This Sale Won't Last – 5 Stocks Worth Buying

[01:00:00:03 - 01:06:27:19] Lucky for us, a couple of weeks ago,   the market had gone on sale. The corrections hit,  and some of the best businesses in the country got   marked down pretty hard. And a few of them have  already started to climb back up. So this window,   it's not going to stay open for long. But there's  one that I want to start with. So this company has   $638 billion in signed contracted revenue. Money  customers are already on the hook to pay. And the   stock is still trading 57% below its high. So it  seems like the market is ignoring these receipts.   Because this is exactly the kind of company that  I'm here to talk about today. So they're going   to be best in class businesses that happen to  be on sale that Wall Street just kind of sort   of got bored with. And I don't want to waste your  time. So hey, I'm Brian. If we haven't met before,   I retired six years ago at the age of 46 after a  corporate career with Target and Amazon and being   extremely smart with my investments. And now I  want to turn that hobby into something that I can   at least share with you. Because having freedom  over your time, it's the best thing there is. Now   before I just start rattling off names, here's  the one idea that makes this whole video make   sense. Most stocks trade on a guess. Wall Street  estimates what a company might sell for the next   year. And it prices that stock on that hope. So  the moment the market gets a little bit scared,   it stops trusting that guess. And good companies  happen to fall pretty hard. But a few companies   don't just trade on a guess. They trade on a  receipt of contracts. So when a business signs   a customer to a multi year contract, that revenue  gets booked before a dollar of it is actually   collected. That's money the customer is legally on  the hook to pay. And the companies that I'm buying   right now are priced as if that isn't even there.  Which brings me back to the company from the top   of this video. The one that's sitting on that  $638 billion of signed revenue. And it's Oracle.   The database company that your bank is probably  running on. And here's why that number is the   whole story. A year ago, Oracle's contracted books  at around $138 billion. Today it's $638 billion.   And that's not a typo. It grew more than four  times over a single year. So to put $638 billion   into perspective, that is roughly what Nvidia,  the company at the center of this entire AI boom,   that's what it was worth back in 2021. So  that was their market cap. And Oracle isn't   valued at that. That is just the contracts  that they already signed. Unfortunately,   most of it came from just one deal. And it was  a $300 billion agreement to supply computing   power to open AI. Over five years, which is about  $60 billion a year, roughly the size of Oracle's   whole business today. So a single customer  is close to doubling the entire company. Now   here's the other side, because there's a little  bit of a catch. To deliver all that computing,   Oracle has to build the data centers first and  building, well, it happens to be pretty expensive.   In fact, their construction spending went from  around $6 billion a quarter two years ago to   roughly $16 billion a quarter now. So that's about  $55 billion across the entire year. And sadly,   that type of spending completely flipped their  free cashflow negative to around $24 billion in   the red. And it's a swing of nearly $60 billion  from where it was just two years ago. So it goes   without saying that Oracle is spending an enormous  amount of cash today just to fulfill contracts   that pay out over the next several years. Which  it then brings us to the real question. If Oracle   is sitting on the biggest order book in its  history, why did the stock fall so hard from   its high? Because a year ago, that open AI deal,  that's exactly what sent it to that high. When the   deal was announced, the market added nearly $250  billion to Oracle's value in a single day. That   happens to be its biggest jump since 1992. Then of  course the honeymoon phase wore off and then the   mood completely flipped. Wall Street did the math  and they realized that close to half of that book   leans on a single customer, open AI, which loses  money and hasn't gone public yet. And this is all   happening while Oracle borrows to build for them  and its cashflow is now running negative. So the   same $638 billion that was treated as an asset on  the way up suddenly got reread as a liability on   the way down. So is that fall justified? Part of  it? Honestly, yes. If you're building on debt for   who might not pay, that contract is only as good  as that customer. And I'm not going to pretend   that the risk isn't real. But here's the devil's  advocate and it's almost absurd. The day before   the open AI deal, Oracle was worth about $241 a  share before a dollar of this book even existed.   And today it's down roughly 40% from that, even  after signing $638 billion in contracts that are   sitting on top of it. So let's say we go ahead and  strip out open AI completely from the books. Even   then you're still buying a bargain because you can  still buy this whole company for a lot less than   what it cost before that deal ever happened. So  for my money, Oracle is a business that the market   just got a little bored with at exactly the wrong  moment because they're really cheap on the sales   that it's already made while it spends to lock in  the sales that it's about to Like right now I'm   accumulating it slowly, on weakness, in small  pieces. Because the chart, it's still a little   broken and I'm not trying to call the bottom.  