A 23% Market Crash Could Be Coming — 5 Stocks I’d Buy More Of

Michael Barry believes the stock market could be approaching a major top and has warned that a decline resembling 1987 is possible and he's not merely expressing a vague concern. Barry says he remains short semiconductors and believes falling volatility is encouraging leverage strategies to buy even more stock. But while Barry prepares for a possible collapse, the S&P 500 has returned to an all-time high after more than 42 sessions without setting a new record. And this rally is no longer being driven exclusively by seven technology companies. Small caps have gained more than 22% and are beating every major US index. And at the same time, we've got Microsoft, Alphabet, Amazon, and Meta which are preparing to spend more than their entire combined operating cash flow on capital expenditure. In fact, their combined capex has more than doubled while free cash flow has moved in the opposite direction. The companies supporting the market are quietly becoming very different businesses. So today, I'm not going to pretend that I can predict the precise day of the next crash. I'm going to examine Bar's warning and rank five stocks already in my portfolio that I buy more of if volatility returns. Before examining Bar's argument, listen to how confidently the opposing side views this rally. The bullish case rests almost entirely on earnings continuing to rise. >> This rally, what do you make of it? Where's this market going? >> It's going higher. Uh I mean, my my year-end forecast is 8,250 and all of a sudden that looks fairly conservative. It's only 6 and a half% away. Uh I think uh we've got FEMO what I've uh previously previous previously discussed with you and that is fabulous earnings momentum. That is a central bullish argument. The economy remains resilient. Corporate earnings continue expanding and rising profits can make an expensive market gradually look more reasonable. But Barry's argument is different. Importantly, he does not say the market must crash immediately. He explicitly acknowledges that new highs could attract even more money first. His concern is the machinery underneath the rally. As volatility falls, funds designed to maintain a specific level of risk while they're permitted to increase their equity exposure. Prices rise, volatility falls, and systematic strategies buy more. Those additional purchases push prices higher and make the market appear even more stable. And then you have sentiment that then follows price. The fear and greed index has now moved from fear one month ago to greed today, reinforcing the belief that the danger has passed. And the danger is that apparent stability can encourage too much leverage when volatility eventually returns. The same rules that force funds to buy or they can suddenly force them to sell. And that is ultimately the relationship Barry appears worried about. not simply high valuations but a market where positioning becomes increasingly crowded and mechanically dependent on volatility remaining low. However, this does not look like uniform spective euphoria. Several large technology companies either flat or negative year to date while leadership has shifted into other areas of the market and the mag 7 returned more than 100% in 23 64 in 24 and almost 25 in 2025 but only around 4% this year. Meanwhile, the Russell 2000 has gained around 22.4%. That can be interpreted as healthy participation rather than the final stage of a narrow technology bubble. And the historical evidence also challenges the most dramatic interpretation following similar record highs. 4-week returns. Well, we can see here right at the bottom, they were positive in almost 93% of the previous cases shown here. And the average four-we gain, well, that was around 1.6%. While the average maximum one-mon draw down that was below 2%. Now obviously none of this proves that Barry is wrong. It simply means that a long rally without a 5% correction is not by itself reliable evidence that a crash must follow. His warning ultimately matters because of what could amplify the next decline. Not because record highs automatically signal that the decline begins tomorrow. The first genuine warning, well it's already visible during earning season. This heat map, it tells you how companies performed on the day that they reported the index. Well, yes, it can look calm. While individual meap companies, they're experiencing historically violent moves. >> The shares after hours, you see some really big hits and some really big misses. >> Yeah, I will tell you, you know, specifically when you look at an Amazon and when you look at a Microsoft, their one-day earnings realize move was the largest on record. So, you know, pulling it back to all the previous quarters, I think it was plus 15% and plus 17% respectively. But overall, when you look at earning seasons specifically as it relates to the hyperscalers, they're beating these implied moves that are happening on options and that's historically not the case. Typically, options tend to overpric the earnings move and then they underrealize. We're seeing the opposite this time. >> That's the takeaway. The options market expected large reactions but the actual moves were even larger. Investors are struggling to price how sensitive these companies have become. And look AMD it provides another example. The company delivered yesterday extraordinary growth but still fell because its results only narrowly exceeded the expectation which was already embedded into the price. In fact, revenue increased 50% data center revenue that more than doubled and profitability improved