Even with the S&P 500 sitting near record highs, investor sentiment is still flashing fear.

That contrast matters.

On the surface, this market looks expensive, crowded and increasingly difficult to navigate. But underneath the headline index, the picture is far more interesting.

The S&P 500 is up more than 8% for the year.

By headline level, that looks like a strong market. But an index return alone does not tell us where the underlying opportunities are or how unevenly those returns are being distributed.

The average S&P 500 stock has performed better than the traditional market-cap-weighted index.

That tells us the market has been broadening beyond a small group of mega-cap winners.

This is no longer simply a case of buying the largest technology companies and expecting them all to move together.

The divergence inside the Magnificent 7 makes that especially clear.

Around 55 percentage points separated the best and worst-performing members of the group by late July. Some remain firmly in positive territory, while others have fallen deeply into the red.

Lumping every mega-cap technology company into the same trade therefore makes increasingly little sense.

The quality, expectations and valuation attached to each business now matter far more.

At the same time, valuations are not stretched everywhere.

The broad market is not cheap, and long-term measures such as the Shiller CAPE remain uncomfortable. But forward valuations across equal-weighted stocks, mid-caps, small-caps and international equities are far less demanding than the most expensive headline numbers suggest.

There are still pockets where earnings can justify the current multiple.

This is becoming much more of a stock-picker’s market.

The July heatmap reinforces that point.

There were major winners, violent declines and substantial rotation both between and within sectors.

That is exactly the kind of market where a disciplined screening process becomes valuable.

So for August, I screened 244 stocks, ranked them across valuation, quality, risk, income and data confidence, and narrowed the universe down to the ten opportunities I believe deserve the closest attention.

That table is the final output of the August screen but there is an important distinction:

Ten stocks made my final ranking. I am not calling all ten outright buys today.

Six currently fall into my Buy in Tranches or Accumulate categories.

The remaining four are businesses I would rather purchase at a better price, after fresh earnings or only once I have greater confidence in the valuation.

That selectivity matters.

A stock can score highly because it appears inexpensive, but that does not automatically make it investable.

An unusually high estimated value might be stale. A low earnings multiple could be masking deteriorating profits. And an exceptional company can still be a poor investment at the wrong price.

For every stock that made the final list, I therefore assigned:

• A clear action

• An estimated valuation range

• The main reason it could outperform

• The most important threat to the thesis

• The next result or development I will be watching

Before revealing the complete ranking, I want to share one of the ten selections with every reader.

One August Pick I’m Sharing for Free

No. 2: Meta Platforms

Action: Buy in tranches
Value basis: My DCF
Estimated value: $743
Estimated upside: approximately 38%

Meta’s latest earnings created one of the most interesting disconnects in the market.

The shares sold off sharply, but the underlying advertising business remained exceptionally strong.

Quarterly revenue increased 28% to $60.8 billion. Ad impressions across the Family of Apps rose 14%, while the average price per advertisement increased another 12%.

Those are not the numbers of a core business losing momentum.

Why did the stock fall?

The concern was not revenue. It was the cost of delivering that growth.

Meta’s total costs increased 55%, its operating margin fell from 43% to 31%, capital expenditure reached $31.1 billion, and quarterly free cash flow collapsed to just $784 million. Management now expects 2026 capital expenditure of between $130 billion and $145 billion.

Investors are therefore being asked to trust that today’s extraordinary infrastructure spending will generate sufficient returns in future years.

That is the central question surrounding Meta now:

Is this a temporary free-cash-flow collapse caused by a major investment cycle or the beginning of structurally lower returns?

Why it still made my Top 10

The expenditure risk is real, but so is the strength of Meta’s core business.

Its advertising engine continues to grow at a rate that most companies of this size could not replicate. Management is also guiding for third-quarter revenue of between $61 billion and $64 billion, suggesting that demand remains healthy even as the company absorbs much heavier infrastructure costs.

At the price used in my August workbook, my $743 DCF estimate leaves approximately 38% potential upside.

I would not treat that as a guaranteed destination. The valuation depends on Meta converting its AI investment into sustained revenue growth while eventually restoring stronger cash conversion.

But the post-earnings decline has improved the balance between risk and potential reward.

My action

I would buy Meta in tranches, rather than establishing a full position immediately.

An initial allocation gives exposure to one of the strongest advertising franchises in the world. Keeping capital back provides room to add if:

• The market becomes more concerned about expenditure

• The stock falls further without a comparable deterioration in the business

• Future results demonstrate that AI spending is producing measurable returns

Meta is not the safest selection in the August list but at the current valuation, I believe the potential reward now justifies accepting the higher uncertainty.

The Complete August Report

Meta is only one of the ten stocks that made my final list.

Premium members receive:

• The complete August Top 10 and my action for every stock

• The six opportunities I would buy or accumulate today

• Full analysis of the No. 1 selection, NVIDIA and the leading value and income ideas

• A concise investment case for every remaining stock

• Bear, base and bull valuation scenarios

• Estimated buy-below prices

• The complete 244-stock ranked screener

• The downloadable August premium workbook

• The stocks that narrowly missed the final list and why

Continue reading and download the complete August workbook containing all 244 stocks, valuation scenarios and action categories.

Annual members receive both of my flagship monthly research releases: the full market screen and the mid-month DCF report.

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The Index Is Holding Up. Individual Stocks Are Crashing.

The S&P 500 is still positive this year.

You would not know it from looking at many individual stocks.

Across the market, high-quality businesses have quietly fallen toward or through their 52-week lows. Some have declined because earnings expectations weakened. Others have been caught in sector rotations, valuation compression or company-specific uncertainty.

And a falling share price creates a dangerous illusion:

A stock can look considerably cheaper without becoming genuinely undervalued.

That distinction matters today.

Over recent weeks, market leadership has shifted dramatically. Financials and healthcare have advanced, while technology, communication services and consumer discretionary stocks have lagged.

This is not an indiscriminate market collapse.

It is a market increasingly separating companies, sectors and investment narratives from one another.

The S&P 500 recently fell by approximately 1.6% over five trading days, yet beneath the surface several widely followed companies suffered significantly larger declines. Fear has returned, individual-stock volatility is rising and investors are becoming less willing to pay premium valuations without clear evidence of durable earnings growth.

Yet there is an important contradiction.

While share prices have weakened across parts of the market, aggregate earnings expectations have not collapsed. S&P 500 second-quarter earnings-growth forecasts have actually been revised materially higher, with technology and energy responsible for much of the improvement.

That means today’s market is not offering one simple conclusion.

Some stocks are falling because their previous valuations were unsustainable.

Some are falling because the underlying businesses are deteriorating.

And some may be falling despite their long-term fundamentals remaining intact.

Those three situations can look almost identical on a share-price chart - but they produce completely different investment outcomes.

This Is Becoming a Stockpicker’s Market

The dispersion between the index and its individual constituents has increased sharply.

That is precisely the environment in which valuation discipline matters most.

I am not interested in buying a stock simply because it is down 20%, 30% or even 50%.

A lower share price is only attractive when the decline creates a sufficient gap between price and conservative intrinsic value - without requiring heroic assumptions or ignoring structural damage to the business.

I selected eight established companies trading near their 52-week lows or significantly below their recent highs:

• Each has a recognisable and established business.

• Each has suffered a meaningful valuation reset.

• Each has a plausible recovery or long-term compounding case.

• But each must clear the same non-negotiable hurdle.

A Minimum 20% Margin of Safety

To qualify, a company must trade at least 20% below my conservatively estimated intrinsic value.

But the DCF result is only the starting point.

I also examined:

• What growth the current share price already implies

• Forward valuation relative to historical levels

• Bear, base and bull-case outcomes

• Balance-sheet and free-cash-flow strength

• Whether recent weakness is temporary or structural

• The principal risk that could invalidate the valuation

The objective is not to identify the stock with the largest theoretical upside.

It is to find the businesses where quality, price and expectations finally align.

Of the eight companies tested, only three currently offer a margin of safety above 20%.

Several famous businesses came surprisingly close.

Others remain significantly overvalued despite trading near their lows.

And one of the three that passed offers the widest gap between price and my estimate of intrinsic value in this screen.

Let’s begin with the first company.

7. Microsoft: Cheaper — But Not Cheap Enough

Microsoft is precisely the type of stock that makes a 52-week-low screen dangerous.

The share price has fallen approximately 19% this year. Its forward P/E has compressed dramatically, sentiment has weakened and the stock is trading much closer to the bottom of its 52-week range.

At first glance, this appears to be the opportunity investors have been waiting for.

The decline has not been caused by a collapse in Microsoft’s underlying business.

In its latest quarter, revenue increased 18%, Microsoft Cloud revenue grew 29% to $54.5 billion and commercial remaining performance obligations reached $627 billion. Azure continues to benefit from strong demand, although the cost of building the infrastructure required to meet that demand is rising rapidly.

The central debate is therefore not whether Microsoft remains a high-quality business.

It clearly does.

The question is whether a great business has finally reached a great price.

A Significant Valuation Reset

Microsoft currently trades at approximately 21.3 times forward earnings, compared with a five-year average of 30.6 times.

Its dividend yield has also risen to approximately 0.92%, above its five-year average of 0.81%.

That is a meaningful reset.

However, historical valuation comparisons only tell us that Microsoft is cheaper than it used to be. They do not tell us whether the current share price offers sufficient protection if growth slows, AI infrastructure spending remains elevated or investors become less willing to pay a premium multiple.

That requires an intrinsic-value calculation.

My Updated Microsoft DCF

For the central scenario, I have assumed:

• Starting free cash flow of approximately $90 billion

• Long-term free-cash-flow growth of 13%

• An 8% discount rate

• A 3% perpetual growth rate

Those assumptions produce the following valuation range:

The base-case intrinsic value is approximately $422.91.

Against a share price of approximately $393, that provides a margin of safety of only:

7.1%

That suggests modest valuation upside, but it falls well short of the 20% hurdle required for this report.

The reverse DCF reaches a similar conclusion. At the current price, Microsoft must grow free cash flow by approximately 11.4% annually to justify the valuation.

That is achievable for Microsoft. But it is not a pessimistic expectation.

The market may be less optimistic than it was previously, but it is not pricing Microsoft like a struggling business.

My Microsoft Verdict

Microsoft is cheaper.

Its multiple is far below its recent norm, the business remains exceptionally strong and the long-term AI opportunity is substantial.

But cheaper is not the same as cheap enough.

At approximately $393, my base-case valuation offers only a 7% margin of safety. To provide the full 20% margin required by this screen, Microsoft would need to trade closer to:

$338

That does not mean Microsoft cannot deliver attractive long-term returns from today’s price.

It means investors are still being asked to pay for a significant amount of future success, while carrying the risk that AI spending remains capital-intensive, margins compress or growth merely meets rather than exceeds expectations.

Verdict: Watchlist — not a qualifying buy

Microsoft fails the test.

And it is far from the only famous company that does.

One business trading almost 30% below its 52-week high remains slightly overvalued under my base case. Two companies came within only a few percentage points of passing. And just three of the eight produced the full 20% margin of safety.

The highest-ranked stock offers:

• A 6.7% dividend yield

• A valuation materially below its five-year norm

• Nearly 29% margin of safety

• Three separate valuation methods that all point to undervaluation

Paid members unlock the complete report

This includes:

• The full eight-stock ranking

• All intrinsic values and qualifying buy prices

• The three stocks that passed

• Two near-buys within touching distance of qualifying

• Bear, base and bull-case outcomes

• The risks that could invalidate each valuation

• My final order of preference

Paid members will also receive the next Undervalued Dividend Dashboard on 1 August, alongside immediate access to every previous premium valuation report.

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Every month on the 15th, I take a fresh look at the stocks Wall Street believes offer the most upside.

On the surface, the process sounds straightforward:

Find the biggest gaps between current share prices and analyst targets, sort them from highest to lowest and buy the names at the top.

That is also one of the easiest ways to be misled by a stock screener.

The most “undervalued” company in this month’s raw data appeared to offer:

849.8% upside

It did not.

The likely explanation was a simple but dangerous unit mismatch.

A Vodafone analyst target quoted in pence appeared to have been compared with the price of its US-listed ADR in dollars.

One broken comparison was enough to transform an ordinary analyst target into what looked like a potential ten-bagger.

That single example captures the entire purpose of today’s report.

A free screener can show us where analysts are optimistic.

It cannot reliably tell us:

• Whether the target is current;

• whether the company has completed a stock split;

• whether a spin-off has changed the underlying business;

• whether currencies and share classes are being compared correctly;

• whether a low P/E reflects sustainable earnings or the top of a cycle;

• or whether the business is strong enough to deserve our money.

So this month, I went much further.

I reviewed 328 stocks carrying either a Strong Buy or Moderate Buy analyst consensus.

I then applied a stricter quantitative filter, reduced the universe to 70 qualifying names, ranked the most interesting candidates, investigated the biggest data-quality risks and manually selected the:

Five stocks worth researching first

This is not a list of five stocks I am blindly buying today.

It is something more useful:

A structured research queue showing where Wall Street’s optimism appears credible, where patience is required and where the headline upside should not be trusted at all.

The market is rising but conviction is not

The S&P 500 is up approximately 10.2% year to date, having recovered strongly from the correction earlier in the year.

The S&P 500 is up roughly 10.2% year to date after recovering from its spring correction.

At first glance, that looks like a straightforward risk-on market.

Underneath the index, however, the picture is considerably less comfortable.

The Fear & Greed Index remains in Fear territory at 44.

Retail net inflows have fallen sharply.

Single-stock volatility premiums are near cyclical highs.

And July’s performance has been extremely uneven.

Some of the market’s largest AI beneficiaries have continued to rise, while parts of semiconductors, software, industrials and healthcare have been hit hard.

July’s heatmap so far. The index-level move hides enormous dispersion beneath the surface.

That dispersion matters.

When almost everything rises together, stock selection can look easier than it really is.

When leadership narrows and volatility increases, the difference between a durable business and a fragile narrative becomes much more visible.

This is exactly the environment in which analyst targets can be useful but only as a starting point.

Earnings are doing the heavy lifting

The underlying earnings picture remains strong.

Current estimates point to approximately:

• 12% year-over-year S&P 500 revenue growth

• 23% year-over-year S&P 500 earnings growth

Technology is expected to lead revenue growth, while Energy and Technology are forecast to deliver the strongest earnings growth.

Technology and Energy are expected to lead Q2 growth, but the bar for positive surprises is already high.

There is also an important reason not to dismiss Wall Street estimates completely.

Wall Street has underestimated final S&P 500 earnings growth for 13 consecutive quarters.

Wall Street has repeatedly started too cautiously but that does not mean every individual stock target is reliable.

The key distinction is between earnings estimates and price targets.

Earnings estimates can be revised each quarter as companies report new information.

A price target adds several more layers of judgement:

• What valuation multiple should investors pay?

• How quickly will margins expand?

• How durable is the company’s growth?

• How much risk should be discounted?

• What will interest rates and investor sentiment look like?

• Will the market still reward the same sector in 12 months?

That is why a company can beat earnings while its stock falls.

It is also why a price target can remain far above a share price for years without ever being reached.

AI is still leading but the easy phase may be over

AI beneficiaries produced a stellar second quarter, but volatility has increased sharply at the start of Q3.

The Philadelphia Semiconductor Index and Korea’s KOSPI surged during the first half of the year before experiencing much larger swings.

AI beneficiaries delivered extraordinary first-half returns, but volatility has started to rise.

That does not necessarily mean the AI investment cycle is ending.

It does mean the market is becoming less willing to reward every company simply for spending more money on AI.

The next phase is likely to be more selective.

Investors will increasingly want evidence that:

• AI spending is producing revenue and cash flow;

• demand remains strong after the initial infrastructure buildout;

• margins can absorb continued capital expenditure;

• end customers are receiving measurable value;

• and valuations still leave room for upside if growth remains merely good rather than extraordinary.

This matters for today’s screen.

Technology produced the largest number of qualifying names, while Industrials and Energy were close behind.

The opportunity set is broad but it is not neutral.

It contains major underlying bets on:

• AI infrastructure;

• software monetisation;

• industrial restructuring;

• power demand;

and the commodity cycle.

The index looks calm, but the opportunity set underneath it is changing quickly. Share this report with an investor who would find the full screening process useful.

What I found after screening 328 Buy-rated stocks

Here is the headline data:

328 stocks screened
166 Strong Buy ratings
162 Moderate Buy ratings
21.8% median analyst upside
70 stocks passed the premium quantitative filter
27.4% median upside among the 70 passes
Only five passed my final editorial review

The raw list was undeniably attractive.

Across the full universe, the median company was expected to rise almost 22%.

After removing Vodafone’s obvious data anomaly, average target upside was approximately 24.6%.

The stricter group looked even stronger.

The 70 premium-filter passes had:

• Median upside of 27.4%

• Average upside of roughly 31%

But the more impressive those numbers became, the more important it was to challenge them.

High upside can be created by several very different situations.

It may represent:

1. A genuinely undervalued, high-quality business;

2. a stock that has collapsed because earnings expectations are falling;

3. a cyclical company being valued on peak profits;

4. an analyst target that has not been updated;

5. a corporate action that has broken the historical comparison;

6. a company carrying risks that are difficult to capture in a spreadsheet.

My job was not to find the biggest percentage.

It was to identify which percentages deserved further work.

What paid members receive today

Paid members receive:

• My complete five-stock ranking;

• the full investment case for every finalist;

• current price, target, upside, valuation and dividend data;

• the evidence that allowed each stock to pass;

• the specific risk that could break each thesis;

• what I would investigate before buying;

• my full Top 30 quantitative research queue;

• additional quality, dividend and cyclical watchlists;

• the stocks whose headline upside should not be trusted;

• a 30-day earnings and research plan;

• and the companion Excel workbook containing the complete 328-stock universe, scoring methodology and editable research tracker.

The five finalists include:

• A European software leader with nearly 50% analyst upside;

• a dominant software compounder trading at a compressed valuation;

• the strongest growth company in the entire screen;

• an industrial special situation where the headline target requires careful repair;

and a media turnaround finally showing evidence of sustainable streaming economics.

