AWS, robotics, retail, advertising).
  • Netflix: 38% off highs; strong subscriber growth and earnings; currently trading at a P/E of 26.
  • Duolingo: 74% off highs; a high-conviction, long-term play on digital education.
  • Uber & DoorDash: Both are significantly off their highs and recommended by analysts like Mark Mahaney for their growth potential in transportation and delivery.

• Holds/Passes:

  • Costco: Currently trading at an expensive valuation relative to its intrinsic value.
  • Google: 11% off highs; while a strong company, the speaker suggests waiting for a better entry point.
  • ASML: Trading near all-time highs; while fundamentally excellent, the speaker advises waiting for a pullback.

3. The Role of ASML and Memory

ASML is identified as a critical player not just in GPU/CPU manufacturing, but increasingly in the memory sector. As server racks require faster and more abundant solid-state memory, demand for ASML’s EUV (Extreme Ultraviolet) lithography machines has surged, creating a "wave after wave" demand cycle that reinforces the company's long-term value.

4. Market Sentiment and Macro News

• Inflation: May inflation hit 4.2%, largely driven by energy costs. However, economists suggest this may be the "high-water mark" assuming energy prices stabilize.
• Market Jitters: Tom Lee and Dan Ives characterize current market volatility as "jitters" ahead of the SpaceX IPO. They argue that the market has sufficient capital to support the massive CapEx requirements of the "hyperscalers" (Google, Meta, OpenAI, Anthropic).
• SpaceX IPO: While acknowledging SpaceX as an excellent company, the speaker refuses to buy at the IPO due to extreme, unpredictable valuations.

5. Cultural Commentary: The Social Network Sequel

The speaker discusses the trailer for the upcoming sequel to The Social Network, noting Jeremy Strong’s performance as Mark Zuckerberg. The speaker highlights how the film captures Zuckerberg’s specific mannerisms and "awkward" persona, while expressing skepticism regarding the film's likely negative portrayal of Meta.

6. Fail of the Week: ProShares 2x SpaceX ETF

The speaker labels the upcoming ProShares Ultra SpaceX ETF as the "fail of the week." By offering a 2x daily return on an IPO—a notoriously volatile event—the product is categorized as pure gambling. The speaker references Warren Buffett and the late Charlie Munger, warning that parts of the market are increasingly functioning as a "casino" rather than a venue for long-term investment.

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Synthesis

The market is currently bifurcated between high-momentum AI/semiconductor stocks and undervalued, high-quality compounders. Investors should avoid the "casino" mentality of leveraged IPO bets and instead focus on buying durable, high-quality companies that have been temporarily left behind by the current rally. The long-term outlook remains positive for companies with strong ecosystems and clear paths to monetizing their AI infrastructure investments.