sharply. The business here didn't fall. The stock simply carried almost no tolerance for anything less than perfection. And this distinction matters. A healthy economy and strong corporate earnings can coexist with brutal losses in individual stocks when valuations as well as expectations are in fact elevated. And the second and most important risk is capital intensity. Listen carefully here to how she describes the transformation now taking place >> in the same way way that we used to. This is this is an evolution that's taking place. >> It it's an evolution. It's not the hyperscalers you married, you know, they're becoming different people. You're you know, life crisis. Maybe they're having an existential crisis, but look, two big things when you spend that much capex uh and and then you issue that much debt. They're far more uh rate sensitive and they're far more sensitive when you think about that negative free cash flow. So, it's not the same beast. And because of that, there really is a volatility regime shift and how volatile these stocks will be going forward that was not the same as the past. >> That is arguably the most important observation in the entire episode. These companies remain extraordinary, but their financial profiles are changing. Combined hypers scale expenditure rose from 150 billion in 22 to 358 in 2025. Over the same period, free cash flow initially increased but then fell from 234 to 199. The market's therefore being asked to value businesses that are growing quickly but are also spending nearly every internally generated dollar and potentially more to maintain the growth. There is an important counterargument. Recent volatility may have already removed some of the most extreme spective positioning. >> The concern about AI has that kind of played out at this point or not? So yes and no. I think near-term froth, you did get a lot of shakeout just because of what occurred with situational awareness last week, one of our monitors. So, absolute skew inversions, essentially the absolute count in the S&P 500 of how many stocks where the call implied volatility is outweighing the put andfly volatility. That high is around 80. We're sitting about 50 right now. It's about average levels. That tells you froth has been sucked out of the market. However, as we get past this earning season, August tends to be a volatility vacuum and then we hit into midterms. I would expect some of that to reoccur. >> So, the market may not be at maximum euphoria today. The more balanced conclusion is that volatility has eased temporarily, but the conditions that previously encouraged speculation, well, they could ultimately return. And now jumping into the stocks. At number five, we've got Uber, which is down around 12% this year despite the underlining business, delivering record engagement and significantly higher profits. They've also just reported earnings. We're going to take a look at that, but you can see it is trading around 52- week lows, down, in fact, around 4% in the pre-market, sitting at $69 where we get a strong buy from Wall Street, very near to a strong buy from Seek Alpha, 4.45, 4 and a half needed to flip it into the strong buy rating. And having a quick look at the headline, well, revenue did miss slightly. We can see earnings per share, that was a massive beat. Where EPS was up 86% year-over-year, revenue up 12. And some of the important metrics which are closely looked at by analysts, we can see here monthly active platform consumers. That increased from 180 million to 208, growth of 16% year-over-year. And we can see trips they increased 18% to almost 3.9 billion during the quarter while users completed around 6.2 trips per month. The most important detail here is that user growth contributed most of the increase. Frequency per consumer that only rose 2% leaving further upside if existing users begin using more Uber services. And we can note that gross bookings well they reached 58 billion increasing 24% in reported terms 22% in constant currency. Revenue well that increased 11 or 12% again depending on which way you look at it. It does represent a slowdown from the high teens growth rates that have been recorded last year. And we can note the gap income from operations that increased 30% adjusted EBIT DA well that was up 33% and non-GAAP operating income that was up 40% year-over-year. And numerically operating income reached 2.14 billion while operating income as a percentage of gross bookings expanded from 3.3% to 3.7. Non-GAAP EPS will then increase 35% to 81%. GAAP EPS grew even faster. Although investment and tax related items can make gap comparisons a little bit volatile and free cash flow that rose to 2.8 billion we can see up 13% while operating cash flow increased by 12. Now analysts are expecting forward revenue growth to be around the 15% level. EBIT dollar growth around 28% and long-term earnings to sit around 33. Yet Uber trades around 21 times forward non-GAAP earnings 13 times when we look forward EBITD DAR and in fact a forward PG one of the lowest we've seen on this channel when analyzing companies sitting at 65 with its forward enterprise value to EBIT DAR multiple that's fallen close to the lowest point when we look at the last few years and we also have the delivery hero transaction that also expanded Uber's local commerce platform increased its addressable markets and created more opportunities to cross-ell mobility as well as delivery. But acquisitions, they can create execution risk and autonomous vehicles could eventually alter the economic relationship between platforms, fleet owners as well as the riders. And when we