The 3 Best Buying Opportunities I Can Find Now

In today's video, I want to talk about the three stocks that I have been buying over the past week, and these are the three stocks that I think are looking like the best opportunities from a risk-reward perspective in the entire market right now. Now, a quick update before we get into the video, you can see that I am plugging away on my back panels to try and reduce the echo in here, and I have also ordered a brand new camera setup. So, we're making progress at the new house, and thank you again everyone for the kind comments, and for not judging me too hard for having to use my webcam again, which I have not used in about a year now. Now, getting back over to the video, again, I want to discuss three stocks that I have been buying this week. Now, if you watched my last video, right at the end, then you already know two of them. However, I wasn't able to give a full update on even those two stocks that I am buying because I just quickly discussed them in my quick thesis. So, in this video, I want to dedicate it to my updated thesis, some new news that has come out with these businesses, and why I am continuing to buy them, and ultimately why I think that they are still looking like such good risk-reward investments today. So, with that being said, let's get right into it, and the first stock is the ticker symbol ROAD, which is Construction Partners. This is the number one stock that I have been adding to my portfolio because the stock is down roughly 28% after reporting what I thought were very good Q3 results. They reported their Q3 results on August 7th, and if you guys remember back then, the stock was up 20% on the day they reported because they had record revenues, and pretty much every metric across the board, even their profitability, grew by about 30% on a year-over-year basis. Then, they also reported a record backlog. So, their backlog of revenue for next year is also hitting a record high. So, again, the stock was up 20% after that earnings report, but now it has sold off roughly 30% just over the past couple of months, and it's down almost 40% from its all-time highs. I I think that this is at all justified. So, we're going to talk about some of the bear thesis and cases against Construction Partners in this video and also the rebuttals and ultimately why I still have conviction and I have been buying so much more. Construction Partners now makes up about 5.4% of my total portfolio and if the stock remains in this range that I'm going to continue increasing my allocation to it as I continue to earn money and make more cash because I truly believe that this stock does not deserve to be down here. So, what I want to do now is run you through some of my updated research. So, let's officially start the Daniel Prong slideshow for this video. All right, so what this first screenshot is showing us is that Construction Partners has raised its guidance every single quarter over the past year for both revenue and EBITDA. The current guide is now $3.66 billion in revenue for this fiscal year and $565 million of EBITDA. In the third quarter, which again was the last quarter that they reported in August, the CEO said demand for both public infrastructure and commercial construction projects remained healthy throughout our markets driving a record backlog of $3.36 billion. We anticipate strong organic growth again in the fiscal year 2027 and we already have approximately $140 million of acquisitive revenue carrying over for next year. Now, in addition to this, Construction Partners has completed three acquisitions since their last earnings report and these acquisitions by my best estimate will probably grow the revenue by about 5 to 7% over the next year already. So, they are continuing to grow the business and acquire more businesses on top of what seems like will be strong organic growth for their next fiscal year and when Construction Partners reports their earnings in November, they should give us a guide for their full year 2027 results and what they are seeing. So, that's going to be a pretty interesting earnings report as well. But now, let's move on to the next screenshot and now we are going to start getting into the bear cases against construction partners and talking about why the stock has been selling off so much. The first reason is because of increased inflation and oil prices. Construction partners, for those of you who may not know, is a business that maintains, repairs, and builds roadways across the United States. That is what the business does. It provides critical infrastructure and maintenance across its key markets. I also have a full video dedicated to my thesis on Construction Partners and what the business does on my channel and I'll put a link somewhere on your screen right now. But what this also means is that the market believes that when inflation is high and oil prices are rising, then this business's costs go up dramatically, which also means that its margins should be coming down and ultimately its profits should be coming down. And that is one of the reasons why the market has been selling it off so much on increased oil prices and inflation data. However, this is what the CEO said in the most recent earnings report on the conference call. "We are experiencing normal cost adjustments with labor, concrete, pipe, and we have a pass-through model. There's really nothing that's affecting our business in an outsized way. And in addition to that, I have created a chart of roads' gross and EBITDA margins from fiscal year 2021 to this year's current guide for margins. Management used to do fixed-price contracts pre-2022. And then as we all know, inflation in 2022 was very high, getting all the way up to 9.5%. And this hit Construction Partners' margins very hard. And its