Paid members receive the complete High-Upside Stock Report every month on the 15th, alongside the full screening database and research tracker.

Paid members will also receive the downloadable 328-stock workbook at the end of today’s report.

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The AI Chip Trade Is Finally Splitting

The AI trade is no longer moving as one.

For most of the last few years, investors could almost treat the entire AI infrastructure basket as a single trade. Nvidia, Broadcom, Micron, AMD, semiconductor equipment, data centres, power infrastructure, hyperscalers - if it had any connection to AI spending, the market was willing to bid it higher.

But that is starting to change.

The AI trade is starting to split. Some of the biggest semiconductor winners are selling off, while other parts of the supply chain are still holding up.

Over the past month, some of the biggest AI winners have started to sell off sharply.

Nvidia is down around 13%.
Broadcom is down around 25%.
Micron is down around 8%.
Oracle is down more than 40%.
Microsoft is down more than 11%.

And yet, not everything in the AI supply chain is falling.

Applied Materials is still up strongly.
KLA is still holding up.
Intel has rallied.
Parts of the semiconductor equipment trade are still green.

That is the important point.

This is no longer a market where every AI-related stock is being rewarded equally. The market is starting to separate the companies with durable earnings power from the companies where expectations may have moved too far, too fast.

Before we get into the models, a quick note.

If you enjoy deep-dive valuation work like this, you can subscribe below. I publish regular DCF models, fair value estimates, stock screens, dividend dashboards, and premium stock rankings for investors who want to cut through the noise.

Premium members get access to:

• My full DCF assumptions

• Bear, base and bull case fair values

• Margin of safety estimates

• Ranked stock lists

• Monthly undervalued stock dashboards

• High-upside DCF model updates

The stocks I think offer the best risk/reward today

The Market Is Strong — But Fear Is Back

The strange thing is that this sell-off is happening while the broader market still looks strong.

The S&P 500 is up roughly 9.5% year-to-date, almost exactly in line with its long-term average annual path.

Over the past year, the S&P 500 has also delivered a return of around 31%, which is a very strong one-year move by historical standards.

But under the surface, sentiment has weakened.

The Fear & Greed Index is sitting in fear territory, around 32. One month ago, it was neutral. One year ago, it was in extreme greed.

That shift matters.

When sentiment is euphoric, investors often stop asking whether the valuation makes sense. They simply chase the story. But when fear returns, the market starts asking a much harder question:

How much future growth is already priced in?

That question is especially important for AI chip stocks.

Because these are not bad businesses. In many cases, they are some of the highest-quality businesses in the market. The issue is that even a great company can become a poor investment if the expectations are too aggressive.

Market sentiment has cooled sharply, even while the broader index remains up strongly this year.

The Economy Is Not Falling Apart

The macro backdrop is still fairly supportive.

The labour market has been bumpy, but it has not collapsed. Monthly job gains in 2026 have averaged around 92,000, compared with roughly 9,700 in 2025. That is not a booming labour market, but it is still enough to support consumer spending and keep the economy moving forward.

Oil has also cooled off. WTI crude has fallen back near pre-Iran war levels, which should help ease some pressure on inflation and consumers if gas prices follow with a lag.

The Fed remains split. Around half of FOMC members appear to think rates should stay on hold or move lower in 2026, while the other half think raising rates may still be appropriate. So this is not a perfect environment, but it is also not an obvious recession setup.

That is why this market is so interesting.

The economy is not broken.
The market is not collapsing.
AI spending is still real.
But valuations are starting to matter again.

And that is exactly the kind of environment where DCF work becomes useful.

The Bull Market Is Broadening Away From the Mag 7

One of the biggest changes this year is that the market is no longer being driven only by the Magnificent 7.

The Russell 2000 is up strongly.
The equal-weight S&P 500 is outperforming the cap-weighted index.
Small caps, mid caps, value stocks, and non-Mag 7 names have all started to participate.

This is important because it tells us the market is not simply saying, “AI is over.”

Instead, the market seems to be saying:

“We still like growth. We still like risk assets. But we are no longer willing to pay any price for the same narrow group of mega-cap winners.”

That is a much healthier market, but it is also a more dangerous one for overvalued AI stocks.

In 2023 and 2024, the market rewarded the AI story almost regardless of valuation. In 2026, that is changing. Investors are still willing to pay for AI exposure, but only where the numbers make sense.

AI Is Still the Centre of the Market

Even with the recent sell-off, AI remains one of the most important forces inside the S&P 500.

One chart I found especially interesting shows that AI-related stocks now make up roughly 45% of the S&P 500’s market cap.

Another shows the broader AI complex rising from 37.5% of the index at the end of 2025 to 42.3% by mid-2026.

Semiconductors and semiconductor capital equipment alone have become a much larger part of the index. According to one chart, semiconductor weight in the S&P 500 has climbed to almost 20%, far above previous cycles.

That is both bullish and risky.

Bullish because it shows how important AI infrastructure has become.

Risky because when one theme becomes this large, small changes in expectations can have a huge impact on the entire market.

This is why I do not want to simply say, “AI stocks are down, therefore they are cheap.”

That is lazy.

The better question is:

Which AI chip stocks still have enough future free cash flow growth to justify their current valuation?

That is what today’s article is trying to answer.

The AI Spending Boom Is Still Real

The strongest argument for the AI trade is that the spending boom has not disappeared.

Data centre construction spending in the U.S. has now eclipsed $50 billion, and private data centre construction has surged over the last few years. This is not just a stock market narrative anymore. Real capital is being deployed into real infrastructure.

That matters for semiconductor demand.

AI chips are not just a software story. They sit at the centre of a much larger physical buildout:

• GPUs

• custom accelerators

• high-bandwidth memory

• networking chips

• semiconductor equipment

• advanced packaging

• data centres

• cooling

• power infrastructure

So yes, the long-term AI infrastructure story is still very much alive.

But here is the problem.

A great long-term story does not automatically equal a great stock today.

If a stock already prices in years of perfect execution, the risk/reward can still be poor. If margins are already near peak levels, revenue growth needs to stay extremely high for a long time. And if the market starts questioning the pace of AI capex, even the best companies can see sharp multiple compression.

That is why valuation matters most when the story sounds most obvious.

The Other Side: Crowding Risk Is Rising

There is also a clear risk building beneath the surface.

Prime brokerage data suggests investors have recently been net sellers of U.S. information technology. The chart from Goldman Sachs showed a very sharp negative reading in weekly net trading flow for U.S. Info Tech.

That does not mean AI stocks have to crash.

But it does show that the trade has become more fragile.

When everyone owns the same theme, the downside can move quickly. And when the most crowded stocks start missing expectations, even slightly, the market can punish them very aggressively.

This is why I think the next phase of the AI trade will be much more selective.

The question is no longer:

“Which companies benefit from AI?”

That list is too broad.

The better question is:

“Which companies benefit from AI and still offer attractive upside after updating the assumptions?”

That is a much smaller list.

So I Re-Ran My DCF Models

That brings us to today’s screen.

I re-ran my DCF models across 6 AI chip stocks to see which names still offer attractive risk/reward after the recent moves.

For each company, I looked at:

• updated revenue growth assumptions

• free cash flow growth potential

• margin durability

• terminal multiple assumptions

• discount rate sensitivity

• bear, base and bull case fair values

• current upside or downside to fair value

• margin of safety

The goal was not to find the most exciting AI story.

The goal was to find the best investment setup.

Because those are not always the same thing.

Some of these companies are outstanding businesses, but the valuation still looks stretched. Some have sold off, but not enough to create a real margin of safety. And a few now look much more interesting after the recent weakness.

After updating the assumptions, most of the stocks still failed my screen.

But two passed.

And one stood out as the clearest risk/reward opportunity in the group.

ASML: World-Class Business, But Not Enough Margin of Safety

ASML has rallied strongly this year, but the valuation now leaves very little room for error.

Before we get into the full paid screen, I want to show one example of why this article is not simply about buying every AI chip stock that has exposure to the theme.

And I think ASML is the perfect case study.

ASML is one of the most important companies in the entire semiconductor supply chain. The company dominates extreme ultraviolet lithography, which is essential for producing the most advanced chips in the world. If AI demand keeps growing, the world will need more advanced chips. And if the world needs more advanced chips, companies like TSMC, Samsung and Intel will continue relying on ASML’s machines.

So from a business quality perspective, ASML is exceptional.

But the stock has already moved a lot.

ASML is up around 65% year-to-date. That is the key tension. This is not a stock that has collapsed and suddenly become obviously cheap. It is a high-quality AI infrastructure business that has already been rewarded by the market.

And that makes the valuation much harder.

The Market Still Loves ASML

Wall Street remains very positive on the company.

The analyst rating is still sitting at Strong Buy, and the average price target is around $1,781, which is almost exactly where the stock trades today.

That tells us something important.

Analysts clearly still like the business, but the average price target implies almost no upside from the current share price.

So even the bullish Wall Street view is not screaming “bargain” at today’s valuation.

Wall Street still likes ASML, but the average price target implies almost no upside from the current price.

Growth Is Strong — But Expectations Are Already High

The growth profile is still impressive.

ASML’s forward revenue growth is around 23.9%, forward EBITDA growth is around 32.1%, forward EBIT growth is around 33.4%, and forward diluted EPS growth is around 35.1%.

That is exactly why investors are willing to pay a premium multiple for this business.

But again, the problem is not the company.

The problem is the price.

ASML currently trades at a forward P/E ratio of roughly 45x to 49x, depending on the data source, compared with a 5-year average closer to 33x.

That means investors are not just paying for a great business. They are paying a historically elevated multiple for a great business after a very strong run.

And when a stock already trades well above its historical valuation range, the DCF has to do more work. The future free cash flow growth needs to be strong enough to justify not only the current price, but also the premium multiple already embedded in the stock.

My DCF Result

In my base-case DCF, I assumed ASML can grow free cash flow at 15% annually over the next 10 years, with a 3% perpetual growth rate and an 8% discount rate.

That is not a bearish model.

A 15% free cash flow CAGR for a company of ASML’s size is still a very strong assumption. It reflects the quality of the business, the importance of EUV, and the long-term demand tailwind from AI, advanced chips and semiconductor capacity expansion.

But even with that assumption, my intrinsic value estimate came out at around:

$1,571 per share

Against a current price of roughly $1,769, that implies the stock is trading around 11% above my base-case fair value estimate.

My margin of safety is therefore negative, at around -12.6%.

So based on my model, ASML does not pass.

Reverse DCF: What Is Already Priced In?

The reverse DCF also tells the same story.

At the current price, ASML appears to be pricing in roughly 16.7% annual free cash flow growth over the next decade.

That is possible.

But it is not low-risk.

Especially for a business that is still exposed to semiconductor cycles, customer capex timing, China restrictions, and the broader question of how long AI infrastructure spending can continue at this pace.

This is why ASML failed my screen.

Not because the business is weak.

But because the stock already expects a lot.

My Verdict on ASML

ASML remains one of the highest-quality companies in the semiconductor ecosystem.

It has a dominant competitive position, excellent long-term relevance, strong forward growth expectations, and direct exposure to the most important parts of the AI chip supply chain.

But at today’s valuation, I do not see enough margin of safety.

The stock is already up heavily this year. The forward P/E ratio is above its historical average. Wall Street’s average price target implies almost no upside. And my base-case DCF suggests the stock is trading above fair value.

So for me, ASML is a:

High-Quality Fail

I would happily keep it on the watchlist. But based on my updated assumptions, it was not one of the two AI chip stocks that passed my DCF screen.

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Premium members get the full breakdown of all six AI chip stocks, including my updated fair value estimates, bear/base/bull cases, margin of safety calculations, and the two stocks that actually passed the model.

And that is the key point of this article.

ASML is a world-class business, and it still failed.

Across the six AI chip stocks I modelled, four failed my updated DCF screen.

Only two passed.

And one stood out as the clearest risk/reward opportunity in the group.

Read more

The market is back near highs.

But that does not mean every opportunity is gone.

In fact, this is where screens become even more useful.

When markets are falling, almost everything can look cheap.

But when markets rebound, the easy discounts disappear first.

The weak businesses stop looking obvious.

The high-quality names start getting bid up again.

And the market becomes much less forgiving.

That is why July’s screen is different.

This month is not about finding the stocks that crashed the hardest.

It is about finding the companies that still look mispriced even after the rebound.

Because if a stock still screens as undervalued when sentiment has improved, that is usually worth paying attention to.

For July, I screened 260 stocks using the Dividend Talks framework.

The goal was simple:

Which stocks still deserve capital when the market is no longer handing investors easy bargains?

Not the most popular names.

Not the biggest winners.

Not the loudest AI trades.

But the businesses where the numbers still suggest the market may be too pessimistic.

Why July’s Screen Is Different

This is the part that matters.

The opportunity set has changed.

April was about broad valuation resets.

May was about the market punishing the wrong stocks.

June was about quality businesses being repriced.

July is different.

The market has already bounced.

Sentiment has improved.

And many of the obvious discounts are no longer as obvious.

So the question is no longer:

“What looks cheap after the selloff?”

The question is now:

“What still looks cheap after the rebound?”

That is a much stricter test.

And it is why this month’s spreadsheet is designed less like a simple stock screener and more like a capital allocation tool.

I do not want a list of random cheap stocks.

I want to know where the strongest balance exists between:

• valuation reset

• business durability

• dividend support

• balance sheet resilience

• risk-adjusted upside

• quality of earnings

• margin of safety

That is the whole point of this month’s work.

What Stood Out This Month

The July screen produced a few important patterns.

1. The best opportunities are more selective now

This was not a screen where everything looked cheap.

Out of 260 companies reviewed, only 15 reached the highest conviction tier.

That matters.

When too many companies rank highly, the filter probably is not strict enough.

This month, the model was selective.

The median fair value upside across the universe was around 15.9%, but the top-ranked opportunities stood out far more clearly.

That tells me the market is not broadly cheap.

But there are still pockets where the risk/reward looks very attractive.

2. Quality still matters more than pure upside

The ranking is not based on upside alone.

That is important.

If the model only ranked stocks by fair value upside, the list would simply reward the most aggressive valuation gaps.

But large upside can sometimes be a warning sign.

It may mean:

• the fair value estimate is stale

• the market is pricing in a real deterioration

• the business has higher uncertainty

• the downside case has not been fully considered

That is why the allocation score blends valuation with quality, risk and income support.

The framework weights:

• 40% valuation

• 35% quality

• 15% risk

• 10% income

This means a company with slightly lower upside can rank above a company with larger theoretical upside if the overall risk/reward is stronger.

That is how I want to think about capital allocation.

Not:

“What is the cheapest stock?”

But:

“Where is the best balance between price, quality and risk?”

3. The top-ranked names are not all from one sector

One thing I liked about this month’s output is that the opportunity set was not concentrated in just one theme.

The top 10 included:

• healthcare

• information technology

• industrials

• consumer staples

• financial data / exchanges

That is a healthy sign.

It suggests the screen is not just chasing one beaten-down sector.

It is finding individual businesses where valuation has compressed faster than the underlying quality score.

Inside the top 25, industrials and information technology were especially well represented.

That is interesting because it shows the market is still offering opportunities in quality compounders, technology services, and business infrastructure names not just obvious deep-value stocks.

4. Some large upside names need extra verification

A few companies in the screen show very large upside to model fair value.

That can be attractive.

But it also needs discipline.

A big fair value gap does not automatically make a stock a buy.

It means the assumptions need to be checked carefully.

That is why the upgraded spreadsheet now includes:

• data quality checks

• extreme upside flags

• payout ratio checks

• leverage checks

• dividend safety checks

• bear / base / bull scenario analysis

• investment committee-style research notes

This matters because a premium stock screen should not just show upside.

It should also show where the model could be wrong.

Before We Start

Most investors do not lose money because they only buy bad companies.

They lose money because they overpay for good ones.

That is why I built this valuation framework around one simple question:

What is actually worth buying now and what only looks attractive on the surface?

Paid members get the same tools I use to rank upside, size risk, compare quality and avoid value traps.

Each month, members receive:

📊 Undervalued Dividend Dashboard
A premium workbook ranking income and quality stocks by valuation, dividend safety, upside and margin of safety.

🚀 High-Upside Valuation Models
Fair value estimates, buy-below prices, scenario analysis and risk-adjusted rankings across market leaders and mispriced compounders.

🧠 Buy / Hold / Avoid Research
Clear decisions tied directly to the numbers not just market commentary.

Free readers can understand the setup.

Paid members get the rankings, the fair values, the risk flags, the buy zones and the decision-making framework.

What Paid Members Get Below

Below, paid members get access to the full July research pack, including:

• the full premium spreadsheet

• the Word-style research report

• the complete top 10 ranked list

• fair value estimates

• expected upside

• allocation scores

• quality scores

• risk scores

• dividend and income scores

• conviction tiers

• buy-below prices

• bear / base / bull scenario analysis

• investment committee summary

• data quality checks

• research notes and watchlist framework

This is not designed to be a blind buy list.

It is designed to be a structured starting point for better capital allocation.

The goal is simple:

Screen the market.
Filter for quality.
Stress test the downside.
Rank the opportunity.
Allocate with discipline.

Read more

Most investors don’t lose money by picking bad companies, they lose it by overpaying for great ones.

That is why I built a valuation system to answer one question every week:

👉 What’s actually worth buying now, and what only looks attractive?

Paid members get the same tools I use to size risk, find upside, and avoid value traps.

Each month, members receive:

📊 Undervalued Dividend Dashboard - A live spreadsheet ranking income stocks by valuation, yield safety, and margin of safety.

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Introduction

The Magnificent 7 setup is finally getting interesting.

Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta and Tesla are some of the most powerful businesses on earth, but at the wrong price, even a world-class company can become a poor investment.

And after the latest sell-off, the question has changed.

It is no longer: are these great companies?

Most of them clearly are.

The real question is: are any of them finally cheap enough to buy?

Some Magnificent 7 stocks are now down heavily from their highs.

Microsoft has been hit hard. Meta has pulled back sharply. Tesla has rolled over again. Nvidia, Amazon, Alphabet and Apple have all weakened too.

The headline looks scary.

But the important point is this:

This is not a broad market collapse.

It looks much more like a leadership reset.