take a look at the DCF model, we can see we get a value using the lower rate of 8% $125. That does indicate some nice upside. We're talking 81%. Now, the medium and high cases here reach $141, $160. But these outputs as always shouldn't be treated as precise target because Uber's current free cash flow base it's still relatively new. You can also note most recent year it was up 42% 4K 193 on a reverse basis that sits very low. We're talking negative minus1% where when we take a look at where the share price is today we're talking a massive margin of safety of 45%. and Wall Street with their very wide range of 70 to $150 have an average target of 104 that gives currently around 44 45% upside. So Uber it's one of the stocks today because it offers the fastest growth and potentially one of the largest upsides but also the widest range of possible outcomes. I'd add gradually not assume that one model here eliminates complete risk. Then we move on to Visa which is one of the most profitable and durable business in the entire global economy is up barely year to date 5% where we get a strong buy from Wall Street weaker one from seeing Alpha. They reported their earnings not too long ago and we can see they've now gone from 52- week lows to near all-time highs at 374. And then their most recent quarter well we can see here net revenue that was up 14% to 11.6 billion. Non-GAAP net income that was up 8% while non-GAAP earnings increased 11% to $3.32. Payment volume always good to look at these key drivers that was up 10%. Process transactions that also increased 10% and crossber volume excluding intrauropean transactions grew 12%. In fact, total crossber volumes that increased 13% demonstrating the international travel and global commerce still remains healthy. And Visa also has around 5.2 two billion cards worldwide, an 8% increase from the previous year. But the most remarkable numbers, as you'd expect with Visa, are the margins. They converted 11.6 billion of revenue into 6.9 billion of operating profit. And after tax and other expenses, it generated 5.6 billion of net income with a 48% net margin. That is a direct contrast with the hyperscalers. Visa does not need to build data centers, own factories, or continually replace expensive computing equipment. And Wall Street, they expect around 12% upside over the next year, $414 target, although the more bullish analysts see it as high as $450. Now, in terms of growth expectations, forward revenue that sits around 12%. We've got EBIT DAR very similar. EBITD as well sitting around 12. Long-term EPS sitting at 13 1/2%. And also good to see free cash flow in a similar region 13.4. Something worth pointing out as well that Visa is buying bioatch for 2.4 billion expanding its exposure to fraud prevention and cyber security as AI makes digital scams a lot more sophisticated and it's currently trading around 25 times forward earnings. It's slightly below their 5year of 26.5. So you could argue perhaps slight undervaluation. And when we look at the blue tunnel from simply safe dividends, we can see it is sitting towards the low end. Now as always, blue tunnel here represents fair value intrinsic price. So reasonable signal perhaps slight undervaluation. But over the last 5 years, Visa has given especially in the more recent period investors the opportunity to buy this in a undervalued level. And the dividend yield while it's almost perfectly aligned with its historical norm overall indicates here that Visa looks to be reasonably valued rather than deeply distressed. And using my low case of 10% cash flow growth, it produces a value around $386 per share. The base case comes to $437 and the high case $495. The reverse DCF here suggesting the current price requires around 9.3% annual growth and at a price around $369. The base case offers around 18% upside. But the low case it only offers around five. It means the investment works. If Visa maintains low teens growth, it offers less protection if revenue and free cash flow slow permanently into the high single digits. Visa, therefore, it's a company I'd continue buying in tranches. But the other payment network is growing faster, trades further below its historical valuation, and remains my largest individual holding. But before we talk about Mastercard, let's cover McDonald's. And its presence may surprise people, but it provides something the other four companies we're discussing today does not. income as well as potential resilience during a consumer slowdown is down around 12% year to date trading pretty much around 52- week lows where we do get a double buy rating but both of them on the weaker side in fact below four out of five and in their most recent earnings which was reported this week systemwide sales increased 5% to around 37 billion consolidated revenue was up 4% and adjusted EPS that was up six an important metric to look at is in fact their global comparable sales That was positive but the US business remained underwhelming US comparable sales that only increased around8%. And management well they also admitted the performance in its largest market was falling short and they pointed a new present of McDonald's USA but the concern here is not simply the low headline growth rate. Customers paid more for their meals but traffic declined during the quarter. Now in terms of headline numbers they did beat on EPS. They did have a slight revenue miss where they were both up year-over-year, but we're talking around mid single digit. The strongest part though of the story was the digital loyalty. Sales to loyalty members, well, that exceeded over 40 billion in the trailing 12 months. And