profits did actually decline in that year. Margins dropped dramatically in 2022, and since then they have been recovering and are now at a brand new all-time high with a guide of 5.4% EBITDA margins for this year. 2022 is when Construction Partners started implementing their cost adjustments in their contracts, which allowed them to pass on increased costs and maintain and expand their margins. They learned their lessons from the inflation pressures of 2022, made changes, and now are a much more resilient business. Now, the next major risk that I have been seeing bears talk about is interest rates because Construction Partners does have quite a bit of debt on its balance sheet today. But, in terms of interest rate increases, a 1% rise would cause Road to see a $17.6 million change in its interest payments over a year. The Fed has increased interest rates by 0.25% so far, with another 0.25% increase expected by the end of the year. Road earns about $565 million in annual EBITDA and does about $324 million in owner's free cash flow per year. So, they have more than enough profits to absorb a slight increase in interest rates. So, to put it simply, I do not think that rising interest rates justifies the stock being down a 30% and really will not be that much of a headwind on the overall business. So, now let's move on and talk about Road's guidance for 2030. They are expecting to compound the revenue by 15% annually to achieve over $6 billion in revenue for their fiscal year 2030. EBITDA is also projected to grow faster than the revenue through margin expansion and grow by 18% annually out to 2030 to over $1 billion in EBITDA for that year. Now, I also know that a lot of people do not like EBITDA, so I'll show you what I do here with this metric. Road shows us that about 80% of their EBITDA converts into operating cash flow. Then, they have also said that 3% of the revenue is spent on maintenance CapEx. This works out to Road having $324 million of owner's free cash flow for 2026, growing to $644 million in 2030. This guidance also does not include any transformational acquisitions, which are larger acquisitions that materially grow Road's business. But they are probably going to do at least one transformational larger acquisition out to 2030, which will boost pretty much every single metric that they have guided for by 2030. So basically, if they can actually achieve at least one transformational acquisition by 2030, then I think that their guidance is going to be beaten once again. So now let's head over to Stock Unlock very quickly, and let's take a look at Road's price to EBITDA. And here we can see that it is now dropped all the way down to about 10.33 as of the close on Friday. And the last time that Road was trading for a similar price to EBITDA was all the way back here in September of 2020. Now, if we can take a look at Road's share price back in September of 2020, this was a $17 stock. And the stock is up 388% since then. And again, this is the last time right here that Road's business was trading for a similar price to EBITDA. What's also interesting to note is that Construction Partners underlying business was not growing really at all back in 2020 because COVID was happening and the world was shut down. So they were seeing headwinds on their overall business. Or in other words, the last time that Construction Partners was trading for the same price to EBITDA, the business was not growing at all. Whereas today, they are actually seeing a record backlog. They're still growing by about 30% per year, and they're expecting to have another strong year in fiscal year 2027. So that doesn't really make sense when I think about it, and I think that the market is now being way too pessimistic on this business. Now before we move on to our DCFs, I quickly just want to show you that Construction Partners is trading for a $4.94 billion valuation in the market today. And as I said earlier, this business is expected to do about $324 million of owner's earnings this year. That means that it is trading for about 15.2 times owner's free cash flow for this year, which I think is a very fair multiple for a business that is providing such critical infrastructure services for the United States and is also continuing to grow by well over 20% per year. Now, lastly, let's go over to my DCF on Road. And I do like to use EBITDA because this is the metric that the market follows most closely. And over the next 5 years, I'm saying that they will compound their EBITDA by 19% annually, which is their own guidance, which also leads to it about a billion dollars in EBITDA for fiscal year 2030. I also have an exit price to EBITDA multiple of 15, which if we take a look at Road's long-term median, it is right at 15. So, this DCF is saying that Road will eventually get back to its historical average price to EBITDA multiples. Now, with these inputs, I get a 27% compounded annual growth rate to Road's share price, a $178 fair value, and a future share price of $287, which is a total return of 231% over the next 5 years. So, to put it simply, if Construction Partners can actually achieve their 5-year guidance and grow EBITDA by 19% annually and simply get back to their long-term average price to EBITDA multiple, then this stock could produce tremendous gains over the next 5 years. Now, what I also want to show you is if we drop down the EBITDA growth rate to 13% annually, which means that they would dramatically miss their guidance over the next 5 years, and we put the exit multiple all the way down to 12, which is well below their historical averages, then we still get a 15% compounded annual growth rate to the share price over the next 5 years, which I think is still a very solid return on metrics or inputs that I think are also extremely conservative because Construction Partners does not have a history or reputation of missing their guidance. In fact, they have a reputation of sandbagging their guidance and hitting it about 2 years early. So, I am betting that this business is not going to miss its guidance once again and actually beat its own guidance. And if they do, then I think that the stock is very, very cheap today and looks like one of the best buys in the market, at least in my opinion. And that is why for me, I have been continuing to buy so much Construction Partners and make it a larger position in my portfolio as the share price falls because as the share price falls, the risk is actually reduced and the future returns are actually increasing. So, that is one of the reasons why I am continuing to buy it. I think that the bear cases against the stock don't really make sense right now. I think that they are overblown and ultimately I do not think that the stock deserves to be down 30% after what I thought was a very good earnings report. So, that is the update on Construction Partners. So, now let's move on to the second stock that I have been buying a lot of in the market and this one is BAM or Brookfield Asset Management, which you guys probably already know. I also did a full dedicated video to Brookfield Asset Management here on my channel not that long ago, which covered its investor day and also explained the highlights from the investor day and why I thought that the stock was still looking cheap. I continue to believe that Brookfield Asset Management stock looks very cheap and if you guys know me, you know that I am not someone who really does a lot of technical analysis. It's It's not what I focus on. I focus on fundamentals first. But when I take a look at Brookfield Asset Management share price and its historical stock chart, it does look like the stock is starting to bottom out as well. And that's also backed up by, in my opinion at least, the price multiples of this business being very cheap and the stock and its fundamentals continuing to grow very well. So, at some point, I do believe that this stock is going to bottom, obviously, and I I would speculate that the bottom is very close, if not in already. And let me explain why. So, right away, we can see here that Brookfield Asset Management's dividend now is about 4.4%. So, the going in yield on this stock today is 4.4%. That is a very high dividend in the market right now. Now, additionally, one of Brookfield Asset Management's main goals is to continue growing the dividend by 15% annually, which means that the dividend should double every about 5 years. So, in 5 years, this dividend yield on cost of shares today should be approaching about 9%. Then in another 5 years, it should be 18%, then in another 5 years, it could be 36%. This is one of the main reasons why I continue to think that Brookfield Asset Management is the most attractive dividend growth stock in the market right now. It is very rare to see a dividend yield this high that is also projected to grow that quickly. And over the longer term, if they can actually achieve that growth, then the dividend yield on cost of the shares today could be massive. And that is why I have loaded up my TFSA and my RRSP, which are tax-deferred accounts, with Brookfield Asset Management, because I will not pay any taxes on those dividends. I can fully benefit from that, and then drip those dividends back into buying more shares, which should increase the compounded annual growth rate on the stock. So, I think that Brookfield Asset Management is a very undervalued stock in the market today, just looking at its dividend yield and its growth outlook. Now, in addition to that, Brookfield Asset Management's forward price-to-earnings ratio is sitting at 21.7 today. And its long-term median since it IPO'd has been about 26.9 historically. So, it is trading way below its historical median forward price-to-earnings ratio. Now again, this is a forward P/E, and on a trailing 12-month basis, this stock has historically traded well over 30 times earnings, because it is such a high-quality company that pays out pretty much all of its earnings as a dividend. Now, I know that there's also been a lot of fears around the private equity space this year with redemptions and investors trying to get their money out, but this doesn't seem to be applying to Brookfield Asset Management because on your screen right now, you are seeing that this business's overall fundraising is continuing to grow in the right direction. And for 2026, they are expecting to have a record year of fundraising by far. So, Brookfield Asset Management is continuing to attract more capital even despite all of the headlines, negative news, and investor fear in the private equity space. Brookfield Asset Management being able to continue attracting more capital has led to its fee-related earnings compounding by 16% annually since 2020. They did have a little bit of a dip in growth from 2022 to 2023, but the business has reaccelerated hard and it is growing strong now. Over the next 5 years, they're also saying that they believe they could compound earnings by over 20% annually, but the official guide is for about 15% to 17% annual growth. But again, they do see a path to compound earnings by 20% annually out to 2030. Now, I've also been tracking BAM's historical guidance versus its reality and its fee-related earnings are actually ahead of schedule versus its previous targets from prior years. However, its distributable earnings is behind guidance slightly and this is largely because of realized carry, which is earnings on investments, are coming in slower than expected. That said, BAM's unrealized carry is compounding extremely quickly and is already at $1.9 billion. This is very real future earnings that will come through at some point. The