These are Cheap Stocks with Catalysts | TCAF 235
Speakers
Josh Brown -- Host
— Ritholtz Wealth CEO
Summary
- The current market environment is characterized by significant multiple compression in former high-flying "Mag 7" tech stocks (e.g., NVDA forward P/E under 20 vs. 5-yr avg 48x, MSFT at market multiple), creating value opportunities for long-term investors.
- Jonathan Boyar's investment framework focuses on buying high-quality, misunderstood businesses at prices below what an acquirer would pay, with a required catalyst for realization within a 2-3 year timeframe.
- MSGS (Madison Square Garden Sports) is highlighted as deeply undervalued: $8B enterprise value vs. a combined Forbes valuation of $14.75B for the NY Knicks and Rangers, with catalysts including a potential team spin-off and a tax rule change post-2027 that could force the entity to go private.
- A major thesis on Uber centers on its pole position for autonomous vehicles (AVs); its vast network, partnerships with multiple OEMs (Lucid, Rivian, Pony.AI), and capital-light model are seen as key advantages over a potential single-player AV market.
- Scott's Miracle-Gro (SMG) is presented as a potential special situation: a family-controlled, high-quality consumer staples company trading at ~9.5x EBITDA, with a catalyst stemming from an aging founder and potential shareholder pressure to sell.
- Salesforce (CRM) is cited as an example of a hated, entrenched software giant now trading at compelling value (13-14x forward earnings), with its role as a "system of record" in regulated industries providing durability against AI disruption.
- Disagreement exists on the Mag 7 sell-off: value perspective sees it as short-sighted fear over AI capex, while bears question if margin compression from heavy investment justifies derating.
- Narrow niche observation: MSGS is the only publicly traded NBA team, and a looming tax rule (non-deductibility of top-five employee salaries for public companies) creates a unique, tangible catalyst.
- Important uncertainty: The timeline for profitable AV rollout and whether the competitive landscape will be a winner-take-all tech battle or a multi-OEM logistics ecosystem favorable to Uber.
- Market implication: A resurgence in M&A, particularly for small and mid-cap stocks, is anticipated as interest rates stabilize, potentially putting a floor under valuations.
Trade Ideas
Salesforce (CRM) is trading at 13-14x forward earnings, a historically cheap valuation. It is critically ingrained as the "system of record" in many regulated business processes. Activist investors like Starboard Value have taken positions. Its entrenched position in regulated industries (e.g., healthcare) provides durable revenue and high switching costs, protecting it from AI disruption. Activist involvement pressures management to improve capital allocation and profitability. LONG due to a wide margin of safety at current prices, durable competitive advantages, and catalysts from both operational improvement and shareholder activism. The company fails to demonstrate that its AI investments are improving earnings, leading to prolonged growth stagnation and a "value trap."
MSGS (Madison Square Garden Sports) has an $8B enterprise value versus a combined Forbes valuation of $14.75B for the NY Knicks and Rangers. Management is exploring a spin-off into two separate publicly traded teams (Knicks & Rangers). A tax rule change effective after 2027 will prevent public companies from deducting the salaries of their top-five employees. The spin-off would unlock the underlying asset value for shareholders. The impending tax rule makes public ownership of a sports team with high-player salaries financially untenable, forcing a sale or going private. LONG due to a significant valuation gap and two clear, company-specific catalysts (corporate action and regulatory change) that should close it. Controlling shareholder James Dolan may not execute the spin-off optimally or may delay action. The market may not assign full private market values to the standalone teams post-spin.
Uber has the largest ride-hailing and delivery network, is forming capital-light partnerships with multiple autonomous vehicle (AV) players (Lucid, Rivian, Pony.AI), and is a cash flow machine. The stock is disliked due to fears of competition from Waymo. In AVs, the largest network will win. Uber's strategy of fostering a multi-OEM AV ecosystem positions it to aggregate supply and meet demand, unlike a scenario where one company (e.g., Waymo) owns all vehicles. Its cross-platform data (rides + delivery) and Uber One membership create a durable competitive moat. LONG because it is the best-positioned logistics platform for the AV future and is currently undervalued as the market misprices this strategic advantage. Waymo or another single player achieves overwhelming market share and bypasses Uber's platform entirely, making its network irrelevant.
Scotts Miracle-Gro (SMG) is a high-quality, family-controlled consumer staples company. It trades at ~9.5x EBITDA, a discount to its historical multiple (12-13x). The 69-year-old founder/controller is heavily involved, and the company suffered from a costly foray into cannabis. The discounted valuation, aging controlling shareholder, and recent business struggles create a scenario where the controlling family may be motivated to sell the company to realize value. WATCH for a potential corporate action (sale) catalyst that could realize the valuation gap. The current price offers an attractive entry point if the catalyst materializes. The family decides against a sale, opting to maintain control indefinitely. The core business faces new headwinds that further compress earnings.
Up Next
This The Compound News video, published March 27, 2026, features Jonathan Boyar discussing CRM, MSGS, UBER, SMG. 4 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Jonathan Boyar · Tickers: CRM, MSGS, UBER, SMG