But the receipt, they happen to be real. And I'd   rather own it while everyone else is just staring  at the price tag not knowing what to do. Now we'll   move on to our next company and this one is a  completely different animal of Inodata. So here's   the one idea to hold onto. In a gold rush, you can  bet on the miners or you can make a big deal. In   many videos. Because every AI company on earth,  open AI, Google, anthropic, all of them is racing   to build smarter models. And to do that they need  one thing above all else. And that happens to be   enormous amounts of clean labeled human check  data so it can train on it. Somebody has to   build out the data and it doesn't matter which  model is going to win the race because they all   buy their shovels from that same short list  of suppliers. So what exactly is Inodata?   [01:06:28:29 - 01:10:17:04] Inodata is a company worth about $2   billion that has quietly become one of the go-to  data engineers for Big Tech's AI. They happen to   be a neutral shovel seller that's sitting in the  middle of the biggest gold rush of our lifetime.   And something happened last year that made being  neutral extremely valuable. So Inodata's biggest   rival is a company called Scale AI and Meta paid  around $14 billion for roughly just half of it.   So to put that into scale, Meta spent about 7  times Inodata's entire value just to buy half   of one of its competitors. And of course, the  moment that Meta owned a piece of Scale AI,   its other customers think Google and OpenAI,  well they started to pull their workload away   from them. Because no lab wants to hand its secret  training data to a company that's half owned by a   direct rival. So suddenly, overnight, independence  just went out the window. And what used to be just   a little footnote for Inodata suddenly became its  single biggest selling point. And of course the   business is booming. Revenue grew 58% just last  quarter. Its 12th straight quarter of growth.   With management guiding to at least 40% for the  full year. And of course here's the part that I   like most. A year one giant customer was more than  half of everything that Inodata sold. Today that   same customer is down to about a third. And it's  not because it shrank, but because so many others   grew around it. Including a second big tech giant  that went from almost nothing to nearly a third   of revenue in a single year. So picture the one  customer who used to be the whole story. Well now   they're just one of eight seats that are sitting  at the table. Now to the flip side which is very   important. This is a small company so the stock  can swing very hard in either direction. And it's   not a very cheap buy. And it trades at around 46  times its earning because everyone can already   see the growth. And on top of all of that, the  people betting against it are betting loudly.   Short interest sits near 14% of the shares and it  has been climbing very fast. So when you're like   me and you're buying Inodata, you are buying the  right shovel seller. But unfortunately it happens   in the choppiest corner of the market. So why  exactly did it fall from half of its high? Well   it's not because the business broke. It just  posted its best growth yet. Honestly I think   it fell for three very plain reasons. It's  a small fast-moving AI name that gets sold   really hard whenever the market sours on anything  AI. And of course short sellers piled in betting   the growth is going to slow. And of course it  didn't help that its own executives began to   sell a chunk of stock near the highest of highs.  Including the founder CEO cashing out at around 24   million dollars. And some of that is very fair.  Because 46 times earnings is a very rich price.   And insiders selling into strength is a real  yellow flag. But none of it is a crack in the   business. It just happens to be a re-rating of  the mood and the price. So overall the machine   underneath isn't broken. And that short bet has a  little bit of a flaw in it. The one thing they're   leaning on the hardest is that InnoData depends  too much on a single customer. And that happens   to be the very thing that they're fixing the most.  Because like I said that customer has gone from   more than half of the company to about a third  in a single year. While the rest of the big tech   just keeps lining up behind it. So how exactly  do I play this? Well InnoData is the highest risk   name on my entire list. And I treat it exactly  that way. I have it as a very small position.   So the kindest size so that a bad month never  really hurts you. Because this stock is going to   be violent. Either way up and down. But it is that  neutral shovel seller in an arms race that isn't   slowing down anytime soon. And I would rather  own a little of that than none of it at all.   [01:10:17:04 - 01:11:58:23] And when quality names go on sale, the real   tell isn't always in the discount. Sometimes it's  who's buying it while everyone else is looking   away. And someone who has mastered exactly that  is Howard Marks, the investor that Warren Buffett   drops everything to read. That brings us to the  portion disseminated on behalf of Mayfair Gold   Corporation, where Marks and his Oaktree Capital  own roughly four and a half million shares. And   Mayfair happened to be the only pre-production  gold stock that Oaktree holds. But the ownership   picture is the standout. Insiders hold about 35%  of Mayfair, institutions another 28%, and high net   worth investors 20%, leaving less than a fifth  for retail investors. And they all keep buying.   Insiders have put around $20 million into their  stock in just two years. And the CEO recently   added another $400,000, and Carson Bloch's Muddy  while they hold north of 17%. So what exactly are   they buying? A developer climbing the Lassonde  Curve. The FenGib project in the Trimmins Gold   District just posted a pre-feasibility study with  an after-tax value around $652 million Canadian,   a 24% return, and first production targeted for  2030. And management already built and ran mines   like Detour Lake, which is in that concentrated  ownership, heavy insider buying, and a near-time   producer in Canada's top mining jurisdiction.  That's the kind of setup that most investors are   looking for. Plus, they are located on the New  York Stock Exchange and are available on most   every exchange out there. As always, do your own  due diligence and learn more about Mayfair Gold   down in the link in the description. [01:11:58:23 - 01:18:50:18]   Now I'm going to move on to the company that  takes that receipt idea from the very top and   makes it almost too obvious. And that's Sterling  Infrastructure. Remember how I said a few names   are trading on a receipt instead of a guess.  Sterling is the cleanest one on this entire list.   So what do they actually do? Well when a tech  giant decides to build a data center long before a   single server even begins humming, somebody has to  move what is basically a small mountain of dirt.   They need to grate it out flat. They need to pour  the foundations and now wire the power into it.   That extremely unglamorous, absolutely essential  groundwork is Sterling's entire business.   They don't own the data center. They simply build  the ground that it stands on. And in the middle of   an AI boom that runs on data centers, seems like  a pretty good place to be. So I should probably   share the receipt. So Sterling's backlog, the  work that it's already been hired to do but hasn't   finished yet, now sits north of five and a half  billion dollars. And it grew by half again in a   single year. That is more work already signed than  the company built in the last two years all put   together. Sitting in the order book before they've  even broken ground on most of it. And the growth   underneath it is pretty much just as loud because  the revenue nearly doubled last quarter. So for   a construction company, those are not normal  numbers. This has quietly become one of the   most profitable, fastest growing infrastructure  names in the country. And it carries no net debt   with a return on equity around 40%. So here's the  real a company growing like that with a receipt   like that is trading at about 46% below its high.  And of course here's the twist and it's a good   lesson. Last year, Sterling bought an electrical  contractor so it could now offer the groundwork   and the wiring all on the very same job. And that  electrical work runs at a thinner margin than   Sterling's core dirt business. So when you blend  it all in, the segment's operating margin slipped   about four points. And of course Wall Street saw  the dip and they decided the golden business was   losing its shine. So a lot of them begin to sell.  And the management's own words broke it down by   simply saying it's purely mix. They just happened  to bolt a slightly less profitable business onto   a very profitable one. And the average overall  just came down a little bit. Now of course the   sell-off, it's not crazy. The stock had a run  for a long time and a long way up and it was not   cheap. It still trades nearly 40 times earnings.  And the blistering growth is set to cool down from   around 60% this year toward the low 20s next  year. And of course those are real reasons to   want a lower entry. But the core business is still  elite and the receipt just grew by half. And the   very acquisition they got punished for is the one  thing that lets Sterling win even bigger because   they get more complete jobs. So we should kind  of sit with that for a second because the market   sold Sterling because one margin number ticked  down just a few points. And in the very same   quarter its order book grew by half. And this is  exactly why Sterling is a name that I hold with a   little bit more conviction than most on this list,  even though it's not statistically cheap. It's a   net cash elite margin builder that's sitting on a  multi-billion dollar receipt. And it just happened   to get sold off for adding a business that makes  it stronger. Of everything that I'm covering   today, this sell-off is the one that makes the  amount of sense to me. And that's okay because   that's usually where I find better opportunity.  So Sterling happened to build the ground that the   data center sits on and this next company builds  the power that feeds it. So meet MassTech. And   of course here is the one idea. Every data center  we've been talking about needs one thing before it   can compute anything else. And that's electricity.  And it happens to be a staggering amount of it.   For about 20 years America's power sat almost  flat. A straight line that was really going   nowhere. And then suddenly AI showed up on the  scene. And now the power that those data centers   pull off the grid is set to climb real hard. And  on the current forecasts it roughly triples by the   end of the decade. And I think that we all get  it because the grid that we have it was never   built for that. So someone has to string the  new transmission lines, raise the substations,   and wire the connections that carry all of it. And  that someone is MassTech. And just like Sterling,   MassTech runs on receipt. So the backlog, the  work that's already signed and under contract,   sits north of 21 billion dollars. For that company  it's an all-time record. And it grew 30% in a   single year. That is the power side of the AI boom  and it's already booked. So in this past quarter   the company beat and actually raised its guidance  for the year with its two biggest engines.   Power delivery and clean energy. Both running  extremely fast. So sort of like the other ones,   why exactly is a company sitting on a record  backlog down nearly 40% from its high? And   here's the honest answer. And it's a little bit  different from Sterling. When MassTech reported   one of its smaller divisions, the one that builds  cell towers and telecom lines, hit an air pocket   as a couple of really big carriers began slowing  down their spending. So yes, the power business   is booming. But that one weak corner spooked the  entire market and the stock sold off hard in a   single day. On top of that, a lot of that  record backlog is scheduled for next year,   not this one. So the payoff sits further out than  the impatient money really wants to wait for. Now   the drop for this one, I can defend a heck of a  lot more than Sterling's. The chart is broken and   the momentum happens to be against it. And the  strongest cash, well it doesn't even land until   the back half of this year. And unlike net cash  Sterling, this one carries real debt. So there's   less room for having any error. So in my mind this  is not a backup the truck moment. Instead this   moment is where the tail is wagging the dog. The  market sold MassTech over slowdown in cell towers.   Well the part that actually matters, like the  grid backlog feeding the entire AI build out,   just hit an all-time high. So you're telling me  a telecom hiccup grabbed the headline while the   real engine quietly just kept booking the work.  Well hey I'm okay with that. So where exactly   does that leave me? Well on MassTech I'm waiting.  I'm not rushing. I love the story. The grid has   to be rebuilt and MassTech is one of the few that  can actually do it. Then it just its way deeper   into data center power. But the chart is a little  broken and the best cash is still months away. So   this is one where I'm going to start small and I  add it on weaknesses. Letting the setup come to   me instead of trying to chase it. [01:18:50:18 - 01:23:33:27]   us to highest quality business on the entire list.  And easily the strangest story of the bunch. And   that happens to be AppLovin. Every other name  that we've looked at today is cheap because   it's a builder. It's pouring money in and it's  waiting years to get paid. AppLovin is kind of   the mirror opposite of that. It runs the software  that decides which ad you're going to see inside   of an app and more and more inside online stores.  Powered by an AI engine that keeps getting sharper   Now what makes it special is the economics. For  every dollar of revenue that comes in the door,   close to 80 cents falls straight through as  operating profit. So to put that into perspective,   even Visa, a company almost everyone files under  money machine, runs an operating margin in the   mid 60s and AppLovin runs higher than that. So  this isn't a cheap builder waiting to earn. It's   a cash machine that really, really went on  sale. And it did go on sale in a hard way,   down more than 50% from its high. The business  underneath grew revenue almost 53% last quarter   and it throws off so much cash that it casually  buys back its own stock. So after that massive   fall, you're paying around 21 times next year's  earnings for one of the most profitable software   companies anywhere. At a multiple that this stock  almost never carried back when it was the market's   darling. For this kind of quality, this is not  expensive at all. So why exactly did a cash   machine like this fall in the first place? So for  more than a year, AppLovin lived under a cloud.   Short sellers published reports accusing its ad  engine of shady data practices. And eventually,   the SEC opened an investigation and the fear  that the whole business was built on something   illegal followed the stock the entire way up  and the entire way back down. Then on the very   same day that it reported earnings, the company  revealed the SEC had closed that investigation   with no action and no wrongdoing was found. So the  single biggest risk to the company was completely   lifted. And of course the stock dropped anyway,  around 20% that day, because in that same report,   growth came in just a little bit below plan. And  it happened to be its first guidance miss since   it ever went public. And here's where I'll kind of  argue against myself, because the sell off itself   isn't baseless. This was a stock that was priced  for perfection. So even a small miss gets punished   really hard. And the growth is also cooling off  a guided next quarter to something like 47%. It's   still an enormous growth, but it's slower than the  street wanted to see. And the next big is supposed   to come from an ecommerce ads business that had  only opened up to everyone just this summer,   which none of us has watched scale, at least  not yet. And of course, those are just open   question marks. But if you step back and look  at what actually happened that afternoon,   the company happened to get the best possible  news and the worst received number all in the   same report. And I think that the market only  heard about the number. So let's take a step   back and think about this. The scariest thing that  could ever happen to this company is a regulator   ruling that it broke the law. And instead that was  permanently just taken off the table. And on that   very same afternoon, the stock got marked down  for one soft quarter. Now that's another one that   seemed really odd to me because the market seemed  to overreact to the number that it was expecting,   while they also ignored the huge danger that just  got lifted off of its shoulders. So my honest read   on app loving is that it's the highest quality  name in this entire group. And in some cases,   it's also the most volatile. And I know it sounds  weird to say, but I can hold both those thoughts   at the same time. Because at the end of the  day, this business is still elite. And the   fear that was haunting it for a year, it's now  completely gone. And it happens to be cheaper   than it's ever been in about two years. But of  course, the chart is broken. And it's trading   well below where it used to. And the stock well,  it can still stay a little bit cheaper for a while   because it's in that violent stage. This is  one where I already own a lot of it. And I'll   continue to buy more once it's convinced me that  it's hit the floor. And I think it's coming real   soon. Because when you look at the fundamentals,  this is an impeccable company. We just need the   technicals to catch up to it. So there's the list.  It's five very strong businesses that the market   marked way down, most of them sitting on revenue  that's already signed, it's spent, and it's just   waiting to be delivered. And of course, the charts  are going to do with what they do. And I'd rather   just follow those receipts. Hey, just a quick  reminder that I'm not a financial advisor. And   I do this for educational purposes. And  as always, thanks so much for watching.