This Is The Most Undervalued Stock In The Entire Market

Hey, welcome back subscribers to my world of stocks. Today I want to talk to you a little bit about um the current state of the market and what I believe to be the most undervalued stock as a just kind of like a complete package within it. Now, when you look at the broader economy right now, we're going through a pretty crazy almost unprecedented time because on one hand we have crazy inflation, high interest rates, all kinds of trade disputes, war, and more. And yet on the other hand, investors keep buying stocks regardless with the market, you know, up a ton. And all the meanwhile, there's artificial intelligence just kind of looming in the background, overshadowing all of it, delivering a ton of future promise and hype, especially um but also at the cost of heavy spending, elevated prices, and the general fear of all of that kind of uh giant bubble that is being created potentially bursting at some point in the future, too. So it's just kind of difficult like to make any sense of all these things that are going on at once. And um because of it u because of all of that kind of uncertainty I guess investors have been really flocking over to any kind of safe haven investment that they can find to park their money. uh whether it's government bonds or even precious metals like gold and silver that you know apart from a recent dip they have been on a historic rise uh you know like in kind of recent years trading much higher than than previous historic levels. Well, in my opinion, um, today's stock, Vichy Properties, ticker symbol VICI, it carries many of those same characteristics, but while also paying one of the most mouthwatering dividends in the market, making it not only a very reliable long-term asset, in my opinion, but one that also can generate a growing stream of passive income without ever having to sell it like you would with, you know, precious precious metals, um, in order to get a big return from it. And so today, I'm going to explain exactly why I consider this to be the best overall kind of stock package that money can buy at current levels at today's prices in today's stock market and within the context of the general economy. So diving into it here, if I could only buy one stock in the entire market right now, what would I look for? Well, I would want a business that is incredibly resilient, that holds a giant competitive moat, that possesses strong future growth potential, and that is currently trading at a highly suppressed, deeply discounted valuation with ideally to a very large and growing dividend payment. Well, here's why Vichi fits that bill exactly for me and why I believe that it could, you know, easily be trading for around double its current price and likely will in the future in the coming years over the longer term. First off, the business is arguably one of the absolute best to own right now in the current environment that we're in. Cevichi is a REIT, a real estate investment trust that owns the land and buildings to to uh some of the best properties across gaming, hospitality, and entertainment, including some of the most iconic, best performing casinos and resorts throughout Vegas like Caesar's Palace, MGM Grand, The Venetian, and more. And in total, their portfolio of more than a 100 different properties spent across 26 different states, a Canadian province, and uh a US territory. Well, not only are none of these properties at risk of ever being disrupted by AI, which is the biggest fear of all, I would say, in the current market. Like, if you ask any investor what they're most afraid of, they usually say that it's whether a business that they're invested in will end up getting replaced by AI. and and make their investment worthless. Well, AI can't just take over physical real estate like this, especially when it's giant resorts that people want to physically be in. But on top of it, these are some of the best absolute cash generating machines out there. I mean, there's a reason why people say that the house always wins in Vegas because of all the profit that it generates and how difficult it is to uh to walk out of there without them basically taking your money, unfortunately. Well, um, not only does Vichi rent to all of these establishments, but because gambling regulations are so strict, and because all of these giant resorts require unimaginable amounts of money to build and upgrade and maintain, well, there's a ginormous barrier to entry here, too. [snorts] Meaning that whatever your form of disruption is that you can even try to think of, Vichi is likely very well insulated from it. There's just almost no form of disruption that we can realistically expect to see in the coming years for Vichi. And because they um don't even have to run the casinos themselves, they get tons of other benefits to their financial suit. It's actually one of the biggest reasons why they can even afford to pay such a huge dividend in the first place, which we'll get into here in just a second. But see, Vichi runs on what is called a triple net lease structure where they simply rent out the properties to industry-leading operators like MGM Resorts and Caesar's Entertainment. And then it's those operators who are actually the ones responsible for paying the property taxes, the building insurance, and all the maintenance costs. Plus, a huge portion of their long-term contracts are even CPI linked as well. Meaning that as inflation goes up, well, their rental income automatically rises right along with it. So, Vichi can just simply sit back, take on very little operational overhead, and get to collect huge rents all the time, regardless of the environment, month after month, year after year. Which, by the way, they're very good at collecting that rent, too. In fact, Vichi boasts the absolute best occupancy rate that you could ever ask for at a full 100% across their properties, consistently, mind you. In fact, even during the pandemic years, they still collected all the rent during that entire time. And ever since being formed, Vichi has been also growing their funds from operations every single year. That's how incredibly strong this business is for them. It's arguably the strongest across real estate. And yet, you should always remember this this important point, too, that a great business is only a great investment if you can buy it at the right price. Well, as much as I so strongly believe in Vichi's business, I think its current valuation is just as attractive for it, too. See, ever since the pandemic hit, Vichi stock