Carlson, who has over a decade of experience in dividend-growth investing, manages a six-figure passive income portfolio. His detailed analysis blends qualitative assessments with rigorous quantitative modeling to provide insights into where he sees value in today’s volatile market.

The Current Market Sell-Off

Carlson opens by noting the major sell-offs across industries:

• S&P Global: -3.9%
• Netflix: -5% (today), -10% (yesterday), fell below $900 after topping $1,000 recently.
• Spotify: Rapid liquidation.
• Palantir: Dropped from $100 to $80 in one month.
• Costco: Down almost -7% post-earnings, unusual for the stock.

These declines have led Carlson to re-evaluate valuations and uncover potential buying opportunities.

How He Values Stocks

Carlson’s Qualum Discounted Cash Flow Calculator uses these variables:

1. Earnings per Share (EPS) Growth Rate
2. Price-to-Earnings Ratio (P/E)
3. Free Cash Flow (FCF) Yield
4. Discount Rate (Desired Return)

He aims for a 15% annual return, allowing his portfolio to double every five years.

Joseph Carlson’s Stock Rankings (Detailed)

Undervalued Stocks

$GOOGL (Google)
Carlson highlights Google’s consistent and impressive earnings growth—33% over the past 2 years, 26% over the past 5 years, and 22% over the past decade. Despite this, the stock trades at a low PE ratio (21 forward PE). Even with conservative estimates of 10-15% earnings growth, Carlson projects 15-21% annualized returns over the next 5 years. He believes the market is undervaluing Google’s future growth potential.

$AMZN (Amazon)
Joseph calls Amazon “indestructible,” emphasizing its diversification across AWS, advertising, e-commerce, and logistics. Earnings per share have grown 37% over 5 years and 90% in the past year. Carlson expects 20-25% annual growth and sees the stock delivering 20%+ annual returns. He believes tariff fears have unjustly driven the stock price down, making it a compelling buy.

$SPGI (S&P Global)
Carlson’s largest portfolio holding. He forecasts 14% free cash flow per share growth and sees a 17% potential return with a reasonable 3.2% free cash flow yield. Even in conservative scenarios, he expects a 15% return. Carlson states S&P Global’s wide moat and stable business model justify its placement in the undervalued category.

$ASML (ASML Holdings)
Carlson recently increased his position in ASML. He projects 20% free cash flow growth over the next 5 years. At current depressed prices, he sees a 17-21% return, with a potential price target of $1,640 – $1,920 per share by 2030. He notes the company’s technology dominance and geopolitical importance strengthen its moat.

$CRM (Salesforce)
Despite recent underwhelming earnings, Carlson believes Salesforce is undervalued. It trades at a 25 forward PE and offers a 4.6% free cash flow yield. He assumes 10-12% growth and projects 15%+ returns with modest expectations. Carlson views Salesforce as an attractive opportunity at current prices.

$UBER (Uber Technologies)
Carlson is bullish on Uber’s scalability and operating leverage. He projects 20% free cash flow growth and sees a 29% return at a 3% free cash flow yield. Even with more conservative assumptions (10% growth and a 4% yield), Carlson expects a 12% return. He acknowledges risks but believes Uber’s transition to profitability is being underappreciated by the market.

$BKNG (Booking Holdings)
A favorite for Carlson. He sees 15-16% free cash flow growth and 15.6% annual returns. Booking Holdings’ asset-light model, strong free cash flow, and share buybacks make it highly attractive. Even with slower growth or higher yields, Carlson expects solid market-beating returns.

Fair Valued Stocks

$FICO (Fair Isaac Corp)
Carlson notes FICO’s monopolistic pricing power and rapid growth (26% over 5 years). But at current prices, he sees only a 5% return unless growth remains extremely high. He’s waiting for the stock to drop to around $1,100 before buying.

$TXRH (Texas Roadhouse)
Carlson’s third-largest holding by gains. Despite 43% earnings growth last year, he expects future growth to slow to 11-15%. Based on these assumptions, he projects 4-11% returns. It’s fairly valued, but not a compelling buy today.

$MCO (Moody’s)
Similar to S&P Global but less diversified and slightly pricier. Carlson forecasts 10-12% returns unless it trades lower. He’s waiting for a drop to $381 to upgrade it to undervalued status.

