Managing Editor’s Note: Picking up where we left off yesterday, we turn again to Near Future Report senior analyst Nick Rokke.
Yesterday, Nick explained the truth about the tariffs, what’s going on with stocks right now, and how this environment is a sort of blessing in disguise for those who see the current situation for what it actually is – an opportunity for smart investors to go bargain shopping.
Today, he highlights a few of those opportunities – stocks that could deliver outsized returns as the market stabilizes and moves higher…
We’re staring at a once-in-a-decade opportunity to buy some of the best businesses in the world at fire-sale prices.
It doesn’t feel like it, though. And that’s precisely why this opportunity exists.
Investor sentiment is at rock-bottom levels right now. And when fear grips the market, most investors do the exact opposite of what they should be doing – they sell in panic instead of buying great companies at deep discounts.
But this is exactly the time to do precisely that.
If everyone was confident in a positive outcome, stocks would have already priced it in – and the profit opportunity wouldn’t exist. Recognizing opportunities before the rest of the market is one of the very best ways to improve portfolio returns and get ahead.
My colleague, Ben Lilly, highlighted this last week. He showed how investor sentiment is hitting multi-decade lows – levels we’ve only seen twice in the last 20 years. Here’s what he wrote…
Below is a chart showing the percentage of bearish responses to the American Association of Individual Investors Sentiment Survey. The survey is given to individual investors and asks their thoughts on where the market is heading in the next six months. They’ve been conducting it since 1987.
The survey shows that 60% of investors are bearish on the market.
And there have been only two other periods when sentiment was worse than what we see right now.
Those two periods were September 2022 and March 2009.
Less than a year after both those periods, the S&P 500 index went up as much as 67% and 28%. And two years after the September 2022 date, the index was up 60%.
These are the exact moments Warren Buffett was talking about when he said, “Be fearful when others are greedy, and greedy when others are fearful.”
And this is an approach that we use here at Brownstone Research. We don’t sell into the short-term panics. We take advantage of them.
Back in 2022, as markets were in freefall, the panic was palpable. Meta (then known as Facebook) had been beaten down to multi-year lows.
After a disastrous earnings report in October 2022, the stock fell below $100 per share.
At the time Jeff told Near Future Report readers to not sell the fear. Jeff said…
The downside, the move in Meta Networks (aka Facebook) has been swift and sudden. I have no doubt many of us are feeling the pain. I have to say that I didn’t expect such a drastic move from a company with a business as great as Facebook’s.
But here we are, holding on to our shares. And it begs the question: Should we cut our losses and walk away?
I want to express that now is NOT the time to sell.
Facebook still has growth if we look three years out. And it’s still generating consistent gross margins near 80%. So this is a very profitable company.
And Meta is trading 1.8 times next year’s revenues and only 4.3 times 2023 EBITDA. I’ve never seen a company as profitable as Facebook that’s still growing and trading so cheaply as it is now.
That call turned out to be one of the best buying opportunities of the decade. Since then, Meta has rebounded 560%.
We are in another one of those rare moments right now. The market is full of bargains. Many individual stocks are down 20%, 30%, or even 50%.
And some of the best companies with the best growth prospects are trading at valuations we haven’t seen in years.
This is the time to position ourselves for the next bull run.
To show what I mean, let’s look at the king of AI – NVIDIA (NVDA).
The skeptics have been saying for years that NVDA is overvalued. And after a 10-month price consolidation, they’ve doubled down, pointing to the stock’s lack of movement as proof they’re right.
But they’re missing the bigger picture.
All this consolidation has done is allow NVIDIA’s fundamentals to catch up to its stock price.
Look at this chart below: NVIDIA’s price-to-free cash flow (P/FCF) ratio (shown in yellow) has dropped nearly 50% in this period. That means its valuation has come down dramatically – setting the stage for the next leg higher.
The last two times NVIDIA’s P/FCF ratio hit these levels, the stock went on an absolute tear, gaining 107% and 308% respectively.
