Valuentum Exclusive Analysis for the Discerning Investor

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Dear readers:

With the markets retracing most of their recent drawdown, we're taking a victory lap as we didn't panic, nor should have you. We highlighted our wait-and-see approach amidst the worst of the pullback, and we expect the Magnificent 7 (large cap growth and big cap tech) to continue to propel the markets higher, as they have done.

We've been busy rolling valuation models as we finetune our assumptions for a great number of companies under coverage. While doing so, we came across three undervalued stocks that are also included in the simulated newsletter portfolios. We think they're prime for highlight.

The three stocks are UnitedHealth Group (UNH), Nvidia (NVDA) and Alphabet (GOOG). We spend a lot of time on discounted cash-flow valuation, and their 16-page reports can be accessed by link below:

UnitedHealth Group (pdf download): https://www.valuentum.com/downloads/20201109/download

Nvidia (pdf download): https://www.valuentum.com/downloads/20111117_15/download

Alphabet (pdf download): https://www.valuentum.com/downloads/20110924_2/download

UnitedHealth Group recently suspended its already lowered 2025 outlook “as care activity continued to accelerate while also broadening to more types of benefit offerings than seen in the first quarter, and the medical costs of many Medicare Advantage beneficiaries new to UnitedHealthcare remained higher than expected.” The company's CEO also stepped down, and the firm is reportedly under criminal investigation by the DOJ. Shares, however, have been slammed, and the market is building in a worst-case scenario, in our view. We think shares of the healthcare giant are worth more than $400 each, well above where they are currently trading (~$316).

Nvidia will release its first-quarter fiscal 2026 results soon, and we're waiting with baited breath. When it reported fourth quarter results, it handily beat expectations, particularly with Data Center revenue. Nvidia is a stock that we believe the market is being too cautious on. Nvidia ended its fiscal year with $43.2 billion in cash and cash equivalents, while long-term debt was just $8.5 billion. Free cash flow was $15.6 billion in the quarter and $60.9 billion for the fiscal year. Though it remains to be seen whether Nvidia will deliver again in its fiscal first-quarter results, we think shares are cheap at ~$136 each, with our fair value estimate north of $160.

When Alphabet reported first quarter results, consolidated revenues increased 14% in constant currency, while Google Cloud revenues jumped 28% in the quarter. Total operating income at Alphabet swelled 20% higher, while GAAP earnings per share increased a whopping 49% in the quarter. Alphabet also raised its dividend 5%, while the board authorized the repurchase of an additional $70 billion in stock. Alphabet's shares are suffering from two overhangs, the first being antitrust issues that may lead to its breakup, and the other being artificial intelligence that may disrupt its search cash cow. We think both concerns are overblown, however, and we value shares at $220 each, well above where they are currently trading (~$168).

All told, we think these three names are ripe for the picking. UnitedHealth Group has clearly plummeted on bad headline news, while the market is not giving Nvidia enough credit for the sustainability of its technology. Alphabet is being weighed down by antitrust issues and the concern that artificial intelligence will permanently alter its business model, which we believe will not happen anytime soon, if at all. All three ideas are included in the Best Ideas Newsletter portfolio, where we include a diversified portfolio of ideas for members to consider. Happy investing!

Kind regards,

The Valuentum Team

www.valuentum.com

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