10 Undervalued Stocks You Need To Watch This Week
In a Nutshell
The video highlights that low P/E ratios alone don't guarantee good returns, as shown by Netflix's 53% decline despite trading at 17x earnings, while high P/E stocks like Palantir (146x) and Tesla (490x) can outperform when fundamentals support growth expectations. Memory chip companies like Micron, SanDisk, and SK Hynix offer potential 35% upside trading at just 4x earnings, though cyclical demand concerns persist, while major cloud providers face negative free cash flow from heavy AI investments. The core advice emphasizes dollar-cost averaging into fundamentally sound companies at fair valuations without leverage, focusing on long-term recovery rather than market timing.
These notes were generated by AI and may contain inaccuracies.
With the recent market downturn, the importance of long-term investing was emphasized, including knowing what to buy, how to buy it, and how to start investing. This builds on a previous video that received positive feedback. Viewers have been asking for more familiarity with different companies that represent good deals. A list of undervalued stocks was compiled as a starting point, not as a definitive endorsement. The goal is to provide a reference that viewers can evaluate themselves.
These companies primarily trade at very low price-to-earnings ratios. The P/E ratio represents the premium paid to own a part of a company. For example, if a lemonade stand makes $100 in annual profit and someone offers $1,500, the P/E ratio would be 15 times. Different sectors have different acceptable P/E ratios—technology companies commonly trade at higher ratios, while artificial intelligence companies may trade at negative ratios due to lack of current profitability but high growth expectations.
Netflix is trading at a low P/E ratio of 17 times its earnings, with $49 billion in revenue and $14 billion in net income. However, from mid-2025 to now, the stock has lost 53% of its value, consistently making lower highs and lower lows. This demonstrates that a low P/E ratio alone does not guarantee good investment performance.
Technology companies, especially those in artificial intelligence, often trade at higher P/E ratios or even negative ratios because of expected rapid growth. The premium paid reflects expectations of future growth, even if the company is not currently profitable. Infrastructure investments and growth plans can justify these valuations.
Palantir (PLTR) has been a strong performer since 2024-2025, but trades at a P/E ratio of 146 times earnings. This illustrates that high P/E ratios are not necessarily bad—they represent the premium the market places on expected growth. However, fundamentals matter, and overvalued companies experience harsher corrections during market downturns.
Tesla trades at 490 times its earnings with a market capitalization of $1.5 to $1.6 trillion while generating only $3 billion in net income. This represents a significant premium paid due to expectations around Optimus robot, robot taxis, and fully autonomous driving. The Elon Musk effect contributes to these expectations.
The list includes Amazon, Microsoft, Google, Broadcom, Meta, Taiwan Semiconductor Manufacturing Company (TSM), Netflix, Dell, Oracle, Nvidia, SanDisk, Micron, and SK Hynix. SanDisk, Micron, and SK Hynix are all trading at four times their earnings.
Memory chip companies (SanDisk, Micron, SK Hynix) trade at low P/E ratios due to concerns about cyclical demand patterns. With AI-driven demand creating memory chip shortages, these companies can charge premium prices. However, memory is cyclical—periods of high demand alternate with supply surpluses. Wall Street expects growth to slow and these companies to lose their pricing premium.
Micron generates $133 billion in revenue with $85 billion in net income, representing over 60% profit margins. Fair value analysis suggests approximately 35% upside potential. The concern is whether demand will continue or if cyclical patterns will reduce profitability.
Amazon, Meta, Google, and Microsoft are major cloud companies with negative free cash flows due to heavy AI investments planned for 2026 and 2027. The question is whether these AI investments will generate adequate returns.
Meta's stock rose to highs near 780 and recently fell to lows around 614-615, representing a 21% decline. Previous support was around 550, which would represent a 30% drop. Recovery to previous highs would provide 24-25% upside, while waiting for further decline could offer approximately 40% return.
Never attempt to predict market bottoms consistently. Use ratios to determine if a deal is fair. If the deal is acceptable, take appropriate positions without leverage or margin, using only money that can be afforded to lose. Divide investments into installments rather than investing everything at once. If prices drop further, additional positions can be added. This approach is for long-term investment in fundamentally sound companies trading at lower premiums relative to earnings.
Markets have always recovered from sharp declines throughout history. Investors must position themselves to afford the time required for recovery. Calculate worst-case scenarios for any investment amount. If the potential loss percentage causes concern, the investment amount may be too large. Buy one share rather than 100 if emotional stress from larger positions could force panic selling.
Upcoming earnings reports, midterm elections, and potential geopolitical events in the Middle East could affect oil prices and inflation. Rising oil prices could increase inflation, potentially prompting Federal Reserve interest rate increases. Nothing is guaranteed, and the goal is to invest at fair prices rather than avoiding the market entirely or taking excessive risks.
Success comes from investing in good companies at the right time without panic selling. Keep investments simple, avoid leverage, and don't complicate strategies. Consider broad indices like QQQ or SPY as alternatives to individual stocks. Focus on proving capability to invest wisely rather than maximizing returns immediately.
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