active loyalty users increased 13% to nearly 220 million, giving McDonald's a direct channel for promotions, personalized offers, and repeat purchases. Now, in terms of Wall Street and their expectations, well, they see near 20% upside over the next year. $320. Although again, like most stocks, the range is fairly wide. 250 low and 407 on the upper side. And we can see forward revenue growth that is expected to remain below 5% with forward earnings growth sitting somewhere around the 6 to 7% region. These numbers are respectable. Bear in mind, McDonald's is a mature defensive business, but they're obviously materially slower than the likes of Uber, Visa, Mascard, as well as S&P Global that we're going to get on to shortly. The stock though does trade around 20 21 times forward earnings well below its 5year that it sits around 24 and its yield looking very strong pretty much the highest is offered in at least the last 5 years sitting at 2.8% 8% compared to their 5-year at 2.3. This indicates a potential double undervaluation signal. And as we highlighted, yes, they beat on EPS, but given they miss revenue, you could argue the decline overall with McDonald's is understandable. But ultimately, the business here hasn't collapsed. And if we do look at the blue tunnel, we actually get to see an undervaluation signal, something we've seen over the last few months. Zoom out to the last 5 10 years. Again, you do get opportunities, but not as frequent as we see with other companies. McDonald's typically tends to trade either at a fair value or somewhere sitting alongside at a premium. Now, my standalone DCF uses around 10% growth. And even using that, we get a value of $266. That's pretty much identical to the current price today. However, if we do look at some others, we've got here historical multiples as well as the dividend discount model. They're both optimistic, creating a blended intrinsic value around $310. It gives around a 13% margin of safety, but the cash flow valuation prevents me from calling this stock dramatically undervalued. The bull case here is that consumers trade down from more expensive restaurants during economic weakness. The risk is that value conscious consumers now view McDonald's itself as expensive. That's why for me, I'd buy McDonald's selectively, a modest tranch around current levels with great enthusiasm. if another broad sell-off pushes the valuation lower. And number two is Mastercard. One of my largest individual stock holdings and one of the highest quality businesses in my portfolio. This one actually not that great from a year-to- date perspective. Pretty much flat. Although we can see it wasn't too long ago that it was near 52- week lows, now heading towards 52- week highs, sitting around $600. We get a strong buy rating from Wall Street, near strong buy rating from Seek Alpha. And in their most recent earnings, we can see net revenue that climbed 14% to 9.3 billion, while adjusted operating expenses that actually increase at a slower rate of 11. Operating leverage that helped adjusted operating income rise 16% and expanded the adjusted operating margin to around 61.1%. Adjusted net income as well that increased 18% while adjusted EPS that rose 21% from $415 to $54. Again, important metrics to look at here. We can see payment network that increased 10% while value added services and solutions that revenue grew 20%. This second segment here includes cyber security, identity, fraud prevention, consulting and data services, businesses that deepen Mascar's relationship with financial institutions and switch transactions, they increased 9% while the number of Mastercard and Maestro cards increased by around 5%. Now, Mastercard, it produced 5.6 6 billion of operating profit and 4.4 billion of net income from 9.3 billion of quarterly revenue. And Wall Street, they see a fairly modest 16% upside over the next year, $662 target. We can see here the higher end 735 where their forward revenue growth expect around 14%, we can see both EBIT DAR as well as EBIT sitting in the 15% region and forward earnings per share that's expected to grow near 16%. longerterm earnings growth that's expected to be at a very similar level. Although current free cash flow growth little bit lower at 12.6 and Mascard has built a long history of exceeding earnings expectations. That consistency partly explains why the market normally awards it a premium valuation and today in fact the forward price to cash flow multiple is around 27 times compared with a historical median near 30. We've also got a forward P that sits around 27 times. 5-year average sits at 31. So Mascard is not conventionally cheap, but it's meaningfully cheaper than investors have historically been willing to pay for the exact same business. And on the blue tunnel, we do get a very slight undervaluation signal. Although this is something we have seen pretty much from the beginning of the year go over the last five or even the last 10 years. Very very rare to see this situation for Mascard more often than not either at a premium or in fact at a reasonable signal. Now my lowase DCTF using 10% growth produce an intrinsic value of $590 base case $685 high case at $791 and at 571 in the market price today while the base case offers around 20% upside reverse DCF sits around 9.5% annual growth. Visa offers a slightly lower absolute multiple and remains an exceptional company but Mascard it combines faster expected growth with a larger discount to its historical valuation. That's why if I really had to be selective, I'd rank Mascard slightly higher than Visa. And then moving on to the fifth stock, it is S&P