Aug 2021 - Our monthly stock picks

Hey all,

Welcome to ValueInvesting.io's first blog post. This is the first article in our new series: Monthly Stock Picks. Every month our team will pick out 10 stocks that we think are interesting and trending to share with you all.

These are not necessarily undervalued/overvalued stocks that we recommend buying/selling. Rather we try to highlight stocks that are impacted by recent news/policies, stocks whose earnings call is recent, or simply stocks we find interesting that we think you should know about. For each stock, we will list out some key value drivers and highlights that investors may find helpful. To view comprehensive analysis and how we compute the upside of any particular stock, click on the stock's name to go to our platform.

Without further ado, let's jump to this month's list:

Company Name	Market Price	Today % Change	Market Cap (mil)	% Upside	P/E	P/B
GOOGL Alphabet Inc	2800.83	1.9%	1,867,467	11.1%	29.7x	8.2x
VMC Vulcan Materials...	184.94	0.8%	24,538	-13%	36.3x	4x
PFE Pfizer Inc	49.93	2.5%	279,942	31.8%	22.5x	4.3x
F Ford Motor Co	12.73	1.3%	50,853	6.8%	14.9x	1.6x
BABA Alibaba Group Ho...	161.06	2%	429,364	14.7%	22x	3x
MS Morgan Stanley	102.16	1.5%	186,397	-7.1%	13.5x	1.8x
FCX Freeport-McMoRan...	34.2	4.3%	50,208	45.8%	14.1x	4.7x
WEN Wendys Co	23.77	0.2%	5,296	0.9%	28.5x	9.6x
CAT Caterpillar Inc	209.14	2%	114,498	18.8%	26.7x	7.3x
TSLA Tesla Inc	706.3	3.8%	699,248	-47.2%	303.1x	30.3x

1.

GOOGL - Alphabet Inc

Market Price: 2,800.83 USD

Fair Price: 3,110.98 USD

(Upside: 11.07%)

• Excellent Q2 results, beating expectations with 62% increase in total revenue YoY.
• Sustainable advertising growth, both from search ads and Youtube ads, which is expected to be at double-digit rate for the next 5 years after the pandemic is over.
• The launch of Youtube Shorts, which is a direct competitor to TikTok, already has 15 billion daily viewers and plays an important role in attracting new segments of customers and in boosting Youtube's revenue
• Google Cloud is catching up fast to AWS and Azure in the race of cloud computing thanks to Alphabet's huge investments and commitment.

2.

VMC - Vulcan Materials Co

Market Price: 184.94 USD

Fair Price: 160.93 USD

(Upside: -12.98%)

• As America's largest producer of construction aggregates, Vulcan is set to benefit from the Infrastructure bill.
• Aggregates make up 76% of the company's revenues and 91% of its gross profit.
• Slow growth in Q2 with only 2.91% YoY growth in revenue.
• A spike in energy costs negatively affected Vulcan's profitability as higher oil prices resulted in higher diesel and liquid asphalt expenses.

3.

PFE - Pfizer Inc

Market Price: 49.93 USD

Fair Price: 65.81 USD

(Upside: 31.8%)

• Pfizer is set to benefit from the recent announcement that the U.S. will start administrating the 3rd Covid-19 vaccine booster shot this fall.
• FDA is expected to grant full approval for Pfizer-BioNTech Vaccine next week.
• Strong revenue and net-income growth for Q2 of 2021 at the rate of 60.8% and 62.3% respectively.
• Demand for international markets is still high as the number of Covid cases in many foreign countries continue to rise.

4.

F - Ford Motor Co

Market Price: 12.73 USD

Fair Price: 13.6 USD

(Upside: 6.8%)

• President Biden pushes for higher EV and hybrid vehicles adoption in the US, expecting that 40-50% of new auto sales will be electric vehicles by 2030.
• Impressive growth with 38% YoY increase in revenue for the Q2 of 2021. EPS also beats the expectation by more than 300%
• Promising partnership with Lyft to bring self-driving cards to Lyft's service operations by the end of 2021.
• However, Ford is also suffering from the global chip shortage, forcing the firm to cut back on production and to stop manufacturing the popular F-150 truck temporarily.