$MSFT (Microsoft)
Carlson sees Microsoft as a high-quality business, trading at a fair 28 forward PE. He expects 13-15% earnings growth and 13.5% annual returns. It’s not a bargain, but fairly priced for its consistent, diversified growth.

$MA (Mastercard)
Mastercard has delivered 19% annual free cash flow growth over the past decade. Carlson assumes 15% growth and sees an 11% return at a 3.4% yield. Solid, but not cheap enough to offer outsized returns today.

$INTU (Intuit)
Strong recent earnings, AI adoption, and dominant software products. Carlson expects 15% growth but sees only 11% returns unless the stock drops to $500. Fairly valued, but on his watchlist for a better entry point.

$NFLX (Netflix)
Recently sold off from $1,000 to below $900 per share. Carlson expects 18-21% free cash flow growth. He projects 12-16% returns, but with current pricing, he puts it in the fair value category. Below $760, he would consider it undervalued.

Overvalued Stocks

$COST (Costco Wholesale)
Carlson praises Costco’s unmatched business model, but it trades at a lofty multiple. He assumes 10-14% earnings growth, but the stock requires a PE over 45 to justify decent returns. He estimates 4-9% annual returns and calls it overvalued but isn’t selling… yet.

$PLTR (Palantir)
Despite rapid free cash flow growth (138% over 2 years), Palantir trades at an extremely high valuation. Carlson assumes 30% growth and a 2% free cash flow yield but only sees 2.5% returns. He calls it heavily reliant on maintaining its premium valuation and categorizes it as overvalued.

Selling / Reduced Positions

$AAPL (Apple)
Carlson has trimmed his Apple position by 90%. He cites slowing earnings growth (3.42% over 2 years) and a high PE (29 forward). Even with 12% growth and a 35 PE, he only projects a 10% return. Carlson calls Apple overvalued and is near a full exit.

$VICI (VICI Properties)
A real estate REIT he’s reducing. Despite solid performance and dividends, Carlson believes better opportunities exist. He’s trimmed $3,000 from his $9,000 stake and doesn’t see much upside at current prices.

Quick Recap: Carlson’s Rankings

Undervalued

Fair Valued

Overvalued

Key Takeaways

• Carlson uses 15% return as his target hurdle rate.
• He prefers companies with consistent earnings and free cash flow growth, wide moats, and reasonable valuations.
• ASML, Booking, Uber, Amazon, Salesforce, S&P Global are his top undervalued stocks.
• He is cautious on Apple, Costco, Palantir, and VICI due to valuation concerns.

Conclusion

Joseph Carlson emphasizes patience in this volatile environment. His strategy is based on valuation discipline and a focus on long-term predictable cash flow growth. Many stocks are entering undervalued territory, but he warns against chasing momentum without strong assumptions to back it up.

“The biggest opportunities come when investors are fearful,” Carlson notes. “These stocks might get cheaper, but the best time to buy high-quality companies is when the world is uncertain.”

Related: Latest Moves: Trimming Vici and Apple, Doubling Down on ASML

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The post The Most Undervalued Stocks In The Market first appeared on Finblog.

For the first time during this market downturn, Carlson is trimming some of his holdings. After months of holding steady, he’s taking profits on Vici Properties ($VICI) and Apple ($AAPL) to reallocate capital toward ASML ($ASML).

Vici Properties ($VICI)

• Trimmed by $3,000, reducing the position by one-third.
• Despite being a strong performer this year—up 10.8% year-to-date, outperforming the broader market by 21%—Carlson views this as an opportunity to lock in gains during a correction.
• Vici is still a company he likes, but he sees better risk/reward opportunities elsewhere at the moment.

Apple ($AAPL)

• Carlson has been heavily trimming his Apple holdings for months.
• He is selling an additional $4,000, reducing the position to what he describes as a “watcher” size.
• Reasons for the reduction include:
  • Sluggish earnings growth.
  • High valuation, with a 28-29 P/E ratio despite Apple being down 13.3% year-to-date.
  • Ongoing concerns about Apple’s innovation and product pipeline, particularly around its delayed AI efforts (covered below).
• Carlson believes the future of Apple is uncertain and that the goodwill investors have toward the company isn’t enough to justify holding a large position anymore.

