Avoid the AI bubble and look for beaten-down, out-of-favor stocks; Update on Global Payments; Final reminder for the Value Investing Seminar in Italy next month; Interview with Guy Spier

1) All eyes are on the SpaceX IPO. It's pricing tonight, and the stock will begin trading tomorrow...

If you have an investment account or retirement fund, you may have unwittingly opted in to receive those SpaceX shares – and it could spell disaster for your savings. It all has to do with a financial rule going into effect on July 6.

That's why I've put together a special presentation to share how you can protect your portfolio... and the one important move to make so you aren't left holding the bag. To reserve your spot for my briefing on June 16 at 1 p.m. Eastern time, click here.

SpaceX is targeting an offering price of more than $1.75 trillion, which would value it at approximately 100 times revenues. That's despite tepid 15% top-line growth last quarter and large, accelerating losses.

But hey, since those losses are being driven by AI investments, any valuation can be justified, right?

Not in my book... As I wrote last Friday, I think the stock is maybe worth 10% of its target.

That's why I think we'll look back on this as the most overhyped, overvalued large-cap stock of all time – at least until OpenAI goes public (speaking of which, here's the latest bad news from the Wall Street Journal: OpenAI is considering drastic price cuts to compete with Anthropic).

To be clear, I think AI is a big deal – maybe even as big as the Internet. But my "spidey sense" is increasingly telling me we're near the top of an AI bubble...

The hype and overvaluation around AI and SpaceX remind me of early 2000. Back then, investors were right about the importance and impact of the Internet... but lost 80% to 100% of their money.

And here are some more similarities between then and now:

• Investor adulation of tech CEOs and young wonderkids. Remember 29-year-old dot-com investor Ryan Jacob in 2000? Then read this WSJ article from a few days ago about a 24-year-old "AI wiz" who has more than $20 billion in assets under management.

• Criticism of Warren Buffett (such as Porter Stansberry's new book, Warren's Mistakes, which I discussed in my June 2 e-mail) and Berkshire Hathaway's (BRK-B) stock underperforming badly.

• AI stocks hitting the same market-concentration level that led to the bursting of previous bubbles, including 2000's dot-com bubble. This chart posted on X by Barchart shows that the "AI Big 10" stocks now account for 41% of the S&P 500 Index's entire value:

• The bubble driving the real estate market. As this WSJ article from Tuesday details, Manhattan's office market is poised for its best year since 2000, with AI firms leasing large working spaces.

• An exponential spike in investment in the hot new sector by hundreds of companies, all of which, mathematically, can't earn a decent return on that investment.

But identifying a bubble and identifying the exact top of that bubble are two different things...

I'm often amazed at how foolish things can become even more foolish. So I don't spend a lot of time trying to time things perfectly. It's better to be roughly right than precisely wrong.

My team and I aren't engaging in rank speculation in the AI sector. Instead, we're focused on beaten-down, out-of-favor stocks producing gobs of free cash flow ("FCF"), like:

• Global Payments (GPN) – trading at 4.5 times this year's adjusted earnings and hit a 10-year low yesterday

• PayPal (PYPL) – trading at 7.7 times and just hit a 10-year low

• Intuit (INTU) – trading at 11.9 times and hit a six-year low today

• Campbell's (CPB) – trading at 10.5 times, just hit a 32-year low, and its 7% dividend is easily covered by its FCF

• Clorox (CLX) – trading at 17.9 times, pays a 5% dividend, and hit a 12-year low last week

• Lululemon Athletica (LULU) – trading at 10.4 times and hit an eight-year low this week

That said, they're all facing issues. But how much bad news is already priced into each stock? And are these companies permanently melting ice cubes? Those are just some of the questions my team and I are looking into for each company.

There's one thing I've learned the hard way over a quarter century in the markets: If a company's earnings go from $5 per share to $1 per share, it doesn't matter how cheap you buy it. That stock is going down – a classic value trap.

2) Among the six stocks I mentioned above, only Global Payments is an open recommendation in our flagship newsletter, Stansberry's Investment Advisory.

We were early when we first recommended it a year ago, but we continue to believe the stock is a good bet to triple. And in our latest issue, we gave an update on the company:

Global Payments generated $7.7 billion in revenue last year and FCF of around $2 billion. The Worldpay purchase will add around $5 billion of revenue and $1.5 billion in FCF annually.

In its first quarter as a combined company, revenues increased 5.5%, and earnings jumped 10%. Management said it plans to return $7.5 billion to shareholders through the end of 2027, including $2 billion this year.

Right now is a fantastic time to buy back shares. Global Payments' stock is insanely cheap with a forward [price-to-earnings] P/E ratio of around 5. The S&P 500 Index trades at an average forward P/E ratio of 22 today.

We also highlighted the company's price-to-earnings-growth ("PEG") ratio, which is a good way to see if a company's P/E is too high or too low:

Management expects Global Payments' earnings to grow 14% this year, and Wall Street analysts expect similar growth over the next three years. That means Global Payments' stock has a PEG ratio of 0.36 (a P/E ratio of 5 divided by earnings growth of 14).

Anything less than 1 means a stock is cheap. When it's less than 0.50, that tells us investors don't believe the growth story. That's what we're seeing with Global Payments today. The market is still waiting to see how the company digests the Worldpay acquisition and the additional $7.7 billion debt it took on for it.

We're not worried. With an investment-grade credit rating, Global Payments can easily afford its debt. And because of the acquisition, it's the dominant merchant acquirer whose growth should continue.

Only Investment Advisory subscribers have access to our full write-ups and specific buy-up-to advice on Global Payments, as well as our full portfolio of recommendations and new issues every month. If you aren't a subscriber already, you can learn how to become one by clicking here.

3) My friend Ciccio Azzollini and I will once again be hosting – for the 22nd time! – our Value Investing Seminar on July 9 and July 10 in beautiful Trani, Italy.

Here are some pictures from previous seminars:

We limit the seminar to 60 attendees, who will fly into the nearby Bari Airport. (There's now a nonstop flight from New York City.)

Two dozen of them will share their latest thinking on where to find the best opportunities around the world and outline their current favorite investment ideas.

The seminar is fun, educational, and a great addition to any European vacation. Here's what our friend Guy Spier kindly posted about it on LinkedIn a few years ago:

You can learn more and register to attend right here. I hope to see you there!

4) Speaking of Guy, regular readers may recall my two e-mails in February (here and here) about his final annual letter. After 26 years, he closed his hedge fund, Aquamarine Capital, because he's battling grade 4 glioblastoma (brain cancer).

At the Berkshire Hathaway annual meeting in Omaha, Nebraska last month, he sat down for an interview with CNBC's Becky Quick about his value-investing career and how his illness has changed him:

• Value investor Guy Spier says a glioblastoma diagnosis forced him to rethink wealth, time and what it means to leave a lasting legacy.
• After shutting down the Aquamarine fund, Spier is turning his focus to advocate for developing novel treatments for glioblastoma, a rare and aggressive brain cancer.
• Spier says every day is now "basically a gift," and he hopes his story can bring more attention and investment to rare disease research.

You can watch the full interview on YouTube here.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.