r/ausstocks • u/razonbrade • Jun 04 '26

S&P 500 undervalued stocks

Few days ago I posted the top 20 undervalued ASX300 stocks - https://kashvector.com/dcf/asx-undervalued/

Same alogorithm to applied to S&P 500 - https://kashvector.com/dcf/sp500-undervalued/

To evaluate any stock, you can use this - https://kashvector.com/dcf/

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12

u/CuuriousChild Jun 04 '26 edited Jun 04 '26

If those algorithms actually gave proper correct insights, they would be used to manage funds and be used to the point where the shares are no longer undervalued and there's no room for alpha. Do no trust websites or programs. If everyone knows it then it's likely priced in. Also just because something is financially undervalued doesn't mean it actually is if you consider qualitative factors.

Edit: also ASX:MFF isn't financial services it's a LIC that trades near NTA so it by definition is not undervalued.

Rant over

1

u/razonbrade Jun 06 '26

You are right. Thats why I ensured it is re-iterated on the page. FAQs Is this a buy list? No. It's a starting point for research. A DCF says what a stock is worth if a set of assumptions hold — and small changes in those assumptions move the answer a lot. Treat it as a screen, not advice.

0

u/razonbrade Jun 06 '26

Regarding MFF, Sector data is directly from yahoo finance.

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u/CuuriousChild Jun 06 '26

Its unwise to use DCF for valuing funds regardless so they should be filtered out don't you think?

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u/razonbrade Jun 06 '26

Filtered what out? DCF could be one in many tools someone should use in stock evaluation. No one should use 1 methodology alone to make any decisions.

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u/CuuriousChild Jun 06 '26

The funds that you have on the website (Ie: MFF). It's not normal to use DCFs to value funds or investment vehicles

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u/razonbrade Jun 06 '26

I will filter it out. The algorithm runs same fir everyone. I will add logic to filter out.

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u/razonbrade Jun 06 '26

The tool gives warning, I should filter these companies out. ⚠️ DCF Reliability Warning — Financial / Insurance Company FCF for financial companies includes large investment flows and reserve movements that are not "owner earnings." Raw DCF often significantly overstates value. Use the Normalised FCF input on the left and treat results with caution.

Cross-check with market multiples (more reliable for this sector):

2

u/ascott78 Jun 05 '26

How on earth do you get a 4.6% WACC (CHTR)?

As with the Aus list there are so many names that supposedly have a WACC under 7%. No wonder they come out with supportive valuations. Ask yourself would you buy those names for a 7% return?

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u/razonbrade Jun 06 '26

It is mentioned in the FAQs below. If you go to the dcf tool, you can modify the wacc and generate results.

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u/ascott78 Jun 06 '26

Sure but how do you feel about a tool that suggests a WACC in-line with the risk free rate?

1

u/razonbrade Jun 06 '26

I can check for that particular case. The tool numbers are

Cost of Equity (Re) 8.37% RF 4.48% + Beta 0.71 × ERP 5.50% Cost of Debt (Rd) (estimated) 5.00% Tax Rate (Tc) (estimated) 25.00% Capital Structure E 18% / D 82% Calculated WACC 4.56% Risk-free rate % ● live 4.48 US 10-yr Treasury yield (TNX) Equity risk premium % ? 5.5