ASML ($ASML)

• Carlson is increasing his ASML position by $8,000, bringing his total stake to $37,000.
• Carlson sees ASML as undervalued at its current 29 P/E ratio, with consistent earnings and free cash flow growth.
• Historically, ASML has shown 25.6% CAGR earnings growth over the past five years and 21.6% growth over the past decade.
• His projections: If ASML maintains a 22% EPS growth rate, it could deliver 15%+ annual returns.
• Carlson believes the current $700/share price could rapidly return to $1,000/share, as it has done in previous cycles.
• He’s bullish on ASML’s moat, especially as countries move toward self-sufficient semiconductor production, which should drive further demand for ASML’s lithography equipment.

Market Conditions: How Long Until Recovery?

Carlson also addressed the broader market volatility. Trump’s ongoing tariff threats and retaliatory measures have created uncertainty, prompting some to call this a “detox period.”

Historical Data on Market Corrections:

• Past 24 corrections (down at least 10%, avoiding a bear market) took an average of 8 months to reclaim previous all-time highs (source: CF data).
• If this correction began on February 19, history suggests a recovery by mid-October is plausible.
• The average drawdown during these instances was 14%, which aligns with today’s numbers.

Recession Risks:

• If the U.S. avoids a recession, a 16% drawdown from highs with a recovery within 8 months seems likely.
• However, recession scenarios could mean a 36% decline, dragging out recovery much longer.
• Investors like Doug Ramsey are warning that this downturn might be just beginning, citing the wealth effect where falling stock prices lead consumers to cut back on spending.

Upcoming Q1 Earnings Season (April):

• Carlson believes the next earnings season will be pivotal.
• Strong consumer spending and earnings growth could trigger a sharp rebound.
• Weak numbers, however, might result in another 10% market drop.

YouTube’s Moat Under Threat: Streaming Platforms Move in on Creators

Carlson points out an emerging challenge for YouTube (and its parent company Google): the migration of YouTube creators to major streaming platforms like Amazon Prime and Netflix.

MrBeast and Beast Games:

• MrBeast’s Beast Games series on Amazon Prime was a $100 million profit success for Amazon.
• Nearly 1 in 4 Prime Video viewers in the U.S. watched Beast Games in its first month; 60% watched at least three episodes.
• MrBeast chose Amazon over Netflix because Amazon allowed him full creative control.
• This has sparked a wave of interest from streamers eager to sign top YouTube talent.

Other Major Moves:

• Netflix signed Miss Rachel, who quickly landed a spot in Netflix’s Top 10 shows.
• Netflix is also courting Dude Perfect and Mark Rober, two of the biggest creators on YouTube.
• Carlson predicts more YouTubers will move to streaming platforms, drawn by money and creative freedom.

Apple’s AI Woes: Vaporware and Broken Promises

Carlson highlights John Gruber’s scathing critique of Apple Intelligence, the company’s suite of AI tools and features.

Key Points from Gruber’s Review:

• Apple’s WWDC AI demos were concept videos, not live demos.
• Features like personalized Siri, context awareness, and in-app actions have yet to materialize.
• Apple promoted these features as reasons to buy the iPhone 16, but later pulled ads and delayed features until next year.
• Gruber argues that this kind of vaporware marketing is a dangerous shift for Apple, a company historically known for only showcasing finished products.
• Carlson warns Apple risks breaking customer trust if it doesn’t course correct.

Mark Mahaney’s Top Picks: Amazon and Uber

On CNBC, analyst Mark Mahaney shared his top stock picks for this period of volatility:

Amazon ($AMZN)

• Mahaney’s #1 pick.
• Trading at a 25x forward P/E, the lowest valuation in years.
• Historically, Amazon’s growth and profitability justify this valuation, and Mahaney believes now is the time to buy.

Uber ($UBER)

• Mahaney’s other top pick, calling it “dislocated high-quality stock”.
• Mahaney (and Carlson) agree Uber is undervalued with significant upside potential.

Conclusion

Joseph Carlson’s latest episode offers an insightful breakdown of the current investing landscape:

• He’s trimming outperformers like Vici and Apple.
• He’s doubling down on ASML, believing it’s an undervalued growth opportunity.
• He highlights risks in market recovery timelines, Apple’s AI struggles, and YouTube’s eroding moat.
• And he agrees with Mark Mahaney’s bullish stance on Amazon and Uber.

For investors, Carlson’s message is clear: Stay disciplined, buy high-quality businesses, and be patient.

Reference:
This article is based on Joseph Carlson’s YouTube episode, Watch it here.

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
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The post Latest Moves: Trimming Vici and Apple, Doubling Down on ASML first appeared on Finblog.