Market Update

The S&P 500 fell around 2% over the past five days, but the real pain has been concentrated in the same group of stocks that carried the market for most of the last two years: mega-cap technology.

The broader market is wobbling, but it is not falling apart.

Last week’s heatmap tells the story clearly.

Last Week’s Winners & Losers

Before getting into the Mag 7 specifically, here is what leadership looked like last week.

Top performers:

• AbbVie (+17%)

• Merck & Co (+13%)

• Johnson & Johnson (+12%)

• Danaher (+11%)

• Thermo Fisher (+10%)

Biggest drops:

• Western Digital (-21%)

• Oracle (-19%)

• Seagate (-16%)

• Qualcomm (-16%)

• Broadcom (-11%)

Technology and semiconductors were under pressure, with Nvidia, Apple, Alphabet, Amazon, Microsoft and Tesla all red.

But beneath the surface, large parts of the market held up far better.

Healthcare was strong. Financials were resilient. Industrials were mixed, but far from broken. Consumer defensives were not collapsing either.

In other words, money is not simply leaving the stock market.

It is rotating.

That distinction matters.

When everything sells off together, fear usually creates broad opportunity. But when only the most crowded part of the market starts breaking down, the question becomes more specific:

Are investors finally being offered value in the Magnificent 7, or are these stocks just correcting from overvalued levels?

Macro News

There are reasons for the rotation.

Oil prices have fallen sharply after the recent geopolitical spike began to unwind, inflation pressure from energy should ease in the coming months, and markets are already pricing in less pressure on central banks to keep hiking rates.

That matters because if inflation pressure cools, the market no longer needs to hide exclusively in the same handful of AI-linked mega-cap winners.

The broader economy also still looks more resilient than the tech sell-off suggests.

Households have continued spending, even after the spring inflation squeeze. Lower oil prices could give consumers some breathing room, help rebuild savings, and support a broader market where leadership is not dominated by the same seven stocks.

At the same time, the AI trade itself is being questioned.

Investors are starting to ask harder questions about capital expenditure, margins, competition, buybacks, and whether every dollar being poured into AI infrastructure will generate the returns currently implied by valuations.

Magnificent 7 Sell-Off

So the Mag 7 sell-off is not random.

It reflects three things happening at once:

1. Crowded positioning is unwinding.

2. The market is rotating into broader leadership.

3. Investors are demanding more valuation discipline from AI and mega-cap growth stocks.

And that brings us to the real question.

Lower prices alone do not automatically create value.

A stock can fall 20% and still be expensive.

A stock can fall 30% and still lack margin of safety.

And sometimes, a great business falling with the crowd can create one of the best buying opportunities in the market.

That is why I rebuilt every Magnificent 7 DCF model from scratch.

The goal was simple:

Which of these stocks are actually worth buying after the sell-off?

After updating the numbers, the answer was not “buy all seven.”

Three now look deeply undervalued in my DCF.

One looks attractive, but is more execution-dependent.

And three still lack enough margin of safety at today’s price.

Paid members get the full valuation models, fair values, buy zones, downside scenarios and final Buy / Hold / Avoid decisions behind articles like this.

Free readers get the story.
Paid readers get the numbers, the risk, and the decision.

Fear & Greed Index

Sentiment has also weakened.

The Fear & Greed Index is back in fear territory, which is exactly when valuation discipline matters most.

Fear creates opportunity, but it also creates traps.

The job is not to buy everything that has fallen.

The job is to separate the real bargains from the names that still have too much optimism priced in.

This is why the current setup is so interesting.

The Mag 7 trade is cracking, but the market itself is not broken.

That creates a very different opportunity set.

If the entire market were collapsing, the answer might be simple: raise cash, manage risk, and wait for panic.

But if the weakness is concentrated in the most crowded mega-cap growth stocks, then the better question is:

Which of these companies are being unfairly punished?

That is what the DCF models are designed to answer.

Earnings Week

It is a quieter earnings week, but there are still a few names worth watching: Nike, Constellation Brands, FactSet, General Mills, MSC Industrial, Concentrix and AeroVironment.

None of these are likely to define the entire market narrative on their own, but they can still give us useful signals around consumer demand, enterprise spending, industrial activity and whether the broader economy remains as resilient as the rotation suggests.

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I also break down these market moves every week on YouTube.

If you prefer watching the analysis rather than reading it, you can subscribe to the Dividend Talks YouTube channel below 👇

YouTube Channel

Magnificent 7 DCF Models

Now the main event for this article is the Magnificent 7.

So let’s get into the models.

I ranked all seven from weakest to strongest based on valuation, margin of safety, quality, risk, and what the market appears to be pricing in today.

Free Model — Apple (AAPL): Great Business, Weak Margin of Safety

Valuation

Apple is still trading at a premium valuation despite the recent pullback.

The forward P/E sits well above its historical norm at 31x vs a 5-year average of 28x.

This suggests the stock is still being priced as a premium compounder, even though recent free cash flow growth has been relatively modest.

The dividend yield also remains well below its historical norm at 0.4% vs a 5-year average of 0.5%, which supports the same conclusion: Apple is not obviously cheap on traditional valuation metrics.

The blue tunnel also shows Apple trading around the upper end of its expected valuation range. While the stock has pulled back from recent highs, it has not fallen far enough to create a clear margin of safety in my model.

Looking at the last 10 years, Apple has rarely traded at a huge discount for long. The market consistently awards the business a premium because of its ecosystem, brand strength, services revenue and enormous buyback program.

But that premium only makes sense if future cash flow growth can justify it.

DCF Model

Using my DCF model, a few things stand out:

12.8% is currently baked into the reverse DCF for future free cash flow growth.

Apple’s 5-year free cash flow CAGR sits at 2%.

Apple’s 10-year free cash flow CAGR sits at 7%.

Using 8% as the lower growth rate gives an intrinsic value of $210.

Using 10% as the middle growth rate gives an intrinsic value of $238.

Using 12% as the higher growth rate gives an intrinsic value of $270.

Using the middle growth rate of 10%, I get an intrinsic value of $238.

With Apple trading around $283, that means the stock still trades at roughly an 18.7% premium to my fair value estimate.

In other words, even after the pullback, Apple still does not offer enough margin of safety in my model.

Wall Street’s average price forecast is around $315, implying roughly 11% upside, but my own DCF remains more cautious.

What the market is pricing in

The market is still pricing Apple like a premium growth compounder.

That makes sense to a point. Apple remains one of the highest-quality businesses in the world. The ecosystem is sticky, the balance sheet is strong, services revenue is valuable, and the company continues to return huge amounts of cash to shareholders through buybacks.

But the issue is not quality.

The issue is valuation.

At today’s price, Apple needs a meaningful reacceleration in free cash flow growth to justify the current multiple. That is difficult when the company’s recent free cash flow growth has been far lower than what the market appears to be pricing in.

The current setup seems to assume that services growth, buybacks and ecosystem monetisation can offset slower hardware growth for a long time.

That might happen.

But I do not think today’s price gives investors enough margin of safety if it does not.

Verdict: HOLD

Apple is a wonderful business, but it is not one of the Magnificent 7 stocks that looks deeply undervalued in my DCF.

The stock has pulled back, but not enough.

For me, Apple is a perfect example of why falling prices alone do not automatically create value.

A great company can still be a mediocre investment if the valuation already prices in too much future success.

Apple shows why a lower price alone is not enough.

Even after the pullback, my model still does not show enough margin of safety. The business is excellent, but the valuation still assumes a lot of future success.

But Apple is not where the ranking gets most interesting.

After updating all seven DCF models, three Magnificent 7 stocks now look deeply undervalued, one looks attractive but more execution-dependent, and three still fail my margin-of-safety test.

Below, paid members get the full valuation breakdown for the remaining six stocks, including my updated fair values, downside scenarios, buy zones, final Buy / Hold / Avoid decisions, and the exact order I would buy them in today.

Read more

A few weeks ago, the market looked like it was starting to move back into greed.

The major indexes had recovered. Investors were buying the dip again. And after a sharp rebound in some of the biggest names in the market, it started to feel like the panic phase had already passed.

But the latest sentiment data tells a slightly different story.

The Fear & Greed Index is now back in Fear, sitting at 37. That is only slightly below last week’s reading of 41, but it is a meaningful shift from one month ago, when sentiment was sitting in Greed at 58.

So the market has not completely broken.

But investors are clearly not as confident as they were a few weeks ago.

And when you look beneath the index level, the picture becomes even more interesting.

The S&P 500 June heatmap heatmap shows a market that is no longer moving together.

Some areas are still holding up well. Financials, industrials, parts of healthcare, and select semiconductor names have shown strength.

But many of the largest companies in the market are still under pressure.

Microsoft, Apple, Amazon, Tesla, Meta, Oracle, Broadcom, and several software names have all been hit hard this month.

That matters because headline indexes can hide a lot.

The market can look calm on the surface, while plenty of individual stocks are still going through serious drawdowns underneath.

And the S&P 500 drawdown from highs heatmap map makes that even clearer.

This is not just a small pullback in speculative names.

Some of the biggest companies in the market are still meaningfully below their highs.

Microsoft is down more than 30% from its peak. Meta is down more than 27%. Tesla is down nearly 20%. Amazon is down more than 12%. Oracle is down more than 40%. And several software names are still down 40%, 50%, or even more from their highs.

That creates opportunity.

But it also creates traps.

Because this is exactly the kind of market where investors can make two very different mistakes.

The first mistake is assuming every selloff is a buying opportunity.

The second mistake is assuming every weak stock is broken.

The truth is usually somewhere in between.

Some stocks are down because the market has become too pessimistic. Others are down because the business, the valuation, or the growth outlook has genuinely changed.

And that distinction matters even more now because the macro backdrop has become less forgiving.

The Federal Reserve is no longer giving investors the same easy path to lower rates.

Last week the Fed held the fed funds target range steady at 3.5% to 3.75%, removed the previously projected 2026 rate cut from the dot plot, and shifted in a more hawkish direction as inflation remained above target. Markets are now pricing in a higher fed funds rate than the Fed’s own projections, which shows that investors are taking the higher-for-longer message seriously.

That is important because higher rates change the math for stocks.

When rates stay higher, future cash flows are worth less today. That makes valuation discipline more important, not less.

It also means the market is less likely to reward a stock just because it used to trade at a much higher price.

Inflation is another reason the market cannot fully relax yet.

Headline PCE inflation and core PCE inflation have both moved further above the Fed’s 2% target. The recent pickup has partly been driven by energy prices, but core inflation has also moved higher, which makes it harder for the Fed to justify cutting rates quickly.

That does not automatically mean another rate hike is coming.

But it does mean investors should probably not build their entire thesis around fast rate cuts.

And that matters for beaten-down stocks.

Because if rates stay higher for longer, then companies need to justify their valuations through actual earnings growth, cash flow, and execution - not just hopes of a lower discount rate.

There is also an interesting message coming from the fixed income market.

Short-term bonds now offer a wider yield advantage over cash. That reflects the market’s view that rates may stay elevated for longer, while also giving investors more options outside of equities.

That is another reason the stock market has to work harder from here.

When investors can still earn a reasonable yield in short-term fixed income, they do not need to chase every stock that falls 20%, 30%, or 40%.

The opportunity has to be real.

The margin of safety has to be real.

And the valuation has to make sense.

That is why this week’s earnings calendar matters.

It is not the biggest earnings week of the year, but there are still important companies reporting, including FedEx, Micron, Paychex, Carnival, McCormick, Darden Restaurants, Jefferies, and others.

These reports will give investors a better read on demand, margins, consumer spending, business confidence, and whether companies can still guide positively in a higher-rate environment.

And that brings us to the real test.

A stock near a 52-week low can look very tempting.

The chart looks ugly.
The multiple may look lower.
Sentiment may already be washed out.
And the upside back to the old high can look huge.

But none of that automatically makes it a buy.

A lower price only matters if the business is still strong, the growth assumptions are still reasonable, and the valuation now leaves enough room for error.

So for this week’s screen, I wanted to go back to a very simple question:

Which beaten-down stocks are actually undervalued - and which ones are just cheap for a reason?

That is what this week’s DCF screen was designed to answer.

Now let’s get into the screen.

The key distinction here is simple.

A stock can be near a 52-week low and still not be cheap.

The price is down.
The chart looks ugly.
Sentiment is weak.
And the upside back to the old high can look huge.

But low prices alone do not create value.

In many cases, the market is not creating an opportunity. It is simply correcting for weaker growth, weaker margins, lower guidance, rising competition, or a business that no longer deserves the multiple investors once gave it.

That is where investors can get caught.

They see the drawdown.

They anchor to the old high.

And they mistake a lower price for a better opportunity.

But the old high is not what matters.

What matters is what the business is worth today based on the cash it can generate going forward.

That is why I did not want this screen to be driven by price action alone.

I re-ran the valuation work on a basket of stocks trading near 52-week lows, using a DCF-based framework to see which names still offered a real margin of safety - and which ones only looked cheap because the market had already priced in a weaker future.

Most did not make the cut.

Only two did.

The framework I used

There is no perfect way to value a stock.

A DCF is not a magic answer. Change the assumptions, and the output changes with them. But that is also why it is useful. It forces you to be explicit about what needs to happen for a stock to be worth buying.

For this screen, I focused on five questions.

1. Is the business still high quality?

If a company is near a 52-week low because the business itself is weakening, the lower price may not be an opportunity at all. It may just be the market catching up to a worse reality.

2. Are the growth assumptions still believable?

This is where a lot of cheap-looking stocks fall apart.

A stock can look optically inexpensive if investors are still anchoring to old expectations. But if the future growth path is now lower, the fair value is lower too.

3. Is the valuation leaving enough room for error?

Even if the business is solid, that does not automatically make the stock a buy.

The current price still has to leave enough room for a decent return without relying on perfect execution.

4. Is the downside understandable?

Some stocks are near 52-week lows because the market is overreacting.

Others are there because the risks are real.

So I wanted to understand what was actually driving the weakness. Was this mainly sentiment? A temporary slowdown? A margin reset? Or something more structural?

5. Would I still want to own it if the recovery takes time?

This matters more than people think.

A stock near a 52-week low does not have to bounce quickly to be a good investment. But if the thesis only works on the assumption of a fast rerating, it is probably not a very strong thesis.

At a high level, this was not a hunt for the most beaten-down stocks.

It was a hunt for the mispriced ones.

And once I put the list through that lens, the field narrowed quickly.

The first stock that looked interesting on the surface, but failed the full test, was Kimberly-Clark.

A stock that did not pass: Kimberly-Clark

Kimberly-Clark is exactly the kind of stock that can catch a dividend investor’s attention when it trades near a 52-week low.

The business is defensive.

The brands are familiar.

The dividend yield has moved much higher.

And the valuation looks much cheaper than usual.

At the current price of around $102, Kimberly-Clark now yields close to 5%.

For a defensive consumer staples company, that immediately looks interesting.

Especially when the stock is also trading near the lower end of its 52-week range.

So on the surface, I completely understand why investors would stop and look at this one.

But this is also exactly why the screen matters.

Because a high dividend yield and a lower P/E ratio can make a stock look cheap before the underlying numbers actually confirm it.

The historical valuation picture looks attractive at first.

Kimberly-Clark’s dividend yield is now around 5%, compared with a five-year average of 3.7%.

That is clearly well above its normal range.

The forward P/E also looks much cheaper than usual.

Kimberly-Clark is trading at roughly 14x forward earnings, compared with a five-year average of about 19x.

So if I only looked at the multiple and the dividend yield, the setup would look pretty simple.

Higher yield.

Lower multiple.

Defensive business.

Potential bargain.

But cheaper than normal is not the same thing as undervalued.

And the more I looked at the growth profile, the less convinced I became.

The problem is growth.

Kimberly-Clark has a weak growth profile right now, with a Seeking Alpha growth grade of D-.

Revenue growth is barely positive year over year, at just 0.14%.

Forward revenue growth is negative.

Forward EBITDA growth is negative.

Forward EBIT growth is negative.

And forward diluted EPS growth is only around 1.22%.

That matters because valuation compression is only attractive if the business still has enough future growth to justify a higher value.

A stock can deserve a lower multiple if the growth outlook is weaker.

And that is the key issue with Kimberly-Clark.

Yes, the yield is high.

Yes, the P/E is below its historical average.

But if future growth is weak, then the old average multiple may no longer be the right anchor.

That is why I wanted to see what the DCF said.

In my medium-case DCF, Kimberly-Clark came out with an intrinsic value of roughly $100.40 per share.

That compares with a current price of around $102.

So on the DCF alone, Kimberly-Clark actually looks slightly overvalued.

The low case gives a value of around $84.

The medium case gives a value of around $100.

And the high case gives a value of around $119.

So the stock can work if the business performs better than expected.

But the base case does not give me enough margin of safety.

That is the key point.

For this screen, I was not trying to find stocks that might be fine.

I was trying to find stocks where the valuation itself created a clear opportunity.

And Kimberly-Clark did not quite do that.

The reverse DCF also suggests the market is already pricing in around 6.2% future growth.

That does not look obviously conservative when the company’s recent and forward growth metrics are this weak.

So while the dividend yield makes the stock look attractive, the cash-flow valuation tells a more cautious story.

Now, to be fair, the broader valuation picture is not terrible.

My combined valuation model gives Kimberly-Clark an intrinsic value of around $119 per share.

That compares with a current price around $102, implying a margin of safety of about 14.3%.

The dividend discount model also gives a value around $117.76.

And Wall Street’s average price target is around $115, implying roughly 12% to 13% upside.

So I would not call Kimberly-Clark wildly expensive.

This is not a stock where the numbers are screaming danger.

But it also is not a stock where the numbers are screaming opportunity.

And that is why it did not make the cut.

The business is defensive.

The dividend yield is attractive.

The P/E ratio is below its historical average.

And there is some upside in the broader valuation model.

But the DCF does not support enough upside, the growth grade is weak, and the margin of safety is not large enough for me to put it in the final two.

So Kimberly-Clark is a good example of the kind of stock this screen is designed to filter out.

It looks cheap at first glance.

It may still be reasonable for income-focused investors.

But for this specific screen, where I am looking for the strongest opportunities near 52-week lows, Kimberly-Clark did not pass.

A second stock that did not pass: Nike

The second stock that looked tempting, but still did not pass the full screen, was Nike.

And I completely understand why investors are looking at this one.

Nike is one of the most recognisable brands in the world. The stock has been hit hard. It is down around 29% year to date, trading near the bottom end of its 52-week range, and sentiment has clearly reset.

At around $45 per share, this is no longer the premium-priced Nike that investors were looking at a few years ago.

The problem is that a lower price does not automatically mean the risk/reward is attractive.

And with Nike, the issue is not just valuation.

The issue is that the business still needs to prove the recovery is real.

On the surface, Nike does look much cheaper than usual.

The dividend yield is now around 3.6%, which is far above its five-year average of 1.4%.

The forward P/E is also below its historical norm, sitting around 28x compared with a five-year average of 31x.

So the stock is clearly cheaper than it used to be.

But this is where the screen becomes important again.

Nike is cheaper than normal, but it is not obviously cheap in absolute terms.

A forward P/E in the high 20s still requires investors to believe that the company can return to healthier growth over time.

And right now, the growth data does not fully support that confidence.

Nike’s growth grade is currently D-.

Revenue growth is negative year over year.

Forward revenue growth is negative.

EBITDA growth is deeply negative.

Forward EBITDA growth is also negative.

EBIT growth is down sharply.

Forward EBIT growth is negative.

And diluted EPS growth is down almost 50% year over year, with forward EPS growth also expected to remain negative.

That is the issue.

Nike is not just a stock that has fallen because investors got nervous.

The fundamentals are under pressure too.

And when a company still trades at a fairly rich multiple while growth is negative, the valuation has to be treated very carefully.

This does not mean Nike is broken forever.

But it does mean the stock needs a genuine turnaround to justify stronger upside.

The dividend picture also needs some caution.

Nike’s dividend safety score is currently 60, which is classified as Borderline.

That does not mean a dividend cut is guaranteed.

But it does suggest the dividend is no longer as safe as investors may have assumed in the past.

And that matters because one of the things making Nike look more attractive today is the higher dividend yield.

If the dividend yield is rising because the stock price is falling while earnings and cash flow are under pressure, then investors need to be careful about treating that yield as a clean buy signal.

For a dividend investor, this is not just a cheap brand story.

It is a turnaround story with execution risk.

That is also what showed up in my DCF.

In my medium-case DCF, Nike came out with an intrinsic value of roughly $44.38 per share.

That compares with a current price around $45.

So on my base-case numbers, Nike looks slightly overvalued.

The low case gives a value of around $38.

The medium case gives a value of around $44.

And the high case gives a value of around $52.

So yes, there is upside if Nike can execute better than expected.

But the base case does not give enough margin of safety.

And for this screen, that was the key problem.

The goal was not to find stocks where the upside might work if the turnaround goes well.

The goal was to find stocks where the current valuation already looked attractive under reasonable assumptions.

Nike did not clear that bar.

The reverse DCF also implies around 4.2% future growth.

That might not sound aggressive, but when revenue growth, EBIT growth, EPS growth, and free cash flow growth are all under pressure, I do not think the market is giving investors a huge margin of safety here.

Now, this is where Nike gets interesting.

Wall Street’s average price forecast is around $59.58, implying roughly 32% upside from the current price.

So analysts clearly see a recovery path.

And I understand that case.

Nike still has a powerful brand, global scale, direct-to-consumer potential, and room to improve margins if the business stabilises.

But the problem is that my valuation work does not support that same level of confidence yet.

My intrinsic value estimate came out at roughly $44.38.

Against a current price around $45, that leaves a negative margin of safety of about 1.4%.

So while Wall Street sees meaningful upside, my DCF says the stock is much closer to fair value.

And that is why Nike did not make the cut.

This is not a stock I would completely dismiss.

If the turnaround works, Nike could absolutely recover.

But as of today, the numbers still look too uncertain for me to call it one of the best opportunities near 52-week lows.

The stock is down a lot.

The brand is still strong.

The dividend yield is much higher than normal.

And Wall Street sees upside.

But the growth profile is weak, the dividend safety score has been downgraded, and the DCF does not show enough margin of safety.

So Nike was another stock that looked interesting on the surface, but did not pass the full valuation test.

That was the pattern across much of the list.

Some stocks looked cheaper than usual, but still not cheap enough.

Others had strong brands, attractive dividends, or impressive long-term histories, but the current numbers did not support enough margin of safety.

Kimberly-Clark was a good example of a defensive dividend stock where the yield looked tempting, but the DCF did not show enough upside.

Nike was a good example of a famous brand where Wall Street still sees recovery potential, but the current fundamentals and valuation did not give me enough confidence to call it one of the best opportunities near 52-week lows.

And that is exactly why this screen was useful.

It forced me to separate three very different groups of stocks.

The first group were stocks that looked cheap, but where the underlying business trends were too weak.

The second group were stocks that were good businesses, but where the valuation was only fair.

And the third group were the rare names where the business quality, valuation, and margin of safety all lined up.

That final group was much smaller than I expected.

After running the full screen, only two stocks gave me the combination I was looking for:

A business I would still want to own.

Assumptions I could reasonably defend.

And a valuation that left enough room for upside from here.

Those are the two stocks I would put at the top of the list today.

Here are the only two names that still offered the combination of quality and valuation support I was looking for.

Read more

The market is getting interesting again.

Not because everything is crashing.

Not because everything is cheap.

But because the market is starting to split.

On one side, we still have the same AI winners, mega-cap tech names, semiconductor stocks, and high-growth companies that have dominated investor attention for the last 18 months.

On the other side, we are starting to see early signs of rotation, broader participation, and a market that may finally be looking beyond the same handful of names.

That creates risk.

But it also creates opportunity.

And that is exactly why this month’s paid report is focused on one simple question:

Out of hundreds of Wall Street Buy-rated stocks, which ones actually look worth researching today?

Not the most hyped stocks.

Not the most popular stocks.

Not the names with the craziest price targets.

But the stocks where analyst upside, valuation, profitability, market cap, dividend profile, Smart Score, and risk-adjusted opportunity all line up better than the rest.

For this month’s screen, I reviewed 308 Buy-rated stocks.

From there, only 30 made the premium shortlist.

And today, paid subscribers get both:

1. The full written June 2026 High-Upside Dividend Report

2. The complete sortable Excel workbook behind the screen

Before we get into the list, though, we need to talk about the market backdrop because the macro setup matters a lot here.

This report takes a lot of time to build each month, and every share helps support the work.

The goal is simple: cut through the noise, screen the market properly, and focus on the companies that may actually deserve deeper research.

The Macro Setup: Fear Is Back, But The Market Is Not Broken

The CNN Fear & Greed Index is back in Fear territory.

That alone does not mean investors should panic.

In fact, fear can often be useful.

Markets tend to become most dangerous when investors assume nothing can go wrong. Right now, we are not there. The market has become more cautious, more selective, and more sensitive to bad news.

That is not necessarily a bearish setup.

It is a more disciplined setup.

And after the run we have seen in AI, semiconductors, mega-cap tech, and the S&P 500, that is probably healthy.

The S&P 500 is still up strongly year-to-date, but the tone underneath the surface has shifted.

The index has had a strong year.

But the gains have not been evenly distributed.

A huge portion of the market’s strength has come from the same dominant themes: AI infrastructure, semiconductor demand, hyperscaler capex, and mega-cap technology.

That has worked extremely well.

But it also means investors need to be careful about concentration risk.

When the same trade works for too long, everyone crowds into it.

And once expectations become too high, even great companies can become vulnerable to sharp pullbacks.

Last Week: Rotation Under The Surface

Last week’s market action was a good example of how strange this market has become.

It was not a simple “risk-on” or “risk-off” week.

Some mega-cap tech names were under pressure.

Apple, Microsoft, Amazon, Alphabet, Meta, and Oracle all had weakness in different parts of the week.

But at the same time, we saw strength in other areas of the market.

Financials were stronger.

Parts of healthcare were stronger.

Industrials were stronger.

Some consumer staples and defensive names started to catch a bid.

That matters.

Because the healthiest bull markets are not built on one sector forever.

At some point, leadership needs to broaden.

And this is the exact type of environment where a stock screen becomes more useful than simply buying whatever has already gone up the most.

Month-To-Date: The Market Is Starting To Broaden

The month-to-date heatmap tells a similar story.

Tech has become more mixed.

AI winners are no longer going straight up every day.

But beneath the surface, many non-tech areas have started to work.

That does not mean the AI trade is over.

It means the market may be moving from a narrow momentum phase into a more selective phase.

And that is where valuation starts to matter again.

When everything is going up, investors ignore price.

When the market becomes more selective, price starts to matter a lot more.

That is why I wanted this month’s screen to focus on more than just analyst upside.

A stock showing 70% upside is not automatically attractive.

Sometimes it is cheap for a reason.

Sometimes the analyst target is stale.

Sometimes the business has poor profitability.

Sometimes the market is already warning you that something is wrong.

So the goal of this report is not to blindly chase upside.

The goal is to find the highest-quality upside.

The AI Trade Is Cooling, Not Breaking

Semiconductor stocks have had a historic run.

Since 2025, the semiconductor index has massively outperformed the S&P 500.

That makes sense.

AI demand has exploded.

Data center spending has surged.

Nvidia has become one of the most important companies in the world.

Broadcom, AMD, Micron, TSMC, ASML, Applied Materials, Lam Research, and other semiconductor-related names have all benefited from the AI infrastructure cycle.

But even the best themes can move too far, too fast.

And when a trade becomes crowded, investors do not need bad fundamentals to sell.

Sometimes they just need a reason to take profits.

That appears to be what is happening now.

The AI story is still alive.

The long-term demand is still real.

But the market is beginning to ask a more important question:

How much of the future has already been priced in?

That is the key difference between a great business and a great investment.

A great business can still become a poor investment if expectations get too high.

AI Spending Is Still Massive

At the same time, it would be a mistake to pretend the AI investment cycle is suddenly over.

The expected capex from Amazon, Alphabet, Meta, Microsoft, and Oracle remains enormous.

AI infrastructure spending is expected to approach $1 trillion over the next 12 months.

That is a staggering number.

And it explains why investors continue to give premium valuations to the companies supplying the AI buildout.

But this is also where the debate gets more complicated.

On one hand, massive capex supports semiconductor demand, cloud infrastructure, power demand, data centers, software tools, and the broader AI ecosystem.

On the other hand, investors are starting to ask whether this spending will generate enough returns to justify the scale of investment.

That is why I do not think this market is simply “bullish” or “bearish”.

It is more nuanced than that.

The AI buildout is real.

But valuations are no longer universally attractive.

Some names still look compelling.

Others look priced for perfection.

And that is why selectivity matters.

The Average Stock May Have Catch-Up Potential

One of the most important charts right now is the gap between the market-cap weighted S&P 500 and the equal-weight S&P 500.

Since 2021, mega-cap stocks have dramatically outperformed the average stock.

That has created a very top-heavy market.

But it also means there may be catch-up potential outside the mega-cap leaders.

This is one of the reasons I like running screens like this.

The best opportunities are not always hiding in the most obvious places.

Sometimes they are in companies that have been ignored because they are not part of the current market obsession.

Sometimes they are in quality businesses trading at compressed valuations.

Sometimes they are in dividend-paying companies where investors are being paid to wait.

And sometimes they are in beaten-down sectors where expectations have become too low.

That does not mean every laggard is attractive.

Many laggards deserve to lag.

But when Wall Street is still positive, valuation has compressed, and the risk-adjusted setup improves, those names become worth reviewing.

SpaceX, IPO Fever, And Market Liquidity

The other major market event is the SpaceX IPO.

This is not just another IPO.

It is the largest IPO in history.

And that matters because IPOs are not just company events.

They are liquidity events.

When a huge new stock enters the market, investors need to fund it somehow.

Some capital comes from new inflows.

But some capital often comes from selling existing holdings.

That can create pressure elsewhere in the market, especially if the IPO is large enough to become a major talking point across institutional and retail investor circles.

The bigger issue is what SpaceX represents.

It is not just a space company.

It is a symbol of the current market environment:

• Huge private-market valuations

• Massive investor demand for growth

• AI and infrastructure excitement

• Founder-led premium

• Scarcity value

• FOMO

That can be powerful.

But it can also be dangerous.

History suggests that the largest IPOs often struggle after the initial excitement fades.

Big IPOs Usually Require Discipline

The average performance of the 30 largest U.S. IPOs relative to the S&P 500 is a useful reminder.

The excitement is usually highest at the start.

The returns are not always best at the start.

That does not mean SpaceX will fail as a stock.

It means investors should separate the company from the valuation.

A company can be extraordinary and still be a poor investment at the wrong price.

That idea applies far beyond IPOs.

It also applies to the stocks in today’s screen.

Just because Wall Street is bullish does not mean a stock is automatically attractive.

The screen is a starting point.

Not a final answer.

Inflation, Oil, And The Fed

The inflation picture is also important.

Headline inflation has moved higher, but much of the recent pressure appears to be energy-related.

Core inflation has been more contained.

That matters for the Fed.

If inflation is being driven mainly by oil and energy, the Fed may be less likely to respond aggressively than it would if core inflation were accelerating across the economy.

This is where geopolitics becomes important.

If tensions ease and energy prices fall, the inflation scare may calm down.

If energy prices spike again, the market may start worrying about higher-for-longer rates or even the possibility of renewed tightening.

That is why the Strait of Hormuz headlines matter.

Whether investors like the political noise or not, the market does care about energy flows.

Oil prices feed into inflation expectations.

Inflation expectations feed into bond yields.

Bond yields feed into equity valuations.

And equity valuations determine how much investors are willing to pay for future earnings.

That is why macro still matters.

Even if this month’s report is focused on individual stocks, the backdrop affects the multiple investors are willing to pay.

The Key Takeaway

The market is not broken.

But it is changing.

The leadership is broadening.

The AI trade is cooling after a huge run.

IPO activity is testing investor risk appetite.

Inflation remains tied to energy.

And investors are becoming more selective.

That is exactly the kind of market where stock picking becomes more important.

Not because every stock is cheap.

But because dispersion is increasing.

Some stocks are still expensive.

Some stocks are finally interesting.

And some stocks may offer attractive upside if the fundamentals, valuation, and analyst conviction line up.

That brings us to this month’s paid report.

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The rest of this article is for paid subscribers.

Inside the paid section, you’ll get:

• The full June 2026 High-Upside Dividend Report

• The complete sortable Excel workbook

• The 308-stock Buy-rated universe

• The Top 30 premium-ranked shortlist

• The Top 5 highest-ranked names

• A dividend-aware subset

• A large-cap quality watchlist

• Risk buckets and manual-review flags

• My interpretation of which names look most worth researching first

If you want the full report and Excel workbook every month, upgrade below.

Read more

Good morning everyone,

This could be a huge week for the stock market.

Not because one single event will decide everything.

But because several major market forces are now colliding at the same time.

Inflation data is coming.

Interest rate expectations are shifting.

AI stocks just took a hit.

Fear has moved higher.

And the SpaceX IPO could become one of the biggest market events investors have ever seen.

That last point matters more than people realise.

Because SpaceX is not just another IPO.

It is a test of how much investors are still willing to pay for future growth, AI infrastructure, private-market hype, Elon Musk premium, and the idea that retail investors are finally getting access to something they were locked out of for years.

And the timing is fascinating.

Just as the market is starting to question stretched valuations, just as technology stocks are showing signs of stress, and just as interest rate expectations are moving higher, one of the most anticipated IPOs in history is being discussed at a valuation that could leave almost no room for error.

That combination matters.

Because Friday was not just another red day.

It was a warning shot.

Friday Was a Warning Shot

On Friday, the market looked ugly on the surface.

But the real story was even more interesting underneath.

Technology was hit hard.

Semiconductors were crushed.

Nvidia fell sharply.

Broadcom dropped even more.

AMD, Micron, Intel and several other chip-related names were deep in the red.

The Nasdaq was under real pressure.

But this was not a normal “everything is down” type of sell-off.

One of the most interesting charts from Friday showed that more than half of S&P 500 stocks were actually advancing, even though the index itself was down more than 2%.

That is unusual.

And it tells us something important.

This was not necessarily a broad market collapse.

It looked more like a concentrated unwind in the stocks that had been carrying the market higher.

In other words, the market was not selling everything.

It was selling the crowded winners.

That is a very different message.

The Market Is Starting to Question the AI Trade

For most of the past few years, the easiest trade in the market has been simple:

Buy the AI winners.

That trade has worked incredibly well.

AI-related companies have added trillions of dollars in market value since the launch of ChatGPT.

The market has rewarded companies connected to chips, cloud infrastructure, data centres, large language models, and anything tied to the next phase of artificial intelligence.

And to be clear, I am not dismissing AI.

The opportunity is real.

The investment cycle is real.

The demand for compute is real.

But the stock market does not just care whether a theme is real.

It cares how much investors are paying for that theme.

And that is where things become more complicated.

If a small group of AI-related companies has driven most of the market’s gains, then the market becomes much more sensitive to any change in expectations.

If interest rates rise, valuations matter more.

If earnings disappoint, expectations matter more.

If investors start rotating away from crowded trades, positioning matters more.

That is why Friday was important.

It showed that investors may be starting to question whether some parts of the AI trade have become too crowded, too expensive, or too dependent on perfect execution.

Fear Is Rising Again

The Fear & Greed Index has moved back into fear.

That does not mean the market has to crash.

It does not mean investors should panic.

But it does show that sentiment has changed quickly.

One week ago, the market was still in greed.

One month ago, it was deeper in greed.

Now, after one sharp move lower, investors are suddenly more cautious.

That is how quickly sentiment can shift when valuations are high.

And this is why I always come back to valuation discipline.

When investors are greedy, they focus on upside.

When investors are fearful, they suddenly remember risk.

The business may not have changed in 24 hours.

But the price investors are willing to pay for that business can change very quickly.

Good News Is Becoming Bad News Again

The other major issue is interest rates.

The market has spent much of the year hoping for lower rates.

But the latest economic data has made that story more difficult.

