Buy Hold Sell: 5 mispriced growth stocks

Growth stocks have had a truly spectacular 12 months, with many fortunes being made from investing in stocks like NVIDIA (NASDAQ: NVDA) and Super Micro Computer (NASDAQ: SMCI), which have soared 154% and 170%, respectively. 

In the last year alone, the NASDAQ 100 has lifted 26% - meaning, over the past five years, the bourse is now up 153%. Ahh! The benefit of hindsight. 

So, is there any value left on offer among the world's greatest growth stocks? 

To find out, Livewire's Ally Selby was joined by Loftus Peak's Alex Pollak and Magellan's Alan Pullen. 

They analysed three growth stocks, including Qualcomm (NASDAQ: QCOM), Microsoft (NASDAQ: MSFT) and Walmart (NYSE: WMT) and each named a growth stock that they believe has been undervalued by the market. 

Happy bargain hunting!

Note: This episode of Buy Hold Sell was recorded on Wednesday, 17 July 2024. You can watch the video, listen to the podcast or read an edited transcript below. 

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Edited Transcript 

Ally Selby: Hey, how you doing and welcome to Livewire's Buy Hold Sell. I'm Ally Selby. Global growth stocks have had a stellar year, with the NASDAQ 100 lifting 23% in 2024. But is there any value left in global growth? To find out, we're joined by Alex Pollak from Loftus Peak and Alan Pullen from Magellan.

First up today we have American semiconductor company, Qualcomm. Alex, I'm going to start with you today. Is it a buy, hold, or sell?

Qualcomm (NASDAQ: QCOM )

Alex Pollak (BUY): It is a buy. And it is a buy because it's held a really important position in phones over the last 15, 20 years - smartphones I'm talking about. And it's now got a set of chips that are going to go into laptops for the first time or effectively for the first time, and that's a really, really big deal. So they're going from one line of business phones to two lines of business, and they will compete with Apple laptops in that - very important.

Ally Selby: Okay. Its share price has risen around 70% over the past 12 months. Over to you, Alan. Is it a buy, hold, or sell?

Alan Pullen (HOLD): Well, it's been a remarkable performer, but I'm going to have to be a hold here. So it has a licensing business as well as a chip business, which is very high margin, very profitable, and that's under structural challenge at the moment. So I don't see a lot of growth coming out of there. The chip business is excellent, but there are some balanced risks out there as well; a lot of the big chip companies, the handset companies, insourcing their own chips. We've seen Apple do it with their processor. They might do it with their modem. So, some great opportunities there on one hand, but a few risks on the other. So I have to be a hold.

Ally Selby: Okay, next up today we have Microsoft, which is the world's biggest company by market cap. Staying with you, Alan, is it a buy, hold, or sell?

Microsoft (NASDAQ: MSFT)

Alan Pullen (BUY): Well, it's a buy. This has been a fantastic company over many years, but the tailwinds are really still at its back. It's a leader in monetising AI over the long term, both through its Hyperscale cloud platform, which is growing revenue, accelerating revenue growth. Remarkable for a company with $250 billion in revenue, kind of $90 billion in earnings. And it's still growing at mid-teens type earnings rates over the medium term. So still plenty of room to run in that one.

Ally Selby: The share prices lifted around 30% over the past 12 months. Over to you, Alex. Is it a buy, hold, or sell?

Alex Pollak (HOLD): We think it's a hold. I agree with Alan's comments about the quality of the franchise and the things that they've done in terms of AI, et cetera, and the enterprise base that the company also has globally, but we run everything through a discounted cash flow valuation and not a single period measure. We don't use any PEs. And on a discounted cash flow valuation, we really have to stretch to get the current share price. So I'm afraid we're a hole on this one now, just on valuation grounds.

Ally Selby: Okay, last up today we have Walmart, which runs an astonishing 10,500 stores, and it's the world's biggest company by revenues. Last one for you today, Alex. Is it a buy, hold, or sell?

Walmart (NASDAQ: WMT)

Alex Pollak (BUY): It is a buy. It is a buy because little known fact, 90% of people in the United States are within 10 miles of a Walmart. Walmart has got everything, so to speak, that Amazon has in terms of number of stores offering proximity to the end customer, but it hasn't yet rolled out a true omnichannel offering in retail. That is starting to happen. It's got businesses now in e-commerce and also in advertising. We think that will continue to accrete up over the next five years. The DCF is very favourable on that one. It's an easy stock to hold.

Ally Selby: Okay. Its share prices has risen 36% over the past 12 months. Alan, is it a buy, hold, or sell?

Alan Pullen (SELL): I disagree with this one. And while I'm a sell on Walmart, it is a great company, so I admit that. However, it's got some nice businesses, the marketplace business, the advertising business are fast and growing, but the bulk of the business is still an old school offline retailer, which grows at around low single digit levels. So that's going to make it tough to really grow longer term. And the current valuations, which is pushing up towards tech levels, I think it's a sell.

Guest picks

Ally Selby: Okay. We asked our guests to bring along a global growth stock that they believe has been mispriced by the market today. One that is being undervalued by the market. Alan, what have you brought for us?

Booking Holdings (NASDAQ: BKNG)

Alan Pullen: I'd like to talk about Booking Holdings. So you might know Booking Holdings from Booking.com when you're hopefully booking your hotels around Australia or overseas. It is one of the world's two big OTAs (online travel agents). It's in fact by far the largest of those two and holds a number of different brands like Priceline, like Kayak.

Travel has a long-term growth tailwind. As people become richer, they tend to travel more over time, and this company is capturing an increasing share of that. And the quality of the business is improving as people tend to go direct through their app or their website rather than through Google or something like that. And they're increasing that share of direct travel. That's higher margin, it's higher revenue, and it's underpinned by long-term structural tailwinds. It trades a little bit cheaper than the market, which is remarkable for a company of this quality and value.

Ally Selby: Okay. Over to you, Alex. What company do you think has been undervalued by the market today?

Taiwan Semiconductor (NYSE: TSM)

Alex Pollak: That would be Taiwan Semiconductor. It's the only foundry in the world that is capable of making the latest cutting-edge chips, enabling extended battery life on new devices like AI phones and laptops. And it's kind of priced like an old-fashioned manufacturer in a lot of ways, but it's a gatekeeper in terms of its ability to generate cutting-edge technology at scale that cannot be replicated by anybody else.

Ally Selby: Okay. Well, I hope you enjoyed that episode of Buy Hold Sell as much as I did. If you did, why not give it a like? Remember to subscribe to our YouTube channel. We're adding so much great content just like this every single week.

Which growth stock do you think has been undervalued by the market? 

Let us know in the comments section below.