5.

BABA - Alibaba Group Holding Ltd

Market Price: 161.06 USD

Fair Price: 184.72 USD

(Upside: 14.69%)

• Increase pressure from China government to regulate big technologies companies but we expect it will diminish over time.
• Revenue grew 34% YoY in Q1 of 2022 slightly missed the consensus estimate.
• Alibaba's Taobao and Tmall e-commerce websites have a 91% penetration rate among Chinese internet users, giving Alibaba a huge amount of data to better understand and target their customers. However, it also means there is little room left to growt domestically and Alibaba needs to maintain high Capex to further expand to international markets.
• Alibaba increased its share-repurchase authorization to $15 billions, implying its confidence in the company's long-term outlook.

6.

MS - Morgan Stanley

Market Price: 102.16 USD

Fair Price: 94.86 USD

(Upside: -7.14%)

• Mediocre growth in 2nd-quarter of 20201 with revenues and net-income increase by 8% and 9.9% respectively.
• Recent acquisitions of E-Trade and Eaton Vance expand Morgan Stanley's capabilities and further boost its competitive advantages.
• Income from lending activities is expected to goes up as the economic recovery continues and the stimulus payments diminish.
• No major changes to the interest rate is expected anytime soon.

7.

FCX - Freeport-McMoRan Inc

Market Price: 34.2 USD

Fair Price: 49.87 USD

(Upside: 45.81%)

• Since copper is a critical commodity in building and construction, Freeport-McMoRan, as a well-established copper miner, is another company we expect to accelerate its growth thanks to the Infrastructure Bill.
• Explosive growth in Q2 of 2021 with revenue and net-income increase by 88% and 1,943% YoY respectively, partly thanks to rising metal prices.
• Healthy balance sheet but dividend yield is low compared to its peers
• Copper is also used in electric vehicles and solar panels. A shift to green energy (wind and solar) will also benefit Freeport-McMoRan.

8.

WEN - Wendys Co

Market Price: 23.77 USD

Fair Price: 23.97 USD

(Upside: 0.86%)

• Wendy's continues to focus on low and steady expansion of its menu, especially the Breakfast items.
• Dividend is expected to increase to $0.12 in September, equivalent of the dividend yield of 1.6%.
• The revenue and net-income grew by 21% and 164% YoY respectively in the Q2 thanks to the growth in the international markets.
• Huge investments in technology in areas like online ordering and online payments which provide better customer experience and increase speed of service.

9.

CAT - Caterpillar Inc

Market Price: 209.14 USD

Fair Price: 248.48 USD

(Upside: 18.81%)

• Caterpillar, who manufactures construction equipment, is expected to gain huge from the recently-passed Infrastructure Bill.
• A strong and healthy balance sheet and with a history of consistent dividend, which was recently boosted to 8%.
• High return-on-equity compared to its peers but it also have a high level of debt with debt-to-equity ratio of 2.19
• Revenue of Q2 increase 31% YoY to $12.1 billion USD.

10.

TSLA - Tesla Inc

Market Price: 706.3 USD

Fair Price: 373.28 USD

(Upside: -47.15%)

• Impressive growth in 2021 as revenue and net-income increased by 98% and 998% YoY respectively in Q2.
• Tesla' stock price is still too overblown, even with its fast expansion.
• The Level 3 autonomous vehicle software is still in beta mode and far behind its competitors like Waymo and Ford.
• Tesla is diversifying to non-automotive businesses, which include Dojo and humanoid robots. These projects are still at the very early stage and we don't expect them to contribute significantly to Tesla's revenue anytime soon.

That's all we have this time. Let us know in the comment section what you think about this list and these insights. If you have any feedback, please feel free to comment here or email us at [email protected].

We will see you next month with another edition of Monthly Stock Picks. Until then, keep on value-investing!

-- The ValueInvesting.io Team

ValueInvesting.io has no position in any of the companies mentioned. This article does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation.