hi I'm Jimmy in this video we're looking at five stocks that I believe could do
very well over the next couple years now I'm hoping to avoid some of the more
popular stocks companies like Disney Amazon AT&T Verizon Microsoft they're
all good companies for sure and I'm sure many of us like those companies but my
goal with this research the research that I did for this video is to try to
find companies that haven't been on our radar too much recently but they could
still have great performance and hopefully we can use this information to
help expand and improve our portfolio and get us closer to our goal of
achieving financial freedom okay so let's jump right in so I'm
trying to identify companies that seem to have strong free cash flow potential
and they're trying to use that cash flow to grow their business in a smart way I
figure if we could find these companies and then buy them at a reasonable price
well we should do good over the long run and I've tried to vary the companies
I've tried to vary where the companies come from I'm looking and trying to find
some in different sectors that way if we see one that looks good but it doesn't
fit our portfolio perhaps there's another one that also looks good that is
better suited to our portfolio perhaps from a different sector okay so let's
jump in so the first company is Masco ticker symbol MAS Masco sells home
improvement building products they make things like plumbing products the
building hardware they do they sell paint and basically they do things that
go into building new houses or maintaining a house now one of the
reasons that I like Masco is because I expect for a lot of their products to do
perfectly fine in the current economic situation and many raw material prices
have been dropping recently so it's even possible that mass goes margins slightly
improve over the next year or two now when I calculate the fair value from
Masco's stock using a discount of free cash flow valuation method I came up with a
fair value for their stock about $57 per share which is about 15% higher than the
current stock price and I came up with that estimate for intrinsic value using
these free cash flow numbers and as we could see broadly speaking free cash
flow seems to be heading in the right direction
now the green parties are analysts estimates and basically what I did is I
took these analyst estimates stuck them in a formula for discounted free cash
flow and that's how we came up with the $57 fair value for Masco stock now any
one of the companies that I mentioned in today's video could be worth a deeper
dive so if you see a company that I talked about that you think we that you
think deserves its own video please let me know in the comments below and if you
curious how to perform a discounted free cash flow calculation with numbers like
this well I should did a video on that whole topic I'll leave a link to that in
the description below as well ok next up we have a similar company and that is a
home builder that I think could do quite well as the economy begins to settle
down that's DR horton ticker symbol DHI and clearly what DR horton does is there
a home builder and one of the things that I like about DR Horton is they
often focus on entry-level homes and operationally speaking they're one of
the most efficient home builders in the United States and they have one of the
best balance sheets among all home builders and as we could see with this
chart of free cash flow including a few years of projections well free cash flow
seems to be improving and when I use these free cash flow numbers to come up
with a DCF calculation well I got a fair value for DHI's stock of about $80
per share so to me DR Horton is one of those companies that deserve a deeper
look and I think that their business I think that their business has a lot of
upside at this point okay now we jump over to the financial sector to a
company called Global Payments ticker symbol GPN Global Payments provides a
lot of these software and technology behind electronic transactions so as the
world shifts away from cash towards digital payments while global payments
should do fairly well and in 2019 Global Payments merged with the company called
total system services and it was an all-stock deal so they didn't have to
take on any additional debt to complete that merger and I think that this merger
helps strengthen global Global Payments position in the overall industry okay
simple enough now when we look at their free cash flow numbers and then
we applied it to the discount of free cash flow template well I actually got a
fair value of slightly less than one hundred and fifty dollars per share so
while I love global I love Global Payments business and I love what
they're doing I'd like to Steve see the stock pull back a little bit before we
jumped in and bought it so for me this one belongs on our bucket list okay now
we jump over to a healthcare company in Edwards Lifesciences ticker symbol EW
Edwards Lifesciences is a medical supplies company and they do medical
supplies and devices and they're one of the early creators of one of the first
artificial heart valves and they make a lot of similar type products so as we
can imagine in a world where surgeries to help improve the overall health of
people are becoming more and more popular or more and more common at least
I would expect for this company to do quite good over the long run now when we
look at their projected free cash flow numbers while we can see that they're
projected to move in the right direction yet despite the growth in free cash flow
the stock does seems slightly overvalued right now when I did my calculation of
fair value well we got an intrinsic value of about $45 per share so while I
think that this is another one of those great companies and could be a great
addition to our portfolio I just want to see the stock pulled back a little bit
before we add it so once again I think this one belongs in the bull pen
and I should say I also get this stock being overvalued at this time given the
whole coronavirus situation and many companies tied to health care have
performed fairly well so I think for us we're just gonna need to be patient and
wait for a better price although again I think this one belongs in the bucket
list okay now we shift over a company that I
think looks fairly undervalued and could really be worth a deeper dive this is
probably the most interesting company I came across in this research next up we
have switch incorporated ticker symbol s wch switch designs builds operates and
manages data centers and as we could imagine with so many things going online
and going to the cloud while data centers are going to become more and
more important and to me a company that sets up and manages those data centers
makes a lot sense now when we look at their free
cash flow numbers what we can see that free cash flow is negative right now but
it's expected to go positive in the next couple of years now I do want to point
out that while their free cash flow now numbers are in fact negative this is
actually profitable company profits and free cash flow aren't really the same
thing now it may not be too surprising that a company especially in the early
years when they're first setting up and expanding their business could be
profitable but not necessarily have positive free cash flow and that seems
to be the situation that switches in right now now with these numbers our
fair value assuming that we believe the projections because a lot of them all of
the free cash flow projections are going to lead to our intrinsic value well it
came up with an intrinsic value of about $30 per share so when we look at their
stock chart well we can see that $30 a share is a huge upside from the current
level so for all I think that it could make sense to have to for us to take a
closer look at this company and see if it makes sense in our portfolio this is
a really interesting opportunity I think now some of these companies do pay small
dividends but I've just been focusing on trying to find good companies if you're
more interested in good dividend paying stocks well I did recently did a video
talking about just that if you're curious perhaps that could be a good
next video for you to watch I've got a link right here I got a link in the
description below and thank you so much for sticking with me all the way to the
end of the video I really appreciate it thanks and I'll see in the next video