Analyst Reveals 7 Stocks to Outperform Mag 7

In contrast, the Mag 7 has seen an 8.4% increase over the same period, but Paul emphasized his focus on decade-long investment horizons, dismissing short-term results.

He stated, "To say that I'm getting my ass kicked is an understatement. And guys, I'm not worried at all about it. Threearters of 2026 are in the books and the script has absolutely flipped."

For most of the year, the Mag 7 had been underperforming the broader market.

Paul highlighted this volatility by noting his own portfolio swung from a 13% gain to a 0.5% loss within the same period.

The speaker asserted his investment tone and philosophy remain unchanged, regardless of whether his portfolio is performing well or poorly.

He stressed the importance of distinguishing between the market as a "voting machine" in the short term and a "weighing machine" for long-term value.

Investors should avoid blindly copying others, including well-known figures like Warren Buffett, and instead focus on evaluating reasonable assumptions for a 10+ year investment horizon.

Ulta Beauty reported strong last quarter sales of $3 billion, marking a 9% increase, and subsequently raised its annual outlook, supported by a loyal customer base.

However, concerns arise from a slowdown in same-store sales growth, which decelerated to 3.8%.

Financially, Ulta demonstrates high returns on capital and manageable debt, generating $1 billion in free cash flow, though its stock price has risen to $540 from a $400 entry point in January 2025, making it a less attractive buy at current levels.

The speaker employs a proprietary stock analyzer tool to model long-term growth by making assumptions about a company's performance over the next decade.

This involves projecting revenue growth rates at 3%, 5%, and 7%, while profit margins and free cash flow assumptions are based on historical averages ranging from 9.5% to 10.5%.

The valuation process utilizes a P/E ratio and price-to-free-cash-flow multiple of 17x to 23x, benchmarks against S&P 500 averages to determine a reasonable price to pay for the stock.

Southwest Airlines presents a complex investment case with an enterprise value of $40 billion, burdened by $20 billion in debt, a significant increase from its pre-COVID liabilities of $16 billion to $25 billion, though current trends show a decline.

Despite the high debt, management's aggressive share buybacks signal confidence in the company's undervaluation.

The airline's historical pre-COVID profit margins of 10-15% starkly contrast with the 2.2% average over the last five years, suggesting substantial potential for margin recovery.

This divergence between historical performance and recent results highlights the company's opportunity as a margin recovery play.

The tool provides a wide price range for Southwest, with a low estimate of $75, a high of $218, and a middle-ground price of $133.

The speaker emphasized that achieving these returns relies on long-term execution, not short-term market fluctuations, affirming his belief in the reasonableness of these assumptions.

He believes PayPal is currently worth between $120 and $130 per share.

The market analyzer tool supports his view by suggesting a 23% potential middle return.

Alibaba's decision to issue $10 billion in new shares while the stock was trading at a low price drew sharp criticism from the speaker, who questioned the rationale behind diluting shares when the company is considered undervalued.

Additionally, the company's free cash flow turned negative due to substantial capital expenditures in AI and cloud computing.

Despite these concerns, founder Jack Ma reportedly purchased $600 million HKD worth of stock, echoing a long-term investment strategy similar to Amazon's in its growth phase.

This marks a substantial increase from previous expectations of merely 3-7% revenue growth.

The robust growth in its high-margin cloud business is largely credited as the primary driver behind these elevated revenue forecasts.

Adobe is preparing for a significant leadership change as new CEO Anel Shakravari is set to take office on December 1st.

This transition comes amidst considerable turnover within the executive team, introducing an element of uncertainty for the company's immediate future.

The executive changes could impact strategic direction and operational stability, drawing investor attention to the new leadership's plans.

The company had distanced itself from key retailers like Dick's Sporting Goods and Foot Locker, which proved problematic.

This strategic correction is evidenced by a 14% increase in wholesale sales two quarters ago, signaling a return to the traditional retail channels that historically built the business, though China sales declined 12% in the last quarter.

Nike's CEO and board member Tim Cook made significant investments in the company, purchasing approximately $1 million worth of stock each in April at around $42 per share.

This insider buying activity demonstrates a strong vote of confidence in Nike's future.

Currently, Nike's stock trades at $33 per share, presenting an opportunity for new investors to acquire shares at a lower price than these key executives.

This tool enables users to input their specific expectations for sales growth and profit margins, which then dictates a target buy price.

The emphasis is on making calculated decisions based on personal assumptions rather than engaging in speculative 'coin flips,' providing users with both the potential return at today's price and the required price to achieve their desired return.

Despite this, investor Michael Burry recently added Sprouts to his portfolio, making it a full position, signaling a bullish outlook for the stock.

The company boasts strong gross margins of 37% and a growing private-label business, which contribute to the speaker's positive perspective and its current trading at approximately 12 times earnings.

This optimistic projection is based on middle-ground assumptions rather than speculative growth narratives, reflecting a pragmatic investment approach.

He reiterated his core philosophy that in the long run, the fundamental business value, or the 'weighing machine,' will ultimately prevail over short-term market popularity.