Behind the video
4 Insanely Cheap Stocks to Buy Now
Overall Thesis
Four undervalued stocks (Adobe, MGM Resorts, Dick Sporting Goods, and Lyft) offer compelling value opportunities despite the broader market trading at historically expensive valuations of 30x earnings.
Narratives
ADBEAdobeTravis views Adobe as undervalued given accelerating revenue growth, aggressive share buybacks, and a low forward P/E despite leadership transition uncertainty. He believes the risk-reward is attractive because the market is focused on short-term AI disruption fears rather than the company's improving fundamentals.
Key Arguments
- Forward P/E of about 11 and forward price-to-free-cash-flow of about 11 despite double-digit revenue growth
- Revenue growth is accelerating (10-12%) rather than slowing despite AI disruption fears
- Management is buying back significant stock (9-11 billion annually), reducing share count and boosting EPS
- Company is much bigger and more powerful than during its prior SAS transition a decade ago
Risks acknowledged
- CEO stepping down with uncertainty over new leadership and strategy
- Margins may compress as they expand into lower-cost products like pay-as-you-go AI offerings
- Potential disruption risk from cheaper competitors like Canva
Predictions (1)
"I think the risk-reward here is much more attractive than it was at that point for Adobe."
MGMMGM ResortsTravis holds MGM in his portfolio and describes it as a cash flow machine trading at only about 7x free cash flow, driven by heavy share buybacks and future upside from the MGM Japan resort opening in 2030. He believes the market has not yet priced in the potential scale of the Japan opportunity.
Key Arguments
- Trading at about 7x price-to-free-cash-flow, a very low multiple
- Company has bought back 10-15% of shares outstanding annually
- MGM Japan in Osaka could become one of the most profitable casino properties in the world when it opens in 2030
- Las Vegas and China revenue have recovered well above pre-pandemic levels
Risks acknowledged
- Las Vegas Strip revenue has been cyclical and peaked over a year ago
- Enterprise value includes lease obligations making debt appear larger than it is
DKSDick's Sporting GoodsTravis views the recent 44% share price decline as an overreaction to industry-wide softness and the Foot Locker acquisition drag, arguing the forward P/E of about 11 offers an attractive entry point. He believes Dick's dominant retail niche positioning will endure despite near-term margin pressure.
Key Arguments
- Forward P/E of about 11 after a roughly 44% share price decline
- 10-year revenue compound annual growth rate of about 11%
- Company has consolidated a dominant niche position in sporting goods retail
- Operating profit remains about $1.2 billion despite margin decline
Risks acknowledged
- Foot Locker acquisition is a margin headwind and closing stores
- Industry-wide slowdown in consumer demand for sporting goods, seen also at Deckers and On Holding
- Company has had to discount products due to changing consumer tastes
Predictions (1)
SPYS&P 500Travis notes the S&P 500 is trading near 30 times earnings, a historically expensive level for a non-recessionary period, which is his framing for why he is seeking individual undervalued stocks instead. This is presented as market context rather than a directional trading call on the index itself.
Key Arguments
- S&P 500 trades near 30x earnings despite weak real GDP growth and rising interest rates
- High overall market valuation is prompting a search for individually undervalued stocks
LYFTLyftTravis calls Lyft one of his favorite overlooked value stocks, trading at only about 5.5x forward free cash flow, arguing fears about autonomous vehicle disruption are overblown given steady growth in rides and bookings. He sees Lyft benefiting from partnerships like Waymo and views even an acquisition as a favorable worst-case outcome.
Key Arguments
- Forward price-to-free-cash-flow of about 5.5x, a very cheap valuation
- Gross bookings and rider counts continue to grow steadily despite AV competition fears
- Declining diluted share count from buybacks should boost long-term EPS
- Partnership with Waymo positions Lyft well as an aggregator of autonomous ride demand
Risks acknowledged
- Market worried Lyft will be left behind as autonomous vehicles like Waymo and Tesla scale
Predictions (1)
Hedges & Caveats
- Market is historically expensive at 30x earnings in a non-recessionary period
- Real GDP growth is extremely weak and interest rates are rising
- Adobe faces transition risks and leadership uncertainty with CEO search
- Author acknowledges not trying to 'bottom tick' these companies
- Valuations were better approximately 2 months prior to video
- Video is sponsored by Fiscal AI (potential bias disclosure)