has been extremely suppressed for years. Not because the business is going under, not because performance is so terrible, but simply because the macro environment is punishing rates across the board. As high interest rates make borrowing costs more expensive while also raising the yields of risk-free uh government bonds, which results in conservative investors selling out of their dividend stocks to move their money over into those safer bonds as an alternative. And although they just reported some pretty strong earnings, which we'll also touch on here in just a second, well, the market completely dismissed that, too. But because of it, I now get one of my absolute favorite businesses out there at an insane discount where it now trades at about the same level from before the pandemic ever even happened and even pretty close to their original IPO price of around just 20 bucks a share. While their price of funds from operations, the main profitability metric for REITs, it's also sitting over 30% lower than the sector median. Again, despite the fact that they should be trading at a huge premium to the sector for how strong that business is, I would even say double than the sector average is where they really should be. But instead, they're again they're much much more below it, under it. And just as great is again just the the fantastic dividend that they pay out to that, by the way, has now spiked up to about a 7% yield. Again, when you consider the business, I bet under normal macro conditions, investors would very happily take even just half of that yield and still call it a fantastic overall investment. But buying it right now, I get to lock in a much higher yield. One that, by the way, I'm not even worried about it getting cut anytime soon either, despite how high it already is. See, as a REIT, Vich is legally required to pay out at least 90% of its taxable income to shareholders, but they've managed their finances so well that their dividend payout ratio currently sits at only around 70% of their adjusted funds from operations. That means the dividend is well covered by their cash flow, and it even has room to keep growing further in the future. In fact, Vichi has successfully increased their dividend payout every single year since they were formed. They also maintain a very healthy balance sheet armed with a strong investment grade credit rating and they have plenty of financial flexibility to weather any upcoming economic storms which by the way was illustrated further in this most recent earnings. Like I said, the market mostly looked down on those earnings partly because their net income fell by a shocking 39% year-over-year. But this is exactly why you always have to look deeper into these reports rather than, you know, just kind of reading the headline numbers because that drop in net income was almost entirely driven by a non-cash accounting adjustment called a CCL allowance, which stands for current expected credit losses. It's essentially a preemptive move just in case anything gets worse in the mac macro economy. In other words, it's not that their tenants suddenly stopped paying rent, but rather it's just their accountants marking a non-cash reserve, kind of putting that aside in the balance sheet to act as almost like a rainy day buffer in case any credit issues arise in the future that are completely out of their control. But if you look at the actual cash that they generated in the quarter, you get a completely different story. For example, their total sales rose nearly 6% year-over-year to 1.1 billion. while more importantly, their funds from operations increased by nearly 8% up to $680 million, too. In other words, the underlying business continues to thrive and the cash being generated is also getting reinvested back into the business. In fact, just in the second quarter alone, they added several new tenants to their roster. They finalized a new lease with uh Clarevest for the the MGM Northfield Park in over in Ohio, and they officially closed their giant $1.2 2 billion acquisition of seven different um casino properties in Nevada from Golden Entertainment. They expanded into Canada by acquiring the game host portfolio in Alberta for over $140 million. And perhaps most exciting of all, uh they just announced a brand new partnership with Club Med to acquire the uh Carambola Beach Resort in St. Croakkes for just over $20 million while agreeing to fund an additional $55 million for the property's complete redevelopment. Now, this proves that Vichi is not just sitting around or getting complacent or even being too negatively affected by the current macroeconomy, which is very challenging for most RES out there, but rather they continue to perform incredibly well, and they are executing at the highest level. They're diversifying the business. They're expanding internationally and they're growing that dividend too. So when I look at it again the overall package I just feel like you know what is not to like about this stock here trading at these incredibly cheap levels. Right now the market is pricing Vichi as if interest rates will stay elevated forever. But we know that the economy works in cycles. And when those rates do finally start coming back down I think many of these beaten down rates will start to look like they were great deals. I mean, some of them are trading at almost like great recession valuations here. And once investors kind of realize that and especially again once the macro conditions improve, I just think that these stocks will start to recover and go up dramatically in price. That's just my personal opinion. Now, I don't think it'll be tomorrow, and certainly there's always a chance that things could get even worse before they get better. But over the long term, which is the type of investor that I am, long-term investor, uh I do think that this is a stock that should easily be trading at double the price that it's currently at today. So, I plan to keep buying on all of the dips that the market gives me. But hey, again, that's just what I'm doing myself. You always got to do your own research, make your own decisions, but let me know down below what you guys think about this one or any other stocks that you happen to like in the market. What's your favorite out there? Maybe I can do an analysis video on it for you in in the future. which I which you know I think would be fun. But uh hey in the meantime I just hope that you are all doing well. I hope you enjoyed the the video and um I will catch you guys in the next one. All right, take care my friends. Bye-bye.