10 Best Best Magic Formula Stocks for February 2026
Welcome to the Value Sense Blog, your resource for insights on the stock market! At Value Sense, we focus on intrinsic value tools and offer stock ideas with undervalued companies. Dive into our research products and learn more about our unique approach at valuesense.io
Explore diverse stock ideas covering technology, healthcare, and commodities sectors. Our insights are crafted to help investors spot opportunities in undervalued growth stocks, enhancing potential returns. Visit us to see evaluations and in-depth market research.
Market Overview & Selection Criteria
Global markets in 2026 show resilience amid interest rate stabilization and commodity cycles, with financials and mining sectors leading due to strong ROIC and intrinsic value gaps. Value Sense selected these top stocks to buy now using its machine learning-powered screener, focusing on best value stocks with high quality ratings (5.1+), positive 1Y returns, and intrinsic values suggesting undervaluation. Criteria emphasize ROIC above 20%, gross margins over 50% where applicable, and diversified exposure across banking, international finance, and materials—ideal for undervalued stocks to buy portfolios. This stock watchlist highlights investment opportunities in large-cap names with robust fundamentals, drawn exclusively from Value Sense data for educational analysis.
Featured Stock Analysis
Stock #1: JPMorgan Chase & Co. (JPM)
| Metric | Value |
|---|---|
| Market Cap | $846.9B |
| Quality Rating | 6.5 |
| Intrinsic Value | $248.5 |
| 1Y Return | 15.9% |
| Revenue | $256.5B |
| Free Cash Flow | ($267.5B) |
| Revenue Growth | (5.3%) |
| FCF margin | (104.3%) |
| Gross margin | 65.6% |
| ROIC | 25.6% |
| Total Debt to Equity | 137.9% |
Investment Thesis
JPMorgan Chase & Co. (JPM) stands out as a premier U.S. banking giant with a $846.9B market cap and a solid Quality rating of 6.5. Its intrinsic value of $248.5 points to potential undervaluation, supported by impressive 65.6% gross margin and 25.6% ROIC despite a recent 5.3% revenue growth dip to $256.5B. The negative Free Cash Flow of $267.5B and 104.3% FCF margin reflect heavy reinvestment in a high-debt environment (137.9% Total Debt to Equity), yet 15.9% 1Y Return underscores stability for value-oriented analysis. This positions JPM as a core holding in JPM analysis for investors eyeing resilient financials.
Key Catalysts
- Exceptional 25.6% ROIC signaling efficient capital use in lending and operations
- Leading 65.6% gross margin amid scale advantages in U.S. banking
- $846.9B market cap provides liquidity and dividend potential
Risk Factors
- Negative $267.5B Free Cash Flow and 104.3% FCF margin from expansion costs
- 5.3% revenue contraction signaling cyclical pressures
- Elevated 137.9% Total Debt to Equity vulnerable to rate hikes
Stock #2: HSBC Holdings plc (HSBC)
| Metric | Value |
|---|---|
| Market Cap | $304.0B |
| Quality Rating | 5.1 |
| Intrinsic Value | $92.3 |
| 1Y Return | 76.3% |
| Revenue | $116.3B |
| Free Cash Flow | $0.0 |
| Revenue Growth | (44.8%) |
| FCF margin | 0.0% |
| Gross margin | 57.4% |
| ROIC | 166.8% |
| Total Debt to Equity | 49.4% |
Investment Thesis
HSBC Holdings plc (HSBC), with a $304.0B market cap, earns a Quality rating of 5.1 and boasts a standout 76.3% 1Y Return. Intrinsic value at $92.3 suggests room for appreciation, backed by 166.8% ROIC and 57.4% gross margin on $116.3B revenue, even with 44.8% growth and zero Free Cash Flow ($0.0). Moderate 49.4% Total Debt to Equity adds balance, making HSBC a compelling pick in HSBC analysis for global banking exposure in this stock picks collection.