timing is a bit uncertain, but when these earnings start to be realized and Brookfield starts selling those investments and realizing the gains on them, then their distributable earnings could grow materially from here. So, now let's take a quick look at my BAM DCF here. So, in this DCF, I am using BAM's earnings over the next 5 years and saying that they will grow earnings by 15% annually, which is on the lower end of their current guidance. I also have an exit price earnings ratio of 25, which is below what the stock is trading for today. And again, historically this business has traded for well over 30 times earnings. And then lastly, I am saying that they will continue to compound their dividend by 15% annually, which is one of the main goals of the business. With these inputs, we get a 17.3% compounded annual growth rate to the total shareholder value over the next 5 years. And I think that these inputs are on the more conservative end. Because again, BAM believes that they can actually compound earnings by 20% annually over the next 5 years, and the multiple has historically been above 30. If we put Brookfield Asset Management's price to earnings ratio at 30 and factor in some multiple expansion over the next few years, and also say that they will achieve their 20% annual earnings growth guidance, then the compounded annual growth rate goes up to 25.8%, which is a fantastic return over the next 5 years. Now, I do think that this is obviously optimistic DCF. So, in my opinion, I think that BAM will probably produce around 15 to 20% annual returns over the next 5 years, which I still think is a very strong return. That is exactly what I am aiming for in my own portfolio, and I think that the going in price today could achieve this with not that much risk, especially considering the fact that BAM is offering around a 4.5% dividend yield on cost today. So, for the stock to produce a roughly 15% annual return over the next 5 years, the share price just needs to grow by about 10% annually. And if they are doing 15% annual earnings growth, then I think that the company's going to be able to do that, and the stock is going to be able to do that as well. So, ultimately what this leads me to believe is that Brookfield Asset Management shares are undervalued in the market today, especially if they can achieve their guidance. But even if they come in on the lower end of their guidance, then I think that the stock is still looking very, very compelling here. That is why I have made Brookfield Asset Management an over 6% position in my portfolio and it's one of the main stocks that I have been continuing to buy. And if the share price does remain below and the market does not see what I'm seeing here over time and the business can continue to grow its fundamentals, then I'm going to continue adding more and more to my portfolio because I just simply think that it is one of the best risk-reward investments out there, at least that I can find, especially since it's been hit with rising interest rates, which I don't really think is going to impact the business all that much on a fundamental level. So, yeah, I think that the setup here on BAM is very attractive and that's why I have continued to load the boat on this business. Now, the last stock that I want to talk about in today's video because it's the one that I have been buying recently is Amazon. Now, again, if you guys know me and you've been watching my channel, this is not going to be a fun or, you know, new video for you. These are a lot of the same stocks that I have been talking about. Sorry, guys. Tuna is demanding pets. Tuna is fully settled into the new house. He loves it here and yes, say hello Tuna. Say hello, everyone. Tuna has made it to the new house and he yeah, he's demanding cuddles. But yeah, getting back to the video, sorry about that. The tangents I I'm telling you, I get stuck on tangents. But I have added more Amazon to my portfolio on Friday, which is actually when I'm recording this video because I do continue to believe that Amazon is undervalued. I think that Amazon should be well over $300 per share right now because this business is firing on all cylinders. It's one of the businesses that I think is most clearly going to benefit from artificial intelligence and given its earnings reports that continue to come out, I do not understand why this stock seems to be weighted down. The market just seems to be weighing it down when its underlying fundamentals are accelerating and compounding very, very well. And I know that Amazon is known by everyone. It's one of the largest businesses in the world, but I truly think that you don't need to be a genius to see that Amazon is an undervalued stock in the market right now that could still produce over 20% annual returns from here if the business can just simply continue to execute. To put it simply, I think that Amazon is looking like one of the best investments in the market right now, at least just in my opinion, because of the fact that it is such a dominant business with such a strong moat, seeing so many tailwinds, and the price today is not reflecting that at all, which is leading to what I think is a very good setup over the next 5 years. So, I do have some new information that I want to share with you about Amazon's business because there has been some new news coming out. So, let's hop into the slideshow now. So, this first screenshot right here shows us that AWS is increasing its pricing on its GPUs by 15%. AWS has also said that they're doing this because there's still so much more demand than supply for compute. And I think that this bodes very well for AWS's continued growth over the coming years and is suggesting that AI demand is remaining incredibly strong. Now, another piece of recent news that has come out is