Three Turn-Around Stocks I’m Buying Today
Summary
Joseph recently invested $5,000 in three high-quality companies—Netflix, Uber, and S&P Global—which he identifies as "turnaround plays" currently experiencing significant dips. He describes these as businesses where he buys now, anticipating a future recovery and long-term growth. Joseph also elaborates on other stocks he considered but decided to avoid, such as Nike and FICO, while providing an update on Tom Lee's bullish market outlook and highlighting Apple's recent actions as a "fail of the week."
Joseph's Investments:
Stocks Considered But Avoided:
Market Outlook and Apple's "Fail of the Week":
Mentioned Stocks
Reasoning: Joseph chose to pass on Nike, citing it as a company in "full-on contraction mode." He notes a decade of negative returns, with the stock down 36% over ten years. Revenue has declined from $51 billion to $45 billion, and net income/earnings per share are also trending downwards. Joseph attributes this to Nike losing significant market share to competitors and the fading brand value of the Nike logo and Air Jordans among younger demographics. Despite its struggles, Nike's valuation remains higher than other growing alternatives, making it unattractive to Joseph.
Reasoning: Joseph, an Apple enthusiast and investor, critically points to Apple's new privacy controls for Mac users, ostensibly to protect against AI agents, as his "fail of the week." He believes this move, framed as "security and safety," is Apple's familiar "playbook" to protect its highly profitable App Store ecosystem, which he deems the "most profitable platform in the world" and a "toll booth." Joseph suggests Apple's true intent is to prevent AI agents from potentially bypassing its App Store and its lucrative service margins. He highlights that Apple's services division, driven by the App Store, boasts significantly higher margins than its hardware business.
Reasoning: Joseph is "on the fence" about FICO but ultimately decided not to invest due to perceived uncertainty. While acknowledging its strong fundamentals, including high margins, growing revenue, and an embedded product, he criticizes management's self-inflicted decisions to jeopardize its monopolistic moat through short-term price hikes. Joseph also expressed concern over the CEO, William J. Lansing, who has reportedly sold over $50 million worth of FICO stock in the past three years, leading Joseph to speculate about potential management shake-ups.
Reasoning: Joseph bought an additional $2,000 of Netflix, increasing his substantial existing position. He believes it is a great company at a very good deal, despite the stock being down 50% from its highs, 26% year-to-date, and 42% over the past year. Joseph counters common investor biases by arguing that increased competition and media mergers will force companies with massive debt (like Warner Bros Discovery and Paramount) to license content to Netflix, similar to Disney's recent moves. He also debunks the myth of low-quality content, clarifying a misinterpretation of comments from Matt Damon and Ben Affleck. Fundamentally, Netflix shows strong revenue growth across all regions (11-18%), generates substantial trailing free cash flow of $11 billion, and achieves an organic earnings per share growth of 24% (after normalizing for a one-time payout). He finds its 18.42 next 12 months (NTM) PE ratio attractive for its growth profile and wide moat.
Reasoning: Joseph agrees with Tom Lee's bullish prediction that the S&P 500 will finish higher this year. Tom Lee's arguments include accelerating earnings growth (Q3 estimated at nearly 30%), significant increases in 2027 EPS revisions (>20%) which imply the market's multiple has actually become cheaper, and the unexpected benefit of high oil prices strengthening the US economy as an exporter. Joseph emphasizes that strong earnings growth ultimately drives stock prices, and believes there is currently excessive pessimism in the market.
Reasoning: Joseph added $1,000 to his S&P Global position, which now stands at $114,000. He views this as a turnaround play, with the stock down 24% year-to-date, caught in what he calls a "SaaS apocalypse" narrative driven by fears of AI plugins (like Anthropic's) disrupting its market intelligence business. Joseph contends that this segment, while a portion of revenue, is lower margin, and the core of S&P Global's wide moat lies in its high-margin ratings and indices businesses. He estimates that even if market intelligence went to zero, the company would still trade around a 25 NTM PE. He acknowledges rising interest rates as a short-term headwind but highlights that companies will still need to refinance debt and that ETF assets under management linked to S&P Global indices grew from $3 trillion to $6 trillion in 2023, indicating robust long-term demand. Joseph believes the current dip presents a good buying opportunity.
Reasoning: Joseph invested another $2,000 in Uber, which is currently down 30% year-to-date. He argues that very little has fundamentally changed in the company to warrant such a drop from its previous $100 per share. Trading at a 17 NTM PE and an estimated 5-6% free cash flow yield, Joseph considers Uber undervalued, believing it's a fast-growing, highly profitable, and scaled business. He addresses concerns about competition from autonomous vehicle networks like Waymo, Zoox, and Tesla's Cybercab, emphasizing Uber's overwhelming network size: it is 595 times larger than Waymo in weekly rides (297 million vs. 500,000) and is growing at a faster pace, further widening the gap. Even in areas where Waymo is established, such as San Francisco, Uber remains profitable and growing. Joseph is confident in Uber's predictable long-term earnings and revenue growth, asserting that much of the disruption risk is already priced into the stock.