And today, we are at similar valuation levels.
Right now, NVIDIA’s P/FCF sits at 48x. The so-called “value investors” may claim that’s too high. But here’s what they don’t tell you: NVIDIA is trading at just 29x this year’s projected FCF. And 22x the FCF the following year.
That’s not expensive at all for a company that’s the building block of the largest technology trend of this generation.
And NVIDIA’s growth isn’t slowing down.
Just last week, reports surfaced that Elon Musk wants to upgrade his AI supercomputer from 200,000 GPUs to 1 million GPUs by the end of this year.
Last year, Jeff made a bold prediction that because of Elon Musk and his team at xAI’s technological approach to AI, Grok 3, when released, would become the highest-performance frontier AI model in the industry. He has now been proven right.
And he’s also predicted that xAI will be the first company to achieve artificial general intelligence (AGI) within the next 12 months. That’s the entire reason for the 1 million NVIDIA GPUs. Jeff is convinced that it’s going to happen in that time frame and that xAI will do it.
Now, I’m not sure he’ll be able to build the electrical infrastructure that fast, before the end of the year. But I never bet against Musk. He gets things done. And Jeff has personally been out to Memphis to see the site of xAI’s Colossus and walk the ground around the center to see where the expansion is taking place. (You can go here to learn more about what he discovered there.)
Even if it takes him two years, xAI has access to the capital and is planning to buy 800,000 more NVIDIA GPUs. At an estimated $40,000 per GPU, that’s $36 billion in revenue from xAI alone.
And here’s the key – if xAI is building this massive AI cluster, the other hyperscalers have to keep up.
That means Microsoft, OpenAI, Amazon, Anthropic, Google, and Meta will all have to scale up in order to compete. A year ago they were laughing at Musk and xAI for being so far behind. Not anymore. Now they’re chasing him.
I believe the market is underestimating the number of GPUs these companies will purchase in the coming years. That leaves room for NVIDIA to beat its sales and profit expectations.
And as they beat these numbers, the stock should accelerate to the upside.
This market pullback has brought NVDA down to valuation levels only seen twice in the last six years. This is a valuation we need to take advantage of.
I have long said that NVDA stock will surpass $200 per share before this bull market ends. And if it doubles from here, it would meet that target.
And it’s not just NVIDIA that is trading at such an attractive valuation. Here are three other companies on our Brownstone Research shortlist that are trading at incredible discounts.
We’ve talked at length about how NVIDIA is leading the AI revolution. But it’s also quietly powering the future of autonomous vehicles (AVs).
NVIDIA’s Drive platform is a foundational hardware and software solution designed for the rest of the automotive industry. After all, Tesla isn’t sharing its self-driving technology with anyone else in the industry. Neither is Google’s Waymo, not yet at least.
That’s why NVIDIA’s reference platform is being integrated into AV programs worldwide. But here’s what’s even more interesting…
While Tesla will launch its own robotaxi platform, many other companies won’t. Instead, they’ll partner with rideshare platforms like Uber (UBER) and Lyft (LYFT) to fill their AVs with riders. The market perceives AVs as a threat to these companies, but in reality, it’s a massive opportunity.
Longtime readers know we’ve been bullish on Uber for years. Largely because of the incredible work CEO Dara Khosrowshahi has done since taking over in 2017. The company is in the midst of an explosive EBITDA expansion and is set to dominate the rideshare market.
But its smaller competitor – Lyft – might be just behind it.
Lyft just became EBITDA profitable in 2024. And right now, the stock trades at a ridiculous 7x next year’s projected EBITDA.
We don’t just buy stocks because they look cheap. A company needs to still be growing. And Lyft is.
Over the next two years, Lyft’s EBITDA is expected to grow by over 25% annually.
The stock has been beaten down since its 2021 highs, but now it’s back near its pandemic lows. And with profitability firmly in place this year, Lyft is primed to surge higher.
At current levels, it could triple just on multiple expansions alone.