that Amazon is exploring selling chips off its own balance sheet then a leasing them back from the new owner. People are saying that this is Amazon trying to clean its balance sheet or is suggesting that there is an oversupply of chips and that AI demand is slowing down. But, in my opinion, this is the exact opposite of what this is actually suggesting. If you have ever been in the real estate industry, then you know what a sales leaseback is, and that is what Amazon is doing with its chips and GPUs. A sales leaseback is when a company sells an asset to get more cash, then leases that asset back from the new owner so it can still have access to the asset. It gives the company more liquidity or cash, to invest while still having access to the asset. To put it simply, it's a way for Amazon to get more cash while still having access to GPUs. Now, at the same time, another piece of news that has come out recently is that AWS's CEO has said that Amazon is considering more than 100 data centers across the United States. The company has also committed $200 to CapEx, so they clearly need cash to build out AI infrastructure. This is probably why Amazon is doing the sales leaseback, so it can still have access to compute, but also fund its continue AI buildout. So again, in my opinion, Amazon is doing the sales leaseback because demand is too high, not because demand is too low. This morning, AWS's CEO also shared in an interview that AWS's exposure to the frontier models is in the single-digits percentages. This is very good, in my opinion, because it means AWS's revenues and cash flows are not as at much risk if the frontier models fail or cannot meet their commitments. He also said that most of AWS's usage comes from core compute, storage, and inference, not training, which is what the frontier model companies are mostly doing, is trying to push the frontier and train AI forward. This ultimately means that AWS's revenue is very diversified and steady, and I believe that this is partly why Amazon shares were spiking on Friday again. Now, on top of this, analysts are estimating that AWS will produce $177 billion in revenue for this year with growth of 37% then 40% revenue growth in 2027 and 35% revenue growth in 2028. This means that AWS's revenue could double by 2028 and grow to $334 billion. If this happens, then Amazon's cash flows will continue growing incredibly quickly. And you can see why the company is investing so much money into CapEx. So now let's turn over to StockUnlock and quickly take a look at Amazon's price to operating cash flow here, which I think is the best metric to value the stock off of. So today, Amazon's price to operating cash flow is sitting at 17.54. And if you take a look at its history, you can clearly see that this is on the lower end of where Amazon has historically traded, which leads me to believe that Amazon is still cheap in the market today because its price multiple is still well below its historical averages. This is at the same time as Amazon's cash flows are accelerating and its margins are at all-time highs, which leads me to believe that it should actually be trading for a higher multiple, not a lower one. So now let's turn over to StockUnlock's DCF and load up my Amazon DCF here. And in my DCF, I am projecting Amazon's operating cash flows to grow by 20% annually over the next 3 years and for Amazon to get back to a 20 price to operating cash flow. Now, if we take a look at Amazon's historical median over the longer term, they have traded for a 25 price to operating cash flow. So a 20 price to operating cash flow is still well below Amazon's historical averages and really isn't that much of a multiple expansion over the next 3 years. Additionally, given how quickly AWS is growing and with all of the other business segments of Amazon continuing to accelerate, I believe that a 20% annual growth rate to operating cash flow is going to prove to be conservative. Or in other words, I think that this is actually a conservative DCF for Amazon right now and even with these inputs, I still get a 23.5% compounded annual growth rate to the share price over the next 3 years, a fair value of $371 and a future share price of about 500 bucks by 2028, which is an 88% total return over the next 3 years. And again, I believe that this is a conservative DCF for Amazon and even with these conservative metrics, I get over a 20% compounded annual growth rate over the next 3 years. And for all of these reasons, I have continued to buy more Amazon shares and it is the second largest position in my portfolio at over 13% of my total portfolio now. Again, I don't think that you need to be a genius to see that Amazon is a layup in the market right now and for some reason the market is keeping this one down for reasons that I don't understand. And while the market is continuing to do that, I'm going to continue buying more Amazon shares and increasing my allocation to it. But with all that being said, those are the three stocks that I have continued to add in my portfolio over the past week and if you enjoyed this video, then please remember to leave a like on it and consider subscribing to the channel if you want to see more content like this. Also, if you want to get access to my full portfolio and my buys and sells in real time and also join my Discord community, then consider checking out my Patreon or my website because there you can also join my Discord as well and get access to all of the same content. That's just another way that you can continue to support my channel and all of my content as well. But with all that being said, that is going to wrap up today's video and as always, thank you so much for tuning in. I truly do appreciate it and I hope that you're all having a good weekend and also that I will see you in my next video.