The labour market has been stronger than expected.

Hiring has improved.

The economy looks more resilient.

Normally, that should be good news.

And for the real economy, it probably is.

A stronger labour market supports consumer spending, corporate earnings, and overall growth.

But for the stock market, there is a catch.

If the economy is stronger than expected, the Federal Reserve has less pressure to cut interest rates.

And if inflation remains sticky at the same time, the market may start worrying about the opposite problem.

What if rates stay higher for longer?

What if the next move is not a cut?

What if the market has been too optimistic?

That is why this week matters so much.

Inflation data is coming.

And if inflation comes in hotter than expected, the market may have to reprice again.

Higher Rates Change the Valuation Conversation

This is the part investors cannot ignore.

Higher interest rates do not affect all stocks equally.

When rates are low, investors are usually more willing to pay higher prices for future growth.

That helps technology stocks.

It helps companies where a lot of the expected value sits far into the future.

It helps long-duration growth stories.

But when rates rise, or when markets price in higher-for-longer rates, those same valuations become harder to justify.

That does not mean great companies suddenly become bad companies.

It means the price matters more.

A great company can still be a bad investment if the starting valuation is too high.

And that brings us to one of the biggest stories in the market right now.

The SpaceX IPO Is Arriving at a Fascinating Time

SpaceX may be one of the most impressive private companies in the world.

The company has transformed the launch industry.

Starlink has built a global satellite internet business.

The long-term potential is enormous.

And if SpaceX does come public, it will likely become one of the most talked-about listings in market history.

But here is the problem.

It may be arriving at exactly the moment investors are starting to care about valuation again.

SpaceX is reportedly targeting a valuation around $1.75 trillion.

That is an extraordinary number.

At that level, investors are not just paying for a great rocket business.

They are not just paying for Starlink.

They are paying for a future where almost everything goes right.

Reusable rockets.

Satellite broadband.

Space-based infrastructure.

Potential AI compute.

Massive future cash flows.

And entirely new markets that do not yet exist at scale.

Could some of this happen?

Absolutely.

But the question investors need to ask is not whether SpaceX is an incredible company.

The better question is:

How much of that incredible future is already priced in?

The Valuation Gap Is the Real Story

Morningstar has reportedly valued SpaceX at around $780 billion.

That is still a huge valuation.

But it is far below the valuation being discussed for the IPO.

This creates the central issue for investors.

SpaceX may be an amazing business.

But if the IPO valuation is more than double what a fundamental analyst believes the business is worth today, then the margin of safety may be very thin.

And that matters.

Because public market investors are not buying the company in its early days.

They are not buying when the valuation was $10 billion.

They are not buying when the valuation was $100 billion.

They are potentially being invited in after the story has already become enormous.

That does not automatically make it a bad investment.

But it does mean investors need to be honest about where they are entering the story.

Are retail investors getting early access to a once-in-a-generation business?

Or are they providing liquidity at a very high valuation?

That is the question.

Retail Investors Are Being Invited In

One of the most interesting parts of the SpaceX IPO is the potential retail allocation.

Usually, high-profile IPOs are dominated by institutions.

Retail investors often get access later, after the big money has already had the better entry point.

But in this case, retail investors may receive a much larger allocation than normal.

On the surface, that sounds exciting.

It sounds like access.

It sounds like democratisation.

And maybe that is part of it.

But investors should also be careful.

When retail investors are invited into a huge IPO at a very high valuation, the question is not just:

Can I get shares?

The better question is:

Should I want shares at this price?

Because IPOs are often emotional.

They are marketed with excitement.

They are surrounded by hype.

They create fear of missing out.

But long-term returns are usually not driven by hype.

They are driven by earnings, cash flow, growth, and the price paid.

Being early is not always the same as being right.

Especially if the valuation already assumes an extraordinary future.

Index Buying Could Create Forced Demand

There is also another important issue.

Index inclusion.

If SpaceX becomes a public company and is eventually added to major indexes, passive funds may be required to buy it.

That can create automatic demand.

But automatic demand is not the same as valuation-sensitive demand.

A passive fund does not buy because a stock is cheap.

It buys because the index tells it to.

That is why investors should be careful when people point to future index demand as a reason to buy.

Yes, it can support the stock in the short term.

Yes, it can create powerful flows.

Yes, it can make the IPO even more exciting.

But forced buying does not make a stock undervalued.

It just means more money may be required to buy the stock, regardless of price.

And in a market where passive capital is so large, that matters.

This Is the Bigger Lesson for Investors

The SpaceX IPO is not just a SpaceX story.

It is a market story.

It tells us where we are in the cycle.

Investors are still willing to pay enormous valuations for exciting growth stories.

Retail investors are still eager to access anything connected to Elon Musk, AI, space, and the next big technology platform.

Wall Street is still very good at turning a great story into a major market event.

But Friday’s sell-off reminds us that valuation still matters.

The market may love a story when everything is going up.

But when rates move higher, inflation becomes sticky, or investors start reducing risk, the market becomes much less forgiving.

That is why this week is so important.

It is not just about whether inflation comes in hot or cold.

It is not just about whether the Fed sounds hawkish or dovish.

It is not just about whether AI stocks bounce or keep falling.

It is about whether investors are still willing to pay premium valuations in a market where the macro backdrop is becoming more complicated.

Market Leadership May Be Changing

One of the most interesting developments is the possibility that market leadership is starting to broaden.

For a long time, the market has been dominated by mega-cap technology and AI-related stocks.

But recently, there have been signs that other areas of the market are starting to participate.

That could be healthy.

A market led by only a handful of stocks can work for a while.

But it also creates concentration risk.

If those leaders start to weaken, the index can fall even if many individual stocks are holding up.

That is exactly what we saw on Friday.

So the question now becomes:

Is this just a short-term pullback in tech?

Or is it the beginning of a broader rotation?

I do not know the answer yet.

But I think investors should be paying close attention.

Because if leadership broadens, there may be opportunities outside the most crowded AI names.

Dividend stocks.

Defensive compounders.

Financials.

Healthcare.

Consumer staples.

Industrial businesses.

And high-quality companies that have been ignored while investors chased the hottest technology names.

This Week Could Create Opportunities

I am not treating this week as a reason to panic.

I am treating it as a reason to prepare.

The real opportunity this week may not come from predicting the inflation number perfectly.

It may not come from guessing exactly what the Fed will do.

And it may not come from chasing the SpaceX IPO.

The real opportunity may come from watching which high-quality stocks get dragged down unfairly.

That is what I am focused on.

If a weak business falls, that is not automatically an opportunity.

But if a high-quality company with strong cash flows, a durable competitive advantage, and a reasonable valuation falls simply because the market is under pressure, that is where things can get interesting.

Volatility only helps you if you already know what you want to own.

That is why I prefer to build watchlists before the panic.

Not during it.

What I Am Watching Now

This week, I am watching four things closely.

First, inflation.

If inflation comes in hotter than expected, higher-for-longer rate fears could return very quickly.

Second, bond yields.

If yields keep moving higher, expensive growth stocks may remain under pressure.

Third, AI leadership.

If the AI winners keep selling off, the market may start questioning whether valuations have moved too far ahead of fundamentals.

Fourth, market breadth.

If more stocks begin participating while mega-cap tech cools off, that could be a healthy sign.

But if the weakness spreads from tech into everything else, then the market may have a bigger problem.

Final Thoughts

This is a huge week for the stock market.

Inflation is back in focus.

Interest rates are back in focus.

AI valuations are back in focus.

And the SpaceX IPO is arriving as one of the biggest tests of investor appetite for extreme growth stories.

The business may be incredible.

The story may be exciting.

The long-term potential may be huge.

But the price still matters.

That is the lesson investors cannot forget.

A great company can still be a poor investment if the valuation already assumes perfection.

And in a market where fear is rising, rates are shifting, and crowded technology trades are under pressure, valuation discipline becomes more important, not less.

My plan is simple.

I am staying patient.

I am staying selective.

And if volatility creates opportunities in high-quality businesses, I want to be ready.

Because the best opportunities usually appear when the market gets emotional.

And this week, there is a real chance the market gives investors a lot to think about.

For the free section, I wanted to focus on the bigger market setup: inflation, rates, AI valuations, and why the SpaceX IPO could become a major test of investor appetite.

For paid subscribers, I want to go one step further and look at the actual stocks I would rather watch than chase the SpaceX IPO.

Read more

The market has a strange way of doing this.

For months, investors can ignore valuation.

Then suddenly, everything changes.

A stock that once looked untouchable starts to look normal.

A premium multiple becomes a liability.

A short-term earnings concern becomes a reason to question the entire long-term thesis.

A sector that was once loved becomes too uncomfortable to own.

That is usually where the best screens start to get interesting.

Not because every falling stock is cheap.

Not because every lower valuation is an opportunity.

But because once the market starts repricing quality, the gap between sentiment and fundamentals can open very quickly.

For June, I reviewed 177 undervalued candidates.

Unlike a broad all-market screen, this month’s file was already focused on companies flagged as potentially undervalued.

So the question this month was not simply:

“What is cheap?”

It was:

“Which undervalued stocks still have enough quality, balance sheet strength, dividend support and upside to deserve a higher ranking?”

That is a very different filter.

Because when everything in the screen looks optically cheap, price alone is not enough.

This month, I ranked the full list using the same blended allocation framework:

• 40% valuation

• 35% quality

• 15% risk

• 10% income

The goal is not to find the stock with the highest upside on paper.

The goal is to find the best balance between valuation reset, business quality, downside protection and capital allocation potential.

And the June results were very interesting.

Why June’s Screen Is Different

May was about earnings reactions, sector fatigue and stocks being punished too aggressively after a reset.

June is different.

This month’s screen feels much more like a quality repricing.

The market is still rewarding momentum in certain areas.

But underneath the surface, a lot of high-quality businesses have been pushed into much more reasonable valuation ranges.

Some are obvious.

Some are boring.

Some still have uncomfortable narratives.

But the key pattern was clear:

The market is not just punishing weak businesses.

It is also repricing quality businesses where expectations were once too high.

That matters.

Because when a low-quality business gets cheaper, it can stay cheap.

But when a durable business gets repriced too aggressively, the long-term risk/reward can improve quickly.

What Stood Out This Month

The biggest opportunities in the June screen came from four areas.

1. Quality technology is still being reset

Technology appeared heavily again.

But this was not a pure AI momentum screen.

The names that ranked well were mostly profitable, established businesses where the market has compressed the multiple.

That is an important distinction.

The screen was not rewarding the most exciting story.

It was rewarding the businesses where:

• The valuation has reset

• Cash generation remains attractive

• Balance sheets are manageable

• Dividend safety still screens well

• The old premium multiple has disappeared

That is the kind of setup I want to pay attention to.

Not because every technology stock is cheap.

But because some quality businesses are being valued much more reasonably than they were during peak sentiment.

2. Healthcare remains deeply out of favour

Healthcare continues to screen well.

This is a sector where the market has become much more cautious.

Investors are worried about:

• Competition

• Pricing pressure

• Regulatory scrutiny

• Growth durability

• Whether previous valuation premiums were too optimistic

Those concerns are real.

But valuation now looks very different.

Several healthcare names in the June model show large fair value gaps, strong ROIC, and meaningful dividend growth support.

That does not make them risk-free.

But it does suggest that the market may now be pricing a much more pessimistic future than the long-term fundamentals require.

3. Boring cash-generative businesses are coming back into focus

One of the most important lessons from this screen is that not every opportunity needs to be dramatic.

Some of the best setups came from companies that are easy to ignore.

These are often businesses that are:

• Cash-generative

• Profitable

• Dividend-supported

• Less dependent on hype

• Trading below their normal valuation ranges

This is often where screens become useful.

The market tends to obsess over the loudest narratives.

A good screen can surface the quiet names where valuation has improved without the business necessarily being broken.

4. Highest upside was not always the highest ranking

This is important.

The ranking is not purely based on upside.

If it were, the list would simply reward the largest fair value gaps.

But that is not how I want to allocate capital.

The allocation score is designed to reward more than just upside.

It also considers business quality, dividend safety, ROIC, leverage, income support and downside risk.

That means a business with slightly lower upside can outrank a business with a larger fair value gap if the overall risk/reward is stronger.

The point of the framework is not to chase the biggest number.

It is to ask:

“Where does the risk/reward look strongest after adjusting for quality?”

The Key Question

This month’s spreadsheet is not asking:

“What is down the most?”

It is asking:

“Which undervalued stocks still have the quality to deserve capital?”

That matters.

Because a stock being below fair value is only one part of the decision.

A company also needs:

• Durable earnings power

• Strong or improving free cash flow

• A manageable balance sheet

• Acceptable payout risk

• Reasonable dividend safety

• A valuation that compensates investors for the uncertainty

That is where the June screen becomes useful.

The full list includes many stocks that look cheap.

But the top 10 are the names where the model found the strongest combination of valuation, quality, risk and income.

For Paid Subscribers

Below, I reveal the full June spreadsheet, including the ranked top 10 list, fair value estimates, expected upside, quality scores, risk scores, income scores, conviction tiers and the full allocation framework.

The goal is not to tell you to buy everything.

It is to show where the strongest risk/reward now appears after filtering for valuation, quality, income and downside risk.

If you are already a paid subscriber, the full report and spreadsheet are available below.

If you are a free subscriber, upgrading unlocks the full June screener and every monthly paid stock screen going forward.

Read more

Visa and Mastercard have been two of the best businesses on Earth for decades.

They are not flashy AI stocks.
They do not dominate headlines like Nvidia, Microsoft or Tesla.
And they are rarely the first names people rush to buy during a market rally.

But for long-term investors, they have been almost perfect compounding machines.

Huge margins.
Strong pricing power.
Massive global networks.
Light capital requirements.
High returns on capital.
Consistent buybacks.
And exposure to the long-term shift away from cash.

That is why I have owned these businesses for a long time.

But recently, something has changed.

The market has started to question whether Visa and Mastercard’s best days are behind them.

Europe wants alternatives.

The UK wants alternatives.

Merchants are still angry about swipe fees.
Politicians are once again targeting card economics.

Stablecoins are being called a serious threat.
And reports suggest companies like Amazon and Walmart may be exploring their own payment coins.

So the obvious question is this:

Are Visa and Mastercard finally losing their moat?

Or is this simply another moment where investors panic, the stocks sell off, and two elite businesses keep quietly printing cash?

My view is simple.

The risks are real.
But I do not think the business models are broken.

In fact, I think this could be one of those rare moments where the market gives long-term investors a better price on two of the highest-quality companies in the world.

The Market Is Suddenly Worried

What makes this setup so interesting is that the broader market has been strong.

AI stocks have been running.
The S&P 500 has continued pushing near record highs.
Several mega-cap names still trade close to their peaks.

But Visa and Mastercard have moved in the opposite direction.

Visa is down around 12% from its 52-week high.
Mastercard is down around 18% from its 52-week high.

That is not a collapse. But for businesses of this quality, that kind of move matters.

These are not random struggling companies.
These are elite global payment networks that have historically traded at premium valuations because the market understands how powerful their economics are.

So when the market starts discounting them, I pay attention.

The big concern is that Visa and Mastercard are now being attacked from almost every angle at the same time.

Regulators are questioning card fees.
Merchants want more control.
Governments want domestic payment alternatives.
Stablecoins are being promoted as faster and cheaper rails.
And large retailers may want to reduce their dependence on traditional card networks.

That sounds scary.

But scary headlines and broken fundamentals are not the same thing.

The Bear Case Is Not Stupid

Before making the bullish case, it is worth being honest about the risks.

The bear case against Visa and Mastercard has become more credible than it was a few years ago.

This is no longer just the usual argument of:

“The stocks are expensive.”

That argument has existed for years.

The new argument is more serious.

It says Visa and Mastercard could face structural pressure from four directions:

1. Regulation

2. Merchant pushback

3. Stablecoins

4. Alternative payment rails

The political risk is especially important.

For years, Visa and Mastercard benefited from being the default global payment networks. But governments are now asking whether countries should rely so heavily on American card networks.

That matters because payments are no longer just about convenience.

They are about control.
They are about sovereignty.
They are about who owns the rails of money movement.

If Europe, the UK or other regions decide they want more domestic alternatives, Visa and Mastercard may face more pressure over time.

Then there is the swipe-fee issue.

Merchants have long complained about the cost of accepting card payments. Every time a consumer taps, swipes or inserts a card, merchants pay fees into the card ecosystem.

Those fees help fund the system.
They support rewards.
They incentivise banks.
They support fraud protection, processing, authorisation and network access.

But from the merchant perspective, they are a cost.

The recent legal settlement around swipe fees could allow merchants to be more selective over which cards they accept. That matters because premium rewards cards tend to carry higher costs.

If merchants can push back against higher-interchange cards, the economics of certain reward-heavy card products could come under pressure.

This does not destroy Visa or Mastercard overnight.

But it is a genuine risk.

And then comes the biggest fear of all.

Stablecoins.

Are Stablecoins the Beginning of the End?

Stablecoins have become the new scary word for Visa and Mastercard investors.

The bearish argument is simple:

If consumers and businesses can move digital dollars instantly, 24/7, across blockchain rails, why would they keep paying traditional card network fees?

And if companies like Amazon or Walmart launch their own payment coins, could they pull transaction volume away from Visa and Mastercard?

On the surface, that sounds dangerous.

But I think investors need to separate two very different use cases.

Stablecoins may be extremely useful for:

• cross-border payments

• remittances

• B2B settlement

• treasury movement

• crypto-native ecosystems

• instant dollar transfer outside traditional banking hours

But that is not the same as replacing mainstream consumer card payments at scale.

Consumer payments are incredibly difficult.

It is not enough to create a faster rail.

You need trust.
You need fraud protection.
You need dispute resolution.
You need identity.
You need compliance.
You need bank partnerships.
You need merchant acceptance.
You need consumer habit.
You need global reliability.

And this is where Visa and Mastercard are still incredibly powerful.

The biggest advantage of Visa and Mastercard is not just that they process transactions.

It is that they are accepted almost everywhere.

Visa has access to roughly 150 million merchant locations. That kind of acceptance network is extremely difficult to replicate.

Stablecoins may be faster money.