Key Catalysts
- Phenomenal 166.8% ROIC highlighting operational excellence
- Strong 76.3% 1Y Return from international diversification
- Healthy 57.4% gross margin supporting profitability
Risk Factors
- Sharp 44.8% revenue decline indicating regional headwinds
- $0.0 Free Cash Flow and 0.0% FCF margin limiting flexibility
- Lower 5.1 Quality rating amid volatile metrics
Stock #3: Wells Fargo & Company (WFC)
| Metric | Value |
|---|---|
| Market Cap | $286.2B |
| Quality Rating | 5.9 |
| Intrinsic Value | $292.8 |
| 1Y Return | 17.3% |
| Revenue | $123.8B |
| Free Cash Flow | ($23.1B) |
| Revenue Growth | (1.3%) |
| FCF margin | (18.7%) |
| Gross margin | 64.9% |
| ROIC | 22.6% |
| Total Debt to Equity | 105.5% |
Investment Thesis
Wells Fargo & Company (WFC) features a $286.2B market cap, 5.9 Quality rating, and $292.8 intrinsic value, paired with 17.3% 1Y Return. On $123.8B revenue with 64.9% gross margin and 22.6% ROIC, it navigates 1.3% growth and negative $23.1B Free Cash Flow (18.7% margin), alongside 105.5% debt ratio. This profile offers educational insights into U.S. retail banking recovery in WFC analysis.
Key Catalysts
- Robust 64.9% gross margin from core operations
- Solid 22.6% ROIC for capital efficiency
- 17.3% 1Y Return reflecting steady performance
Risk Factors
- Negative $23.1B Free Cash Flow pressuring balance sheet
- Mild 1.3% revenue growth amid competition
- 105.5% Total Debt to Equity exposing to economic shifts
Stock #4: Mitsubishi UFJ Financial Group, Inc. (MUFG)
| Metric | Value |
|---|---|
| Market Cap | $205.0B |
| Quality Rating | 5.9 |
| Intrinsic Value | $2,419.6 |
| 1Y Return | 43.5% |
| Revenue | ¥12.3T |
| Free Cash Flow | ¥0.0 |
| Revenue Growth | 1.2% |
| FCF margin | 0.0% |
| Gross margin | 57.7% |
| ROIC | 62.7% |
| Total Debt to Equity | 348.7% |
Investment Thesis
Mitsubishi UFJ Financial Group, Inc. (MUFG) holds a $205.0B market cap with 5.9 Quality rating and extraordinary $2,419.6 intrinsic value. Delivering 43.5% 1Y Return on ¥12.3T revenue, it shines with 62.7% ROIC and 57.7% gross margin, despite zero Free Cash Flow (¥0.0) and 1.2% growth. High 348.7% debt is offset by efficiency, key for MUFG analysis in Asian financials.
Key Catalysts
- Impressive 62.7% ROIC driving returns
- 43.5% 1Y Return from market positioning
- 57.7% gross margin on massive ¥12.3T revenue
Risk Factors
- ¥0.0 Free Cash Flow and 0.0% FCF margin
- Elevated 348.7% Total Debt to Equity
- Modest 1.2% revenue growth
Stock #5: Banco Santander, S.A. (SAN)
| Metric | Value |
|---|---|
| Market Cap | $189.4B |
| Quality Rating | 6.7 |
| Intrinsic Value | $17.3 |
| 1Y Return | 152.5% |
| Revenue | $75.9B |
| Free Cash Flow | $20.1B |
| Revenue Growth | (3.4%) |
| FCF margin | 26.5% |
| Gross margin | 63.0% |
| ROIC | 25.8% |
| Total Debt to Equity | 288.1% |
Investment Thesis
Banco Santander, S.A. (SAN) commands $189.4B market cap, 6.7 Quality rating, and $17.3 intrinsic value with explosive 152.5% 1Y Return. Positive $20.1B Free Cash Flow (26.5% margin) on $75.9B revenue contrasts 3.4% growth, bolstered by 63.0% gross margin, 25.8% ROIC, despite 288.1% debt—strong for SAN analysis.
Key Catalysts
- Stellar 152.5% 1Y Return momentum
- Positive $20.1B Free Cash Flow and 26.5% margin
- High 6.7 Quality rating with 25.8% ROIC
Risk Factors
- 3.4% revenue growth slowdown
- Very high 288.1% Total Debt to Equity
- Sector cyclicality
Most investors waste time on the wrong metrics. We've spent 10,000+ hours perfecting our value investing engine to find what actually matters.
Want to see what we'll uncover next - before everyone else does?
Find Hidden Gems First!
Stock #6: BHP Group Limited (BHP)
| Metric | Value |
|---|---|
| Market Cap | $175.7B |
| Quality Rating | 6.6 |
| Intrinsic Value | $65.8 |
| 1Y Return | 40.9% |
| Revenue | $107.3B |
| Free Cash Flow | $20.7B |
| Revenue Growth | (10.1%) |
| FCF margin | 19.3% |
| Gross margin | 48.7% |
| ROIC | 28.5% |
| Total Debt to Equity | 46.9% |
Investment Thesis
BHP Group Limited (BHP), a mining leader, has $175.7B market cap, 6.6 Quality rating, $65.8 intrinsic value, and 40.9% 1Y Return. $107.3B revenue yields $20.7B Free Cash Flow (19.3% margin), 48.7% gross margin, 28.5% ROIC, despite 10.1% growth and low 46.9% debt—vital BHP analysis for commodities.
Key Catalysts
- Strong $20.7B Free Cash Flow generation
- 28.5% ROIC in resource sector
- 40.9% 1Y Return from commodity demand
Risk Factors
- 10.1% revenue decline from price cycles
- Commodity volatility impacts
- Sector-specific supply risks
Stock #7: Unilever PLC (UL)
| Metric | Value |
|---|---|
| Market Cap | $168.1B |
| Quality Rating | 7.1 |
| Intrinsic Value | $109.1 |
| 1Y Return | 18.2% |
| Revenue | €120.1B |
| Free Cash Flow | €14.5B |
| Revenue Growth | 2.5% |
| FCF margin | 12.1% |
| Gross margin | 71.3% |
| ROIC | 32.1% |
| Total Debt to Equity | 160.7% |
Investment Thesis
Unilever PLC (UL) offers $168.1B market cap, top 7.1 Quality rating, $109.1 intrinsic value, and 18.2% 1Y Return. €120.1B revenue with €14.5B Free Cash Flow (12.1% margin), standout 71.3% gross margin, 32.1% ROIC, and 2.5% growth despite 160.7% debt—premium consumer staple in UL analysis.
Key Catalysts
- Highest 7.1 Quality rating
- Excellent 71.3% gross margin stability
- 32.1% ROIC and positive growth
Risk Factors
- 160.7% Total Debt to Equity burden
- Moderate 12.1% FCF margin
- Consumer spending sensitivity
Stock #8: Deutsche Bank AG (DB)
| Metric | Value |
|---|---|
| Market Cap | $155.1B |
| Quality Rating | 6.2 |
| Intrinsic Value | $23.9 |
| 1Y Return | 104.2% |
| Revenue | €53.8B |
| Free Cash Flow | €0.0 |
| Revenue Growth | (18.9%) |
| FCF margin | 0.0% |
| Gross margin | 56.5% |
| ROIC | 50.1% |
| Total Debt to Equity | 291.7% |
Investment Thesis
Deutsche Bank AG (DB) at $155.1B market cap has 6.2 Quality rating, $23.9 intrinsic value, and 104.2% 1Y Return. €53.8B revenue shows 50.1% ROIC, 56.5% gross margin, but zero Free Cash Flow and 18.9% growth with 291.7% debt—recovery play in DB analysis.
Key Catalysts
- Massive 104.2% 1Y Return surge
- Strong 50.1% ROIC turnaround
- 56.5% gross margin efficiency
Risk Factors
- 18.9% revenue drop
- €0.0 Free Cash Flow
- High 291.7% debt exposure
Stock #9: Banco Bilbao Vizcaya Argentaria, S.A. (BBVA)
| Metric | Value |
|---|---|
| Market Cap | $152.9B |
| Quality Rating | 6.4 |
| Intrinsic Value | $29.0 |
| 1Y Return | 129.2% |
| Revenue | €53.1B |
| Free Cash Flow | €3,067.0M |
| Revenue Growth | 78.0% |
| FCF margin | 5.8% |
| Gross margin | 60.3% |
| ROIC | 79.8% |
| Total Debt to Equity | 178.2% |
Investment Thesis
Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) with $152.9B market cap, 6.4 Quality rating, $29.0 intrinsic value, and 129.2% 1Y Return excels via 78.0% revenue growth to €53.1B, €3,067.0M Free Cash Flow (5.8% margin), 79.8% ROIC, 60.3% gross margin, despite 178.2% debt—growth standout in BBVA analysis.