The Trade Desk (TTD) flies under the radar. But it’s one of the largest pure advertising companies in the world, with a market cap of $28 billion.
TTD specializes in programmatic advertising – helping companies automate their ad buys across multiple platforms.
Unlike Google, Meta, or Amazon, TTD doesn’t own its own ad inventory. Instead, it operates as a platform where companies can optimize their digital ad campaigns across all channels including display, video, audio, and connected TV.
And customers love them. The company boasts a 95% client retention rate and works with over 1,100 major brands.
Even as Google, Meta, and Amazon have dominated online advertising, The Trade Desk has consistently outperformed the market. It’s proven that it can compete with the giants – and win.
But the stock has taken a huge hit.
There have been rumors that some customers aren’t happy with TTD’s take rate and platform rigidity. These concerns helped push shares down 60% from their peak.
But long term, the company is still growing.
The digital advertising industry is expected to grow 14% annually, and The Trade Desk is projected to grow 20% per year. This will lead to even faster EBITDA and free cash flow growth.
Despite its promising future, TTD shares have plummeted.
At $140 per share, the stock was expensive. But since then, it’s fallen over 60%. And has reached institutional buy zones.
These are the same levels where The Trade Desk bottomed out in 2022 and 2023. And both times, the stock rallied sharply.
When this stock moves, it moves fast.
Now, not every move will be smooth. If we look at the chart above, we’ll see that TTD revisited these lows in 2023 before taking off.
But history tells us this is a valuation level where institutional investors step in.
Salesforce (CRM) has been one of the greatest software-as-a-service (SaaS) success stories of the last two decades.
This is a $270 billion tech giant built on the premise that businesses needed better customer relationship management (CRM) software.
They were among the first companies to provide and manage their software in the cloud. And this allowed businesses to subscribe monthly instead of purchasing expensive on-premise licenses.
This model provided predictable, recurring revenue – something that Wall Street analysts love.
But more importantly, Salesforce’s customers love its product.
Here at Brownstone Research, we use Salesforce. And I can tell you firsthand – our marketing and sales teams would struggle to operate without it.
And Salesforce is at the forefront of AI adoption in enterprise software.
Their Agentforce platform enables businesses to create smart, AI-powered assistants. These assistants are capable of handling tasks like answering customer questions, managing sales leads, or handling service requests. All without needing constant human oversight.
And because Agentforce is built directly into Salesforce’s system, businesses can use their own data to customize AI-powered workflows. And this platform is easy to customize even for those who aren’t tech experts.
Pricing for AI agents is still in the discovery phase across the industry. We’re not sure how much more they will charge for this service. But it will be a massive add-on for customers who want to make their sales efforts more efficient.
The downturn has brought CRM shares down to levels rarely seen in the company’s history.
As we can see, whenever CRM’s price-to-free-cash-flow (P/FCF) ratio dips into the low 20s, institutional investors step in to buy shares.
And history suggests this pattern will continue.
These are some of the best buying opportunities we’ve seen in years.
And many others are just as compelling.
Some of the biggest companies – Amazon (AMZN) and Alphabet (GOOGL) – are also trading at multi-year low valuations.
And here’s what that tells us… If Amazon, Google, and Nvidia aren’t falling anymore – then the market likely won’t go much lower either.
That’s why now is the time to ignore the fear and negative media sentiment around the economy and stock market.
We can use this bearish sentiment to our advantage.
With valuations at the lowest levels we’ve seen in the past decade and AI adoption accelerating across industries, these companies won’t stay cheap for long.
That’s why these are on our shortlist to add to our portfolio in the coming months.
Regards,
Nick Rokke
Senior Analyst, The Bleeding Edge
P.S. If you’re interested in hearing more about Jeff’s recent trip out to Memphis to see xAI’s Colossus and what he discovered there, click here for the details.
You’ll hear all about Musk’s supercomputer that Jeff believes will power the next generation of artificial intelligence… and how you can “partner” with Elon Musk on Project Colossus.
You can go here to learn more.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