But faster money still needs somewhere to go.

And this is where the bull case gets interesting.

Stablecoins may not kill Visa and Mastercard.

They may end up using them.

Visa and Mastercard Are Not Ignoring Stablecoins

This is the part of the story I think the market may be missing.

Visa and Mastercard are not sitting still and pretending stablecoins do not exist.

They are already trying to connect themselves to the new rails.

Mastercard has been expanding into blockchain and stablecoin infrastructure, including the reported BVNK acquisition, which is designed to connect on-chain payments with traditional fiat rails.

Visa has also been building stablecoin settlement capabilities for years and has already talked about real volume moving across blockchain-based settlement infrastructure.

That changes the story.

The simple bearish view is:

Stablecoins replace Visa and Mastercard.

But the more nuanced view is:

Stablecoins still need distribution, acceptance, compliance, security and merchant connectivity — and Visa and Mastercard can provide that infrastructure.

That does not mean there is no risk.

There is risk.

But I do not think this is a clean “old rails die, new rails win” situation.

Payments rarely work that way.

The more likely outcome is that new payment technologies get absorbed into the existing financial ecosystem.

That has happened before.

Investors once worried that PayPal would disrupt Visa and Mastercard.
Then they worried about Apple Pay.
Then they worried about buy now, pay later.
Now they are worried about stablecoins.

But historically, Visa and Mastercard have not been easy to replace.

They have adapted.

And so far, the numbers still suggest these businesses are growing, not breaking.

The Fundamentals Are Still Excellent

This is where the current market narrative starts to look disconnected from reality.

If Visa and Mastercard were truly being disrupted today, I would expect to see weakness in the numbers.

But that is not what we are seeing.

Visa’s latest quarter was strong.

Revenue came in at around $11.2 billion, up 17% year over year.
Non-GAAP EPS came in at $3.31, up 20% year over year.
Payments volume grew 9%.
Cross-border volume, excluding intra-Europe, grew 11%.
Processed transactions grew 9%.

That is not what a broken payment network looks like.

Even more importantly, Visa’s payment volume growth actually accelerated from Q1 to Q2.

US credit improved.
US debit improved.
International payment volume remained strong.

And Visa now has around 5.1 billion cards, up approximately 6% year over year.

So despite all the disruption fears, the network is still expanding.

Mastercard was also strong.

Net revenue grew 16%.
Adjusted operating income grew 19%.
Adjusted diluted EPS grew 23%.
Adjusted operating margin was above 60%.

Again, these are not normal numbers.

Most companies would dream of this financial profile.

But the most interesting part of Mastercard’s results was its Value-Added Services and Solutions segment, which grew 22%.

That matters because Mastercard is no longer just a card network.

It is building a wider ecosystem around:

• fraud prevention

• data analytics

• cyber security

• identity

• open banking

• consulting

• and now stablecoin infrastructure

That makes the business model more diversified than many investors realise.

These Are Still Global Toll Roads

The reason I have always liked Visa and Mastercard is because they behave like toll roads on global commerce.

They do not lend money to consumers.
They do not take the same credit risk as banks.
They do not need to own huge physical infrastructure.
They simply sit in the middle of a global transaction network and take a small fee as money moves.

That is a beautiful business model.

Mastercard converts around $8.4 billion of revenue into roughly $4.9 billion of operating profit.

Visa converts around $11.2 billion of revenue into roughly $7.2 billion of operating profit.

These are extremely high-margin businesses.

Visa operates around the high-60% operating margin level.
Mastercard operates around the high-50s to 60% range.

That is why the stocks rarely look cheap.

Investors are not just paying for growth.
They are paying for growth with exceptional profitability.

And the long-term transaction data still looks healthy.

From 2012 to 2025, Mastercard’s annual transaction volume increased by around 191%.
Visa’s increased by around 165%.

The bear case requires a meaningful slowdown in the core payment network.

So far, the long-term trend is still up and to the right.

The Real Question

The entire debate comes down to one question:

Can the world build alternative payment rails fast enough to weaken Visa and Mastercard?

Or will Visa and Mastercard simply connect themselves to the new rails and continue taking a fee?

That second outcome is the one I think the market may be underestimating.

Because Visa and Mastercard have a long history of adapting to threats.

They did not get destroyed by PayPal.
They did not get destroyed by Apple Pay.
They did not get destroyed by fintech wallets.
They did not get destroyed by buy now, pay later.

In many cases, these “disruptors” actually increased digital payment volume and strengthened the overall ecosystem.

That is the key point.

New payment methods do not automatically hurt Visa and Mastercard.

Sometimes they expand the market.

The world is still moving away from cash.
More commerce is becoming digital.
More transactions are happening online.
More money is moving across borders.
More businesses need fraud prevention, security, identity and compliance.

That is still a very attractive backdrop.

Institutional Investors Are Not Running Away

Another interesting part of the current setup is institutional ownership.

Visa has more than 82% institutional ownership.

Mastercard has around 97% institutional ownership.

That does not mean the stocks cannot fall.
It does not mean institutions are always right.
And it does not mean investors should blindly copy them.

But it does suggest these are not abandoned, dying businesses.

The super-investor data is also interesting.

Around 28 super investors hold Visa.

Around 21 super investors hold Mastercard.

Over the last two quarters, 22 super investors added to Visa, while 10 added to Mastercard.

Again, this does not prove Visa is better.

But it does show that sophisticated investors are still interested in these names despite the headlines.

It is also worth noting that Berkshire Hathaway has reportedly sold out of both Visa and Mastercard.

That is worth paying attention to.

But I would not overreact to it either.

Berkshire has been trimming and reshaping parts of its portfolio for a while. A sale by Berkshire does not automatically mean the long-term thesis is broken.

What matters more to me is whether the businesses themselves are weakening.

And right now, I do not see that in the numbers.

The Valuation Is Finally Interesting

Visa and Mastercard are rarely “cheap” in the traditional sense.

These are premium businesses.
Premium businesses usually trade at premium valuations.

So the goal is not necessarily to buy them at deep value multiples.

The goal is to buy them when the market is temporarily worried enough to offer a reasonable entry point.

And today, I think we are closer to that kind of setup.

Visa trades at a forward P/E of around 24x, compared to its 5-year average of roughly 27x.

So Visa is not screaming cheap.

But for Visa, this is clearly cheaper than normal.

Mastercard looks even more interesting from a relative valuation perspective.

It trades at a forward P/E of around 24x, compared to its 5-year average of roughly 32x.

That means Mastercard is trading at a much bigger discount to its own history.

This is where the comparison gets interesting.

Visa looks safer.
Mastercard looks more discounted.

Visa has the cleaner balance sheet.
Mastercard has the stronger growth profile.

Visa has slightly better defensive characteristics.
Mastercard may have more upside if sentiment recovers.

That is why I like both.

But if I had to pick one today, the answer becomes more nuanced.

Paid Subscribers: My Fair Value Estimates, Buy Prices and Final Ranking

The rest of this article includes my updated valuation work, including:

• my fair value estimate for Visa

• my fair value estimate for Mastercard

• the implied margin of safety for both stocks

• the reverse DCF expectations

• which one I would buy first today

• and how I would rank them inside a long-term portfolio

Paid members also get access to the full research archive, including last month’s May Best Stocks to Buy edition. The full June edition goes live on Monday morning.

👉 Read last month’s May Best Stocks to Buy edition here:

That spreadsheet will screen the market for the best mix of quality, valuation, risk and income and highlight the stocks that currently look most attractive based on my models.

This Visa and Mastercard setup is exactly the type of situation I like to look for:

elite businesses, scary headlines, strong fundamentals, and a market that may be overreacting.

Read more

The market has been strong again.

After a difficult stretch earlier in the year, the S&P 500 has continued to recover, and the recent winning streak has been hard to ignore.

The interesting part is that this rally has happened even while bond yields have moved higher.

That matters.

Higher yields do not automatically kill a bull market, but they do raise the bar for equities. When investors can earn a reasonable return from cash or short-term bonds, they become less willing to pay any price for future earnings.

That is why valuation discipline becomes more important after a rally, not less important.

The 10-year Treasury yield is once again testing the upper end of its recent range. That does not mean stocks have to fall tomorrow, but it does mean investors should be more selective.

This is the environment where I do not want to blindly chase the index.

At the same time, I also do not want to sit completely in cash just because the market has already moved higher.

I prefer a third option:

update the numbers.

Because even when the broad market looks expensive, individual stocks can still be mispriced.

That is especially true when leadership is narrow, sentiment has improved, and investors are paying very different prices for different parts of the market.

The valuation gap is important.

Large-cap indexes are not exactly cheap. But beneath the surface, there are still individual companies trading at more reasonable valuations, especially outside the most crowded parts of the market.

That is what I wanted to test this week.

So I went back through my valuation models and screened for dividend-paying companies where the market price still sits below my estimate of fair value.

I was not just looking for the highest theoretical upside.

A cheap-looking stock is not automatically attractive.

I wanted companies where the valuation, dividend profile, cash flow picture, and business quality still made sense together.

For this article, I focused on companies where my model showed:

• a clear discount to fair value

• dividend support through either dividend history or dividend modelling

• a business that can plausibly recover without needing a perfect macro backdrop

• enough upside to justify deeper research

In total, five dividend-paying stocks passed the screen.

Paid subscribers will get the full list, fair value estimates, buy zones, and my ranking below. But first, I want to walk through one example for free readers.

The results were interesting.

One stock had the highest upside in the model, but also the most execution risk.

Two looked like stronger quality/value setups.

One was more of a cyclical turnaround idea.

And one was a lower-upside dividend compounder that I think is a useful free example.

That stock is AbbVie.

I’m choosing AbbVie as the free example because it is not the most explosive name in the screen. It is not the highest-upside stock, and it is not the cheapest.

But it is a good example of how I think about valuation.

The remaining four stocks, including the highest-upside name in the model, are included for paid subscribers below.

AbbVie: A Lower-Upside, Higher-Confidence Dividend Setup

AbbVie is not the cheapest stock in this screen.

It is also not the highest-upside name.

But that is exactly why I think it is useful to discuss before the paywall.

My valuation model estimates AbbVie’s intrinsic value at around $251.59, compared with a recent market price of around $215.

That suggests a margin of safety of roughly 14.5%.

For a deep-value stock, that would not be enough.

But AbbVie is not really a deep-value situation.

This is more of a dividend compounder trading at a reasonable discount to my estimate of fair value.

The valuation is also supported by multiple approaches.

My discounted cash flow model gives a valuation of around $247.07.

The dividend discount model gives a value of around $242.20.

The multiples valuation comes in at around $251.19, while Graham’s valuation is higher at around $265.88.

The exact number is not the point.

The important part is that several valuation methods are pointing in a similar direction.

That does not make AbbVie an automatic buy, but it does make the setup more interesting.

At a recent price of around $215, AbbVie trades on a forward P/E of roughly 15x, with a forward dividend yield of around 3.2%.

That is not screaming bargain territory.

But it also does not look expensive for a profitable, large-cap pharmaceutical company with a meaningful dividend.

The key debate with AbbVie is still the same one investors have been wrestling with for years:

Can the company move beyond Humira?

Humira was a monster drug, and the loss of exclusivity created a real earnings challenge.

That concern was valid.

But the market also knew this was coming. The question today is not whether Humira declines. It already has.

The question is whether AbbVie’s newer portfolio, pipeline, and cash flow can support the next phase of growth.

That is where the setup becomes more interesting.

The headline growth grade may look weak, but the underlying metrics are more mixed.

Revenue growth remains positive, forward revenue growth is still respectable, EBITDA growth is strong, and forward EPS growth expectations are not bad.

That tells me the market may still be too focused on the old Humira story, while the actual business is moving through the transition.

Of course, this is not risk-free.

Pharma stocks always come with patent risk, pipeline risk, regulatory risk, and drug pricing pressure.

AbbVie also carries leverage, which is something I continue to watch closely.

Net debt to EBITDA has improved versus prior periods, but it is still not as low as I would ideally like.

That does not break the thesis.

But it does mean AbbVie needs to keep generating strong cash flow, supporting the dividend, and managing capital allocation carefully.

For me, the investment case is fairly simple.

AbbVie does not need to be a perfect company to be interesting.

It just needs to keep proving that the post-Humira business can grow, the dividend remains supported, and the valuation remains reasonable.

In my DCF model, I used an 8% discount rate, a 3% perpetual growth rate, and a long-term free cash flow growth assumption of around 8%.

Based on those assumptions, the DCF gives me an intrinsic value estimate of roughly $247 per share.

That is above the current market price, but not by enough for me to call this a screaming buy.

And that is exactly the point.

AbbVie is not the most exciting stock in the screen.

It is the balanced example.

It offers a dividend yield of around 3%, reasonable valuation support, and a business that may still be underestimated if the post-Humira portfolio continues to deliver.

But the margin of safety is not huge.

So I would still be disciplined on price.

For me, AbbVie is the kind of stock that could make sense for dividend investors who want quality and income, but do not want to rely on a full turnaround story.

The bigger question is whether any of the other four stocks offer a better risk/reward today.

And that is where the paid section begins.

For Paid Subscribers

AbbVie is the lower-upside, higher-confidence example from the screen.

But it was not the most mispriced stock my model found.

Below, I’ve included the full five-stock screen, including my fair value estimates, model upside, key risks, buy zones, and final ranking.

One of the remaining names is down more than 50% this year and still shows roughly 64% upside in my model.

Another has a pristine balance sheet, a dividend yield far above its historical average, and what I think may be the most attractive overall risk/reward setup in the screen.

But the raw upside number is not enough.

The real question is which stock has the best blend of valuation, dividend support, business quality, balance sheet strength, and realistic upside.

That is what I’ll break down below.

Read more

Sell in May? I’m Looking For High-Upside Stocks Instead

Every year around this time, investors hear the same phrase.

“Sell in May and go away.”

And to be fair, there is some historical evidence behind it.

The May to October period has historically delivered lower average returns than the November to April period. Since 1980, the S&P 500 total return index has produced an average return of around 8.4% between November and April, compared with around 4.6% between May and October.

But this is where investors need to be careful.

Lower average returns do not automatically mean investors should sell everything, move to cash, and try to time their way back in later.

Because that requires getting two very difficult decisions right.

First, when to sell.

Second, when to buy back in.

And history has shown repeatedly that most investors are not very good at timing either side.

So while I do think the market has had a strong move and could easily pause, consolidate, or become more volatile through the summer, I do not think “sell everything and go away” is a serious investment strategy.

Instead, I think the better approach is this:

Stay invested. Stay selective. And build a watchlist before volatility returns.

That is exactly what this month’s paid subscriber spreadsheet is designed to do.

The Market Is Strong - But Not Cheap Everywhere

One reason the “sell in May” discussion is getting louder is because the market has already had a very strong year.

The S&P 500 is up more than 8% year-to-date, and after the correction earlier this year, the rebound has been sharp.

This creates a difficult environment for investors.

On one hand, the index is back near highs.

On the other hand, the underlying market is not as simple as “everything is expensive.”

Some areas have run very hard. Some areas still look stretched. But other areas remain unloved, ignored, or priced for weaker outcomes than may actually happen.

That is why I do not think the correct question is simply:

“Should I sell?”

A better question is:

“Where is the market still mispricing future upside?”

That is the question I wanted to answer with this month’s high-upside screen.

Earnings Are Still Supporting The Market

The main reason I am not aggressively bearish here is that the move higher has not happened in a complete vacuum.

Earnings expectations have also been moving higher.

The S&P 500 has rallied alongside improving 2026 earnings forecasts, which suggests part of the market move is being supported by fundamentals rather than just sentiment or multiple expansion.

This matters.

If the market was rising while earnings expectations were collapsing, that would be a much more worrying setup.

But right now, the earnings picture remains relatively resilient.

The labour market has held up better than many expected. Consumers are still spending. Corporate earnings are still coming through. And in certain areas, especially technology, AI, semiconductors, energy, and materials, earnings expectations have actually improved.

That does not mean there are no risks.

It simply means the bearish case is not as obvious as saying:

“The market is near highs, therefore it must crash.”

Markets can be expensive and still move higher.

Markets can look stretched and still consolidate sideways.

And markets can be strong at the index level while still offering opportunities underneath the surface.

Oil Is A Risk - But The Market Is Not Pricing Permanent Panic

One of the biggest macro risks right now is oil.

Higher oil prices can put pressure on consumers, keep inflation stickier for longer, and make life harder for central banks.

But the important point is that the oil futures curve is not currently pricing oil staying extremely elevated forever.

The market appears to be pricing the recent oil spike as a risk, but not yet as a permanent shock.

That can change.

If oil remains higher for longer, inflation could become more stubborn, the consumer could weaken, and the Federal Reserve may have less room to cut rates.

But for now, markets seem to be looking through the risk because earnings remain solid and investors believe oil prices may moderate over time.

This is why I think the current setup requires balance.

Not blind bullishness.

Not panic selling.

Balance.

Sentiment Has Moved Back Into Greed

The other reason I would be more selective today is sentiment.

A few months ago, there was far more fear in the market. Those are usually the periods where the best opportunities appear.

Today, sentiment has recovered.

The Fear & Greed Index is back in greed territory.

That does not mean stocks must fall.

But it does mean the easy bargains are probably harder to find.

When sentiment is fearful, investors often get paid for buying quality businesses that are temporarily hated.

When sentiment is greedy, investors need to be much more disciplined.

That is why I do not want to chase the market blindly here.

I want to know which stocks still have potential upside, which sectors are still unloved, and which names may be worth researching if volatility creates a better entry point.

This Is Not A Market Where Everything Is Moving Together

The heatmap also tells an important story.

Some large technology and AI-related names continue to dominate attention. Energy has been strong. Healthcare has seen pockets of strength and weakness. Financials, industrials, consumer names, and software are all moving very differently.

This is not a market where every stock is cheap.

But it is also not a market where there are no opportunities.

That is why I think a structured screen can be useful.

Not because it tells us exactly what to buy.

But because it helps us narrow the market down into a more useful research list.

A good screen is not the final answer.

It is the starting point.

Earnings Season Can Still Create Opportunities

We also have another important week of earnings ahead.