Key Catalysts
- Explosive 78.0% revenue growth
- Top 79.8% ROIC
- 129.2% 1Y Return strength
Risk Factors
- Lower 5.8% FCF margin
- 178.2% Total Debt to Equity
- Growth sustainability questions
Stock #10: Rio Tinto Group (RIO)
| Metric | Value |
|---|---|
| Market Cap | $149.2B |
| Quality Rating | 6.0 |
| Intrinsic Value | $120.4 |
| 1Y Return | 54.8% |
| Revenue | $107.9B |
| Free Cash Flow | $12.7B |
| Revenue Growth | (5.5%) |
| FCF margin | 11.8% |
| Gross margin | 27.7% |
| ROIC | 26.6% |
| Total Debt to Equity | 38.1% |
Investment Thesis
Rio Tinto Group (RIO) closes the list with $149.2B market cap, 6.0 Quality rating, $120.4 intrinsic value, and 54.8% 1Y Return. $107.9B revenue generates $12.7B Free Cash Flow (11.8% margin), 26.6% ROIC, low 38.1% debt, despite 5.5% growth and 27.7% gross margin—balanced miner for RIO analysis.
Key Catalysts
- Healthy $12.7B Free Cash Flow
- Low 38.1% Total Debt to Equity
- 54.8% 1Y Return from assets
Risk Factors
- 5.5% revenue contraction
- Lower 27.7% gross margin vs. peers
- Mining cycle risks
Portfolio Diversification Insights
This stock watchlist clusters heavily in financial stock picks (JPM, HSBC, WFC, MUFG, SAN, DB, BBVA—~70% allocation) for banking synergy, complemented by commodities stock picks (BHP, RIO) and consumer goods (UL). Financials offer high ROIC (avg. ~70%) and returns (e.g., SAN 152.5%, BBVA 129.2%), hedging via low-debt miners (RIO 38.1%, BHP 46.9%). UL adds defensive 71.3% margins. Together, they balance cyclical financials with materials/commodities exposure, reducing sector risk while targeting best value stocks—financials for yield, miners for commodity upside, UL for stability.
Market Timing & Entry Strategies
Consider positions during financial earnings seasons or commodity rallies, using Value Sense intrinsic values (e.g., JPM $248.5, MUFG $2,419.6) for entry below fair value. Dollar-cost average into high-return names like SAN/BBVA on dips, monitor ROIC trends, and pair with macro data for rate-sensitive financials. Scale in over 3-6 months for investment ideas, watching debt metrics amid volatility.
Explore More Investment Opportunities
For investors seeking undervalued companies with high fundamental quality, our analytics team provides curated stock lists:
📌 50 Undervalued Stocks (Best overall value plays for 2025)
📌 50 Undervalued Dividend Stocks (For income-focused investors)
📌 50 Undervalued Growth Stocks (High-growth potential with strong fundamentals)
🔍 Check out these stocks on the Value Sense platform for free!
More Articles You Might Like
- Nelson Peltz - Trian Fund Management Portfolio Q3'2025: Top Holdings & Recent Changes
- Principles for Dealing with the Changing World Order by Ray Dalio
- The Ascent of Money by Niall Ferguson
- Principles for Navigating Big Debt Crises by Ray Dalio
- Influence: The Psychology of Persuasion by Robert B. Cialdini Ph.D.
FAQ Section
How were these stocks selected?
These top 10 best stock picks were curated via Value Sense's automated screener, prioritizing Quality ratings above 5.0, high ROIC, intrinsic value upside, and 1Y returns for diversified stock picks exposure.
What's the best stock from this list?
Banco Santander (SAN) leads with 152.5% 1Y Return, 6.7 Quality rating, and positive $20.1B Free Cash Flow, though all offer unique investment opportunities based on risk tolerance.
Should I buy all these stocks or diversify?
Diversify across financials 70%, commodities 20%, and consumer 10% to balance high-ROIC banks like BBVA with stable miners like RIO, aligning with Value Sense portfolio diversification insights.
What are the biggest risks with these picks?
Key concerns include high debt (e.g., MUFG 348.7%), negative Free Cash Flows (e.g., JPM -$267.5B), and revenue declines (e.g., HSBC -44.8%), plus sector cycles in financials and commodities.
When is the best time to invest in these stocks?
Target entries below intrinsic values (e.g., UL $109.1) during market pullbacks or positive earnings, using Value Sense tools for timing amid 2026's stabilizing rates.