Global, where shares are down more than 20% this year. And it remains far below 52- week high, in fact, near 52- week lows where we get a very interesting system here. A strong buy from Wall Street, a weaker buy from Se Alpha with a sell from Quan. Wall Street, well, they see around 25% upside over the next year, $517 price target, which actually isn't too dissimilar from the upper end. Lower end, interesting to see, $444, which is actually higher than the current share price today. And we can see second quarter revenue, that was up 11%. Adjusted operating profit, that was up 15. And earnings per share, that was up 23% year-over-year. adjusted operating margin that also expanded nicely to 54.3% showing that the company continues extracting more profit from each dollar of revenue. And ratings revenue increased 17%, indices grew 20%, market intelligence increased 6% and energy revenue rose three. And fascinating to see that quarterly revenue has approximately doubled from just over 2 billion in 2021 to more than 4.1 billion today. The company while is also more diversified than many investors realize ratings remains important but market intelligence indices and energy provides several distinct revenue streams. The most in fact relevant current catalyst is ratings. Total build issuance increased 25% to around 1.27 trillion. S&P Global while they say hyperscaler related build issuance reached 169 billion during the first half of 2026 and was already outpacing its fullear estimate. It creates a fascinating relationship. Big tech is spending enormous amounts on AI infrastructure and some companies are issuing debt to finance it. The spending itself may pressure the hyperscalers own free cash flow while generating additional ratings activity for S&P Global. This broader question, who ultimately captures the economics of AI is important. The following clip here from Dan Niles argues that the most durable value may sit below the model providers themselves. If you're using the right model for the right thing, you don't need a Ferrari to go to the corner store to get milk, right? A Ford will work just fine. And so if you're going ahead and you're starting to split the workloads that way, I think over time, my belief is that the model layer becomes more of a commodity. And if you go ahead and you're on Azure or Google Cloud Platforms or, you know, whatever, those services will route whatever you're trying to do to the best model available for the task. And I think in that scenario, yes, anthropic and open AI become more commoditized over time and the value acrews to more of the infrastructure players, which includes the cloud platforms and semiconductors. SMB Global is not a direct infrastructure provider, but it can participate indirectly by rating the debt used to finance the buildout. Now, the weak share price is not completely irrational. Management's current guidance points to organic growth around 6 to 8% adjusted earnings per share where they're expected to grow 10 to 12% alongside continued margin expansion and the stock trades around 22 times forward earnings compared with their 5year that sat around 30. That also does give us an undervaluation signal when we look at the blue tunnel. Zoom out to the last 10 years. Again, very very similar pattern between most of the stocks we've covered today. They're sitting undervalued. However, historically they've traded at either a premium or in a reasonable level. Now, my low case values of shares around $484, the base case 564, highase 656, and the reverse DCF suggest the markets price below 6% annual cash flow growth, an expectation that I personally believe is too pessimistic. And using the middle case, where we get a 27% margin of safety. Now, Michael Barry may be right that low volatility and momentumdriven leverage could eventually amplify a market decline, but the historical evidence does not support treating a 1987 star collapse as the most likely immediate outcome. We can see participation that's broadening. Smaller companies are out forming and the market is no longer being carried exclusively by the Magnificent 7. In fact, the more credible concern is that big tech has become more capital inensive, more sensitive to interest rates and more dependent on AI demand, remaining extraordinary. Now, I think that Uber here does offer the highest growth and potentially the largest upside, but it also carries the highest execution and disruption risk. Visa, well, it remains an exceptional assetike cash machine, trading close to its historical valuation. and McDonald's. It offers income and potential recession resilience. Although it standalone cash flow valuation is already close to the current share price today with Mastercard combining stronger growth with a larger discount to its own historical valuation and remains one of my larger holdings. SMB Global that also offers the strongest balance of business quality, valuation compression, incredible upside even under a more cautious scenario. Now, personally, I'm not selling excellent companies because one famous investor sees a possibility of a crash. I'm keeping cash available, buying in tanches, and focusing on companies I already understand. But let me know which of these five stocks you'd buy first, whether you believe Var is wrong, simply early, or identifying a risk that the rest of the market is ignoring. And don't forget, you can sign up to the weekly newsletter. We drop one every single week covering severely undervalued stocks as well as what's going in the market by clicking on the pin comment below. You can read all of these straight away. More importantly, have a great day.