There are several major companies reporting, including names across semiconductors, retail, software, consumer, healthcare, industrials, and technology.

This matters because earnings season often creates volatility.

Sometimes stocks fall because the long-term thesis has genuinely changed.

But other times, stocks fall because expectations were too high, guidance was misunderstood, or the market reacts emotionally to short-term noise.

That is where opportunity can appear.

The best time to build a watchlist is before volatility hits.

Because when a high-quality business suddenly drops, you do not want to start your research from zero.

You want to already know what you are looking for.

If you find this market update useful, please consider sharing it.

It helps more investors find the newsletter and allows me to keep building deeper research tools for subscribers.

The Better Question

So no, I do not think “sell in May and go away” is the right framework.

The better framework is:

What should I be preparing to buy if the market gives me a better opportunity?

That is the purpose of this month’s paid spreadsheet.

I screened hundreds of stocks for high-upside potential and then organised the results into a more useful research tool for paid subscribers.

The goal is not to say every stock on the list is a buy.

For paid subscribers, the full spreadsheet is available below - including the ranked Top 25 ideas, sector dashboard, risk flags, methodology, and complete high-upside stock screen.

Paid subscribers get access to the full May High-Upside Stock Screen, plus all future premium spreadsheets and weekly research.

If you want the full workbook and future paid research, you can upgrade below.

Read more

Earnings season has done something very important.

It has pulled the market’s attention away from the noise and back toward the numbers.

Over the past few weeks, investors have had plenty to worry about: geopolitical headlines, oil prices, inflation, interest rates, and whether central banks will be able to cut rates later this year.

But despite all of that, the market has continued to push higher.

The S&P 500 has continued to move higher, with investors refocusing on earnings and fundamentals.

That rebound matters.

Because when markets recover quickly, the easy question is:

“Is it too late?”

But I think the better question is:

“Which companies have actually earned the right to move higher?”

That distinction is important.

Some stocks are rising because sentiment has improved. Some are being pulled higher by sector momentum. Some are simply bouncing because the market has moved from fear back toward greed.

With sentiment moving back toward greed, selectivity matters more than ever.

And this is where investors need to be careful.

When markets are fearful, opportunity is often easier to find. But when sentiment improves and prices start moving higher again, selectivity becomes much more important.

At that point, I do not want to simply chase whatever is going up.

I want to focus on companies where the latest earnings report actually strengthened the long-term thesis.

And so far, this earnings season has given investors plenty to think about.

Corporate earnings have remained stronger than many expected, especially across large-cap technology and AI-related businesses. But it is not just the Magnificent 7 doing all the work. The rest of the market is also showing signs of improvement, even if the leadership remains uneven.

Earnings growth remains strongest among the largest technology companies, but the rest of the market is also showing improvement.

That is why this earnings season is so interesting.

The market is not just rewarding companies for beating expectations. It is rewarding companies that can show durable growth, improving margins, strong cash generation, and a credible path to future earnings power.

But even then, not every stock deserves to rally equally.

Some companies have delivered strong numbers but already trade at stretched valuations. Others have disappointed for good reason. And some are sitting in the middle: high-quality businesses where the latest results may have improved the long-term story, but the market may still not be fully pricing it in.

You can see that unevenness clearly across the market.

Recent market strength has been concentrated in certain areas, while other sectors remain much more mixed.

Semiconductors have been incredibly strong. Mega-cap technology continues to attract capital. But other areas of the market remain much more mixed, including financials, healthcare, energy, and parts of consumer defensive.

So this is not a market where I want to blindly buy everything.

Instead, I want to be more selective.

For me, the best opportunities after earnings usually come from companies where three things are true:

1. The latest numbers confirmed the long-term thesis.

2. The business showed durable growth, operating leverage, or strong cash generation.

3. The valuation still leaves enough upside to be interesting.

That is the focus of today’s article.

After going through recent results, three stocks stood out to me.

Not because they are risk-free. No stock ever is.

And not because the market has completely ignored them.

But because the latest numbers suggest the story may be stronger than the current valuation, sentiment, or investor debate implies.

Each company is very different. Each has a different risk profile. And each one, in my view, deserves a closer look after earnings.

Let’s get into the three stocks.

Read more

The market just delivered one of those rallies that makes investors uncomfortable.

Not because stocks went up.

But because they went up while the macro backdrop still looked messy.

Oil prices moved higher.

The Federal Reserve sounded more cautious.

Treasury yields rose.

War uncertainty remained in the background.

Europe’s economic sentiment weakened.

The UK consumer looked under pressure.

Japan dealt with currency volatility.

And central banks around the world continued to wrestle with the same problem:

Inflation is not fully defeated, but growth is not strong enough to ignore the risks either.

And yet the S&P 500 just staged a sharp V-shaped recovery, rising more than 10% in April.

That was its strongest monthly performance since 2020.

So the obvious question is simple:

Why is the market rallying when the macro backdrop still looks so uncomfortable?

I think the answer is equally simple.

Earnings are doing the heavy lifting.

That does not mean the risks have disappeared.

It does not mean oil, inflation, interest rates, or geopolitics no longer matter.

And it definitely does not mean every stock is attractive again after the rebound.

But it does mean something important.

The market is not necessarily being irrational.

It is responding to the fact that corporate profits are still stronger than many investors expected.

The rally makes sense.

But after a 10% move higher, the next phase becomes much harder.

The Rally Was Not Built on Perfect Macro Conditions

One mistake investors often make is assuming that a rising market means the world has suddenly become safer.

That is not what is happening here.

The macro backdrop is still full of contradictions.

Oil prices are being pulled higher by geopolitical risk and supply concerns.

That matters because higher energy prices can feed into inflation, pressure consumers, raise costs for companies, and make central banks more cautious.

The Fed is also not giving the market a clean green light.

For much of the past year, investors have wanted a simple story:

Inflation falls.

The economy holds up.

The Fed cuts rates.

Earnings rise.

Stocks go higher.

That is the perfect soft-landing script.

But the current environment is not that clean.

Inflation is still sticky.

Energy prices are uncertain.

The labour market has not weakened enough to force aggressive easing.

And policymakers do not sound desperate to cut rates just because equity investors want them to.

That matters because higher rates affect almost everything.

They affect valuation multiples.

They affect borrowing costs.

They affect corporate refinancing.

They affect housing.

They affect consumer credit.

They affect the relative appeal of stocks versus bonds.

So this is not a rally built on perfect macro conditions.

It is a rally happening despite imperfect macro conditions.

That distinction matters.

Because if the macro is not doing the heavy lifting, then something else has to be.

Right now, that something is earnings.

Earnings Are Winning the Tug of War

The market is currently being pulled in two different directions.

On one side, you have macro pressure:

Higher oil.

Sticky inflation.

A cautious Fed.

Geopolitical uncertainty.

Rising yields.

Uneven global growth.

On the other side, you have corporate fundamentals:

Better earnings.

Strong margins.

Resilient consumers.

Continued AI investment.

Healthy business spending.

Large companies still clearing expectations.

And for now, earnings are winning.

That is the key.

Investors may worry about oil.

They may worry about the Fed.

They may worry about geopolitics.

But if companies are still growing revenue, protecting margins, generating cash, and guiding reasonably well, the market has something to anchor itself to.

That is what we are seeing right now.

The economy is not perfect.

But it is not cracking either.

The consumer is slowing in places, but has not collapsed.

Business investment remains strong, especially in areas tied to artificial intelligence, cloud infrastructure, semiconductors, software, and data centres.

And many companies are still managing through a difficult environment better than feared.

That is why stocks have been able to climb through the noise.

Not because the noise does not matter.

But because earnings matter more.

At least for now.

AI Is Still the Engine — But the Market Is Becoming More Selective

The most important theme from this earnings season is not simply that AI remains powerful.

It is that investors are starting to become more selective about AI spending.

That is a very important shift.

For a while, the market was willing to reward almost anything connected to AI.

If a company mentioned AI, the stock could move.

If management increased AI investment, investors often treated it as a sign of ambition.

If a company built more infrastructure, the market assumed future growth would eventually justify it.

But we are now moving into a different phase.

The market is no longer asking:

“Are you spending on AI?”

It is asking:

“What return are you getting on that spending?”

That is the real change.

This is why the contrast between some of the major technology companies has been so important.

Investors rewarded companies where AI and cloud investment appeared to be translating into stronger demand, better positioning, and clearer business momentum.

But they punished companies where spending increased faster than visibility around monetisation.

That does not mean the punished businesses are suddenly broken.

Some of them remain among the highest-quality companies in the world.

But the market is sending a message:

AI spending is no longer automatically good enough.

Investors want evidence.

They want revenue.

They want margin leverage.

They want cash flow.

They want to know whether the capital being deployed today will create attractive returns tomorrow.

That is healthy.

Because the truth is simple:

AI capex will create enormous value for some companies and destroy value for others.

The winners will be the companies that turn investment into durable revenue growth, productivity advantages, margin expansion, or stronger competitive positions.

The losers will be the companies that spend aggressively because they feel forced to, but never earn enough on that spending to justify the capital deployed.

That distinction is going to matter more and more.

And I think it will be one of the defining investment themes of the next few years.

The Consumer Has Not Broken

Another reason the market has held up is that the consumer still looks more resilient than many expected.

This does not mean everything is perfect.

It does not mean lower-income consumers are not under pressure.

It does not mean higher energy prices will not eventually bite.

It does not mean discretionary spending is immune.

But there is a big difference between a consumer that is slowing and a consumer that is breaking.

Right now, the evidence still looks closer to slowing than breaking.

That distinction matters.

A slowing consumer can create valuation resets.

A broken consumer creates earnings resets.

And earnings resets are much more dangerous.

When the consumer slows, high-quality companies can still manage through the environment.

They can cut costs.

They can protect margins.

They can lean on pricing power.

They can keep investing.

They can continue compounding.

But if demand truly breaks, the entire earnings outlook changes.

So far, that is not what the market is seeing.

This is why investors have been willing to look through some of the macro noise.

The consumer is not perfect.

But the consumer is still alive.

And as long as that remains true, earnings have support.

The Fed Is Still the Main Risk

The bullish argument becomes more complicated when you look at interest rates.

Because while earnings are strong, the Fed is not providing the market with an easy path.

Markets love falling rates.

Lower rates usually support valuation multiples.

They reduce borrowing costs.

They make future cash flows more valuable.

They reduce pressure on consumers.

They make stocks look more attractive relative to bonds.

But the Fed is still dealing with inflation that is not fully back to target.

And higher oil prices make that job harder.

This is why the current setup is more fragile than it looks.

The market can handle higher rates when earnings are accelerating.

But it cannot easily handle the combination of:

Higher rates.

Higher oil.

Sticky inflation.

And earnings disappointment.

That is the risk.

Right now, earnings are strong enough to carry the market.

But if that changes, the macro risks investors are currently ignoring could suddenly become much harder to ignore.

That is why I do not think this is a market for blind optimism.

But I also do not think it is a market for blind pessimism.

The right approach is more balanced.

Constructive, but selective.

Optimistic, but valuation-aware.

Willing to buy quality, but not willing to chase everything.

The Global Picture Is Uneven

The US remains the centre of the earnings story, but the global picture is far less clean.

Europe is not collapsing, but sentiment has clearly weakened.

The region is still dealing with the pressure of higher energy prices, sluggish confidence, and central banks that cannot ignore inflation risk.

The UK has its own problems.

Rates remain restrictive.

Inflation is still above target.

And consumer-facing data continues to look weak.

That does not mean every UK stock is unattractive.

In fact, weaker sentiment can sometimes create opportunity.

But it does mean investors need to be careful about assuming the global recovery is broad and smooth.

Japan is facing a different problem.

The yen has been volatile, inflation expectations have moved higher, and the Bank of Japan is under pressure to continue normalising policy.

That creates a difficult environment because a weaker currency can support exporters, but sudden currency moves and higher rates can create volatility quickly.

China looks more mixed.

There are signs of strength in manufacturing, industrial profits, high-tech sectors, and areas tied to advanced production.

But the recovery is still uneven.

Domestic demand remains a question.

Policy support remains targeted.

And investors remain cautious.

So globally, the picture is not terrible.

But it is not clean either.

That is important.

Because when the global macro picture is uneven, the strongest opportunities tend to become more stock-specific.

This is not the type of environment where everything rises equally forever.

It is the type of environment where quality, valuation, balance sheet strength, and earnings durability matter more.

This Is No Longer a Simple Buy-the-Dip Market

A few weeks ago, the opportunity was clearer.

Sentiment was weaker.

Prices were lower.

Fear was higher.

Valuations had reset in several areas.

And investors were being paid more obviously to take risk.

But after a 10% rebound, the setup has changed.

The index has recovered a lot of ground.

Many obvious dips have already been bought.

Some stocks have moved quickly.

And expectations are no longer as low as they were.

That does not mean there are no opportunities.

There are always opportunities somewhere.

But the opportunity is no longer as simple as:

“Stocks fell, therefore buy.”

Now the questions need to be more precise.

Which companies still have earnings power the market is underestimating?

Which companies have durable cash flows that are not fully reflected in the valuation?

Which companies sold off because of temporary fear, not permanent damage?

Which companies are spending heavily but can actually generate strong returns on that spending?

Which companies can protect margins if inflation remains sticky?

Which companies can keep compounding even if rates stay higher for longer?

Those are the questions that matter now.

Because after a sharp rebound, valuation discipline matters more, not less.

The Biggest Mistake Investors Could Make Now

I think there are two obvious mistakes investors could make here.

The first mistake is becoming too bearish simply because the macro backdrop looks messy.

That sounds logical.

But it ignores the fact that earnings are still strong.

Markets do not need perfect conditions to rise.

They need conditions to be better than expected.

And right now, corporate profits are giving investors enough reason to stay constructive.

The second mistake is becoming too bullish simply because the market has rallied.

That is just as dangerous.

A rising market can make every stock look attractive.

It can make investors forget about valuation.

It can make weak companies look strong.

It can make temporary rebounds feel like permanent recoveries.

It can make people chase stocks after the risk/reward has already become less attractive.

That is why I think the correct stance today is not extreme bearishness or blind bullishness.

It is selective optimism.

Stay constructive where earnings support the valuation.

Stay disciplined where the market has already priced in too much good news.

And avoid companies where the narrative is running ahead of the numbers.

What This Market Is Really Telling Us

The message from the market is not:

“Everything is fine.”

And it is not:

“Everything is broken.”

The message is more nuanced than that.

Earnings are still strong enough to support equities.

AI investment remains a major growth engine.

The consumer has not collapsed.

Large companies are still clearing expectations.

And business investment is still supporting parts of the economy.

But the macro is getting messier.

Oil is higher.

Rates are not falling quickly.

Inflation is sticky.

Global growth is uneven.

Central banks are cautious.

And after a 10% rally, the market has less room for disappointment.

That is the real setup.

The rally makes sense.

But the easy money may already have been made.

From here, selectivity matters.

The Bottom Line

I do not think this is a market to be blindly bearish on.

The earnings backdrop is too strong for that.

But I also do not think this is a market where everything deserves to be chased.

The best opportunities are likely to be in companies where the market is still underestimating earnings durability, cash flow strength, balance sheet quality, or long-term return potential.

Not every stock that fell is attractive.

Not every valuation reset is an opportunity.

And not every company spending on AI will create value.

But this is exactly why the current market is interesting.

The index has bounced.

The headlines are noisy.

The macro is messy.

And underneath the surface, individual stocks are being repriced very differently.

That is where the work begins.

The market is no longer handing investors easy answers.

It is handing them contradictions.

Strong businesses with weak charts.

Good companies with compressed multiples.

Quality names with uncomfortable narratives.

Real risks mixed with emotional overreactions.

That is where stock picking becomes valuable.

And that is why, even after this rally, I still think there are opportunities for investors willing to be disciplined.

Not by chasing the broad market.

But by finding the companies where the fundamentals still look stronger than the sentiment.

Want the Stock List Behind This?

On Friday, I published my full May paid screen:

For that article, I screened 182 companies.

95 qualified under the valuation and quality framework.

And from there, I ranked the 10 highest-conviction opportunities based on:

• Valuation

• Business quality

• Balance sheet strength

• Downside risk

• Dividend strength

• Expected return

• Capital allocation potential

The key question was simple:

Where has the market confused short-term fear with long-term damage?

That paid article includes the full ranked list, fair value estimates, expected upside, quality scores, risk scores, income scores, allocation rankings, conviction tiers, and the downloadable May spreadsheet.

If You Found This Useful

If this helped you make sense of the market this week, the best way to support the work is to share or restack this article.

It helps more investors find the newsletter, and it tells me these market breakdowns are useful alongside the paid stock research.

The current market is noisy.

But noise also creates opportunity.

The goal is to stay calm, stay selective, and keep separating temporary fear from long-term damage.

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The market has a habit of doing this.

It takes a real concern…

And then prices it like a permanent impairment.

One spending increase becomes a broken thesis.

One margin question becomes a sector-wide reset.

One bad reaction after earnings becomes a reason to sell anything that looks even slightly uncomfortable.

That is where mispricing starts.

Not because the market is always wrong.

But because the market is often impatient.

This month, I screened 182 companies.

Only 95 qualified under the valuation and quality framework.

And from those, I ranked the 10 highest-conviction opportunities based on:

Valuation
Business quality
Balance sheet strength
Downside risk
Dividend strength
Expected return
Capital allocation potential

The question this month was simple:

Where is the market punishing the wrong stocks?

Not the cheapest stocks.

Not the biggest losers.

Not the most obvious dips.

But the companies where the fundamentals still look stronger than the sentiment.

Why May’s Screen Is Different

April was about broad valuation resets.

May is about earnings reactions, sector fatigue, and quality businesses trading below their normal valuation ranges.

That difference matters.

Over the past few weeks, the market has not simply rewarded companies for beating numbers.

It has punished anything that raises a harder question:

Can AI spending generate attractive returns?

Are software multiples still too high?

Is healthcare risk now fully priced in?

Are high-quality compounders finally becoming attractive again?

Is the market overreacting to temporary uncertainty?

That is the setup.

The market is not selling everything equally.

It is becoming more selective.

And selective markets create better stock-picking opportunities.

What Stood Out This Month

The biggest opportunities were not necessarily in the obvious places.

They appeared where investors are currently most uncomfortable.

1. Healthcare is still deeply out of favour

One of the highest-ranked areas in the May screen came from healthcare.

That matters.

This is a sector where the market has become much more cautious.

Investors are worried about:

Regulation
Pricing pressure
Competition
Medical cost trends
Political scrutiny
Whether previous valuation premiums were too optimistic

Those concerns are real.

But after the reset, the numbers look very different.

Several high-quality healthcare businesses now trade at valuations that imply a much more pessimistic future than their long-term fundamentals may justify.

That does not mean the risks have disappeared.

It means the price may finally be reflecting them.

And in some cases, possibly over-reflecting them.

2. Quality technology is being reset

Technology still appeared heavily in the screen.

But this month was not about chasing the most obvious AI names.

It was about quality technology businesses where the multiple has compressed sharply.

Some of these companies are still highly profitable.

Some have strong balance sheets.

Some continue to generate attractive free cash flow.

But the market is no longer willing to pay the same premium unless growth is obvious, margins are protected, and AI risk can be clearly explained.

That is exactly where the screen became interesting.

Not because every technology stock is attractive.

But because some quality businesses are being valued as if their long-term earnings power has permanently weakened.

3. Boring compounders are quietly becoming interesting again

Not every opportunity comes from a dramatic crash.

Some come from slow, quiet multiple compression.

These are the businesses that rarely dominate financial headlines.

They are often:

High-margin
Repeatable
Cash-generative
Asset-light
Disciplined with capital
Less exciting than the market’s favourite stories

They may not have the loudest narratives.

But when these companies move from premium valuations to more reasonable ones, long-term expected returns can improve quickly.

That was a clear pattern in this month’s results.

4. The highest upside was not always the highest ranking

This is important.

The ranking is not purely based on upside.

If it were, the list would simply reward the largest fair value gaps.

But that is not how I want to allocate capital.

The spreadsheet ranks companies using a blended allocation score:

40% valuation
35% quality
15% risk
10% income

That means a company needs more than just upside.

It also needs business quality, balance sheet resilience, dividend support, and downside protection.

That is why this month’s top 10 is not just a list of stocks that fell the most.

It is a mix of quality businesses where valuation, fundamentals, and risk/reward now look more interesting.

The Key Question

This month’s spreadsheet is not asking:

“What is down the most?”

It is asking:

“Where has the market confused short-term fear with long-term damage?”

That is a very different question.

A falling share price is not enough.

A lower multiple is not enough.

A stock being down 30%, 40%, or 50% does not automatically make it attractive.

Sometimes the market is right.

Sometimes the business is weaker.

Sometimes the old valuation was simply too high.

That is why the framework filters for quality first.

The best opportunities this month are the companies where:

The business still appears durable
The valuation has compressed
The balance sheet remains manageable
Free cash flow is still attractive
The market narrative has turned negative
And the long-term earnings power may be underappreciated

That is where expected returns can improve.

Inside the May Spreadsheet

The full May spreadsheet includes:

The complete ranked list
Fair value estimates
Expected upside
Bear case considerations
Quality scores
Valuation scores
Risk scores
Income scores
Allocation rankings
Conviction tiers
The full capital allocation framework

The goal is not to tell you to buy everything.

It is to show where the risk/reward looks most attractive after earnings season.

Because in this kind of market, discipline matters.

The market is giving investors more opportunities than it was a few months ago.

But it is also giving them more traps.

The spreadsheet is designed to help separate the two.

Below, I reveal the full ranked list, including the top 10 stocks, fair value estimates, expected upside, quality scores, risk scores, income scores, allocation rankings, and the full May spreadsheet.

Read more

Visa, Mastercard and American Express are often grouped together as “payment stocks.”

But that description undersells what these businesses really are.

And with Visa and Mastercard both reporting earnings this week, this comparison feels especially timely.

Investors are about to get a fresh look at payment volumes, cross-border spending, consumer resilience, margins, and whether these premium valuations are still justified.

But short-term earnings are only part of the story.

The bigger question is far more important:

If I could only buy one of these three payment giants today, which one offers the best mix of quality, future protection, valuation, dividend growth, and long-term market-beating potential?

At their best, these companies are not just exposed to consumer spending.

They sit underneath global commerce itself.

Every time someone taps a card, pays online, books a hotel, buys groceries, travels abroad, pays for software, or spends through a digital wallet, one of these networks can benefit.

That is what makes this group so powerful.

These are not ordinary financial companies. They are some of the most entrenched businesses in global payments, supported by scale, trust, acceptance, brand power, and the long-term shift away from cash.

And that long-term trend is still visible in the numbers.

Payment volumes have continued to climb over time, even through recessions, inflation shocks, rate cycles, and major changes in consumer behaviour.

That is the appeal of this group.

As more spending moves away from cash and into digital payment networks, Visa, Mastercard and American Express all have a structural tailwind behind them.

But here is where investors need to be careful.

One of the biggest mistakes investors can make is treating Visa, Mastercard and American Express as interchangeable businesses.

They are not.

Visa and Mastercard are open-loop payment networks. They sit between banks, merchants and consumers, processing enormous transaction volumes without taking the same direct lending risk as a card issuer.

American Express is different.

Amex operates a closed-loop model, meaning it acts as the network, the issuer, and the relationship owner. That gives American Express more control over the customer relationship, especially with affluent consumers, but it also gives the business more exposure to credit cycles, lending risk, and consumer stress.

That difference matters.

Visa and Mastercard often look more like global toll roads than traditional financial companies. They benefit from scale, network effects, and high incremental margins, without carrying the same balance-sheet risk as a lender.

That is why their profitability profile is so exceptional.

Very few businesses can sustain margins like this over long periods of time.

And that is exactly why Visa and Mastercard usually trade at premium valuations.

The market knows these are exceptional businesses.

American Express is different again.

It does not have the same pure toll-road model as Visa or Mastercard, but it does have a powerful premium brand, a loyal customer base, and a closed-loop network that gives it deeper insight into both cardholders and merchants.

That can be a real advantage.

But it also means the stock needs to be judged differently.

So this comparison is not simply about asking which company is “best.”

A great business can still be a poor investment if too much optimism is already priced in.

And a cheaper stock can still be a value trap if the market is correctly discounting higher risk.

That is why I wanted to compare Visa, Mastercard and American Express through the lens that actually matters for investors today:

• Business quality

• Future protection

• Downside and recession risk

• Dividend growth potential

• Current valuation

• Potential to outperform the S&P 500 over the next decade

Each company has a different strength.

Visa may be the safest and most predictable.

Mastercard may be the strongest long-term compounder.

American Express may look like the obvious bargain.

But once I adjusted for business model, credit exposure, valuation, dividend growth and downside risk, only one stood out as the stock I would be most willing to buy today.

Paid members get the full ranking, valuation breakdown, buy zones, downside risks, and my top pick today.

Read more

A few weeks ago, the market looked like it was pricing in something much worse.

Oil was surging.
Geopolitical risk was spiking.
Investors were de-risking fast.
And for a brief moment, it felt like the market was starting to brace for a much uglier outcome.

Now the mood has flipped.

The S&P 500 has ripped back toward record highs. Oil has cooled off. Bond yields have steadied. And sentiment has recovered quickly enough that fear is already starting to give way to something closer to optimism again.

That is a big shift in a short period of time.

But under the surface, the picture is less clean than the headline indexes make it seem.

The broader market has recovered sharply, but plenty of individual stocks have not. A surprising number are still sitting near 52-week lows, even as the index pushes higher and investors start looking ahead to the next phase of the rally.

That matters now, because the market is entering a new test.

The panic phase was driven by headlines.
The next phase will be driven by earnings.

Over the next few weeks, investors are going to find out which companies were merely caught in the volatility… and which ones are actually facing weaker fundamentals, weaker demand, or a lower earnings power than the market used to assume.

That distinction matters.

Stocks at 52-week lows often look cheap on the surface. But low prices alone do not create value. In many cases, the market is simply correcting for weaker growth, weaker margins, or a business that deserves a lower multiple than it once had.

That is why I did not want to rely on price alone.

Instead, I re-ran the valuation work on a basket of stocks trading near 52-week lows, using a DCF-based framework to see which names still offered a real margin of safety - and which ones only looked cheap because the market had already priced in a weaker future.

Most did not make the cut.

Only two did.

Why most 52-week lows fail the test

A stock trading near a 52-week low can look tempting.

The price is down.
The chart looks ugly.
Sentiment is weak.
And that is often enough to make investors assume they are looking at value.

Sometimes they are.

But very often, they are not.

A stock does not become cheap just because it has fallen. In many cases, the decline is simply the market adjusting to a weaker reality - slower growth, lower margins, weaker guidance, rising competition, or a business that no longer deserves the multiple investors once gave it.

That is where a lot of people get caught.

They see the drawdown.
They anchor to the old high.
And they mistake a lower price for a better opportunity.

But the old high is not what matters.

What matters is what the business is worth today based on the cash it can generate going forward.

That is why I did not want to build this list around price action alone. I wanted to know which of these 52-week low stocks still offered enough upside based on future cash flows - and which ones only looked attractive because the market had already repriced them lower.

So I ran them through a DCF-based process.

Not as a perfect tool, because no valuation model is. But as a way to force discipline.

For each company, the key question was simple: does the current price still leave enough room for a compelling return, even under assumptions that are not overly generous?

That matters even more right now.

Because with earnings season underway, the market is about to become much less forgiving. Stocks that are already weak will need to show real resilience to stop sliding. And if they cannot, being near a 52-week low today may end up meaning very little.

That is why this screen was useful.

It helped separate the names that are merely down… from the names that may actually be undervalued.

The framework I used

There is no perfect way to value a stock.

A DCF is not a magic answer. Change the assumptions, and the output changes with them. But that is also exactly why it is useful. It forces you to be explicit about what has to happen for a stock to be worth buying.

For this screen, I was not trying to find the stocks with the biggest drawdowns or the most dramatic charts. I wanted to find the names where the current price still looked attractive relative to a realistic range of future cash flows.

So the process was built around a few simple questions.

1. Is the business still high quality?

The first filter was not valuation. It was quality.

If a company is near a 52-week low because the business itself is weakening, the lower price may not be an opportunity at all. It may just be the market catching up to a worse reality.

So I wanted businesses that still showed signs of durability - strong market position, healthy margins, resilient demand, and a model that can continue compounding over time.

2. Are the growth assumptions still believable?

This is where a lot of “cheap” stocks fall apart.

A stock can look optically inexpensive if investors are still anchoring to old expectations. But if the future growth path is now lower, the fair value is lower too.

So for each company, the key question was not whether it used to deserve a higher price. It was whether reasonable forward assumptions still supported upside from here.

3. Is the valuation leaving enough room for error?

This is the margin-of-safety test.

Even if the business is solid, that does not automatically make the stock a buy. The current price still has to leave enough room for decent returns without relying on perfect execution.

That is especially important in this kind of market. When sentiment swings quickly and earnings matter more, I do not want a valuation that only works if everything goes right.

4. Is the downside understandable and survivable?

Some stocks are at 52-week lows because the market is overreacting.

Others are there because the risks are real.

So I also wanted to understand what was actually driving the weakness. Was this mainly sentiment? A temporary slowdown? A margin reset? Or something more structural?

If the downside case looked too open-ended, or the business needed too many things to go right to recover, that was usually enough to move on.

5. Would I still want to own it if the recovery takes time?

This matters more than people think.

A stock near a 52-week low does not have to bounce quickly to be a good investment. But if the thesis only works on the assumption of a fast rerating, it is probably not a very strong thesis.

The names that stood out were the ones where I could still make the case even if the market stayed cautious for a while.

What this process was really designed to do

At a high level, this was not a hunt for the most beaten-down stocks.

It was a hunt for the mispriced ones.

That is a very different exercise.

A large drawdown can create opportunity. It can also create noise. And when a stock is sitting near a 52-week low, the easiest mistake is to assume the discount is the opportunity.

Sometimes it is.

But often, the market is simply telling you that the business, the expectations, or the valuation had to reset.

This framework was my way of filtering that out.

Because the goal was not to find stocks that looked cheap compared with where they used to trade.

It was to find stocks that still looked attractive based on what they can realistically earn from here.

Once I put the list through that lens, the field narrowed quickly.

A stock that failed the test: Novo Nordisk

Novo Nordisk looked tempting at first glance.

The stock is near its 52-week low.

Its forward P/E has compressed to about 12x, far below its five-year average of roughly 30x. Its dividend yield has jumped to around 4.6%, which is also well above normal.

That is exactly the kind of setup that can pull investors in.

But when I ran the DCF, the story changed.

My intrinsic value came out at roughly $39.37, versus a market price around $40, leaving a negative margin of safety of about 1.6%. Even the implied upside to the Wall Street target was only around 8%.

So while Novo looked much cheaper than usual, it still did not look cheap enough.

That is the difference between a stock being down a lot and a stock being undervalued.

Novo may recover over time. But for this list, it did not offer enough valuation support to make the final cut.

A stock that came close, but still did not make the cut: Medtronic

Unlike Novo Nordisk, Medtronic did not fail because it still looked outright overvalued on my numbers.

If anything, the stock looked roughly fairly valued to modestly undervalued, with my DCF pointing to value in the high $80s to low $90s against a share price around $86.

But that was also the problem.

For this list, I was not looking for stocks that merely looked reasonable. I was looking for names where the valuation itself created a more obvious opportunity.

And Medtronic did not quite get there.

The forward P/E and dividend yield also sit close to their historical norms, which makes this look less like a market overreaction and more like a stock trading in a range that is broadly understandable. There may be upside from here, and the Wall Street target suggests as much, but the valuation discount was not wide enough for me to put it in the top tier.

So Medtronic was not a clear reject in the same way as Novo Nordisk.

It was more of a near miss.

A stock I could understand owning, but not one that stood out enough to make my final cut when I was specifically looking for the strongest opportunities near 52-week lows.

That was the pattern across much of the list.

Some stocks looked cheaper than usual, but still not cheap enough. Others were solid businesses, but the valuation discount was too thin to make them stand out. And a few simply needed too much to go right.

In the end, only two names offered the combination I was looking for:

• a business I still wanted to own

• assumptions I could reasonably defend

• and a valuation that left enough room for upside from here

Here are the two names that still offered the combination of quality and valuation support I was looking for.

Read more

S&P 500 Performance in April so far

Markets have already bounced.

That usually convinces investors the opportunity is gone.

Often, it is.

Broad selloffs create broad discounts at first. But once the rebound begins, the market stops rewarding everything equally. The easy upside disappears quickly. What remains is narrower, more selective, and often far more interesting.

That is the setup this month.

The S&P 500 has recovered sharply from its recent lows, and sentiment has improved across several parts of the market. But even after that rebound, a small group of large-cap companies still trade at meaningful discounts to consensus value.

This report focuses on those remaining gaps.

Not where prices have already recovered, but where valuation still appears disconnected from business quality, earnings power, and long-term upside.

Large-cap opportunities rarely stay obvious for long.

Once markets stabilize, the broad repricing phase ends. What remains is a narrower group of companies where the valuation reset has not fully reversed despite durable fundamentals, strong cash generation, and analyst expectations that still point materially higher.

Rather than chasing what has already bounced hardest, this report isolates the remaining S&P 500 names where upside still appears asymmetric relative to downside risk.

This Month’s Screening Framework

To identify those opportunities, I screened the S&P 500 for large-cap companies meeting the following criteria:

• Market capitalisation above $10B

• Minimum 20% projected 12-month upside

• Analyst consensus of Moderate Buy or Strong Buy

• Durable underlying business quality

• Balance sheet and cash flow profile strong enough to support real capital allocation

After applying those filters, 500 companies were screened.

From those, 58 qualified.

That matters.

In a broad selloff, many stocks can look optically cheap. After a rebound, far fewer still do. That makes this month’s list more selective and, in many cases, more actionable.

Some names have already seen their valuation gaps close. Others have not. In several cases, the market appears to have moved on faster than the fundamentals have changed.

Those are the opportunities this report aims to isolate.

April at a Glance

• Companies screened: 500

• Final qualifying stocks: 58

• Minimum projected upside: 20%

• Universe: S&P 500, market caps above $10B

• Objective: identify large-cap companies where valuation, quality, and forward upside still diverge meaningfully even after the rebound

From the final qualifying group, a smaller subset stands out most clearly based on:

• valuation support

• business durability

• analyst alignment

• risk-adjusted upside

• downside support from current levels

Five stand out most clearly this month.

They are ranked based on:

• Upside potential

• Business quality

• Valuation compression

• Downside support levels

• How actionable the setup still looks after the recent rebound

The companies below represent the clearest remaining opportunities currently screening in the S&P 500.

This Month’s Top 5 High-Upside S&P 500 Stocks

Several names have already bounced sharply from the lows.

These five still stand out because the upside has not fully closed.

The lower-ranked names are interesting.

The top-ranked names still look actionable.

#5 — Newmont Corporation (NEM)

Newmont stands out this month for a different reason than the other names on this list.

The opportunity here is not being driven by a high-growth technology narrative or a temporary sentiment reset around software or financials.

Instead, it comes from a large-cap, cash-generative business where the market still appears to be underestimating the combination of earnings power, margin strength, and valuation support.

That makes Newmont one of the more interesting remaining setups in the screen.

What the Market Is Pricing In

At current levels, investors still appear cautious on the broader gold and mining complex.

That hesitation is understandable.

Mining businesses are cyclical, operationally intensive, and often treated as lower-quality opportunities than asset-light compounders. They also tend to screen cheaply for a reason when commodity expectations are unstable.

But Newmont’s current setup looks stronger than that broad market perception suggests.

The company remains the clear scale leader in the space, and the underlying financial profile has improved materially.

Valuation Context

Even after the recent rebound, Newmont still trades at a notable discount to its own historical valuation.

Its forward P/E currently sits around 12.2x, versus a 5-year average closer to 15.9x.

That matters.

Because while the stock has recovered from earlier weakness, the market is still valuing the business below its normal earnings multiple despite a much stronger profitability backdrop than investors typically associate with the sector.