10 Best Undervalued Stocks Smart Money Is Buying for February 2026
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Market Overview & Selection Criteria
In the current market environment, value investors seek stocks trading below their intrinsic value amid sector rotations from tech to financials and healthcare. Value Sense's methodology identifies these opportunities by analyzing key metrics like Quality rating, intrinsic value, ROIC, revenue growth, and FCF margins using machine learning-driven fundamental analysis. Stocks were selected from Value Sense data for high potential based on significant gaps between current implied prices and intrinsic values, strong historical 1Y returns, and balanced sector exposure across semiconductors, tech, e-commerce, biotech, banking, and autos. This watchlist emphasizes companies with robust gross margins and growth trajectories, filtered for market caps over $200B to ensure liquidity for retail investors.
Featured Stock Analysis
Stock #1: Taiwan Semiconductor Manufacturing Company Limited (TSM)
| Metric | Value |
|---|---|
| Market Cap | $1,730.0B |
| Quality Rating | 8.2 |
| Intrinsic Value | $484.8 |
| 1Y Return | 58.8% |
| Revenue | NT$3,818.9B |
| Free Cash Flow | NT$1,019.8B |
| Revenue Growth | 31.9% |
| FCF margin | 26.7% |
| Gross margin | 59.9% |
| ROIC | 38.2% |
| Total Debt to Equity | 18.2% |
Investment Thesis
Taiwan Semiconductor Manufacturing Company Limited (TSM) stands out with a Quality rating of 8.2, reflecting superior financial health. Its intrinsic value of $484.8 suggests substantial undervaluation, supported by explosive revenue growth of 31.9% and Free Cash Flow of NT$1,019.8B. With a Gross margin of 59.9% and industry-leading ROIC at 38.2%, TSM demonstrates efficient capital allocation and dominance in semiconductor foundry services. The 1Y Return of 58.8% underscores momentum, while low Total Debt to Equity of 18.2% provides a strong balance sheet for sustained expansion in AI and high-performance computing chips. This positions TSM as a core holding for tech exposure in a diversified portfolio.
Key Catalysts
- Exceptional revenue growth 31.9% driven by demand for advanced nodes in AI and 5G.
- High FCF margin 26.7% enabling R&D and dividends.
- Top-tier ROIC 38.2% signaling superior returns on investments.
- Massive Market Cap $1,730.0B with global leadership in semiconductors.
Risk Factors
- Geopolitical tensions in Taiwan region.
- Cyclical semiconductor demand fluctuations.
- Currency risks from NT$ reporting.
Stock #2: Micron Technology, Inc. (MU)
| Metric | Value |
|---|---|
| Market Cap | $486.8B |
| Quality Rating | 8.2 |
| Intrinsic Value | $419.0 |
| 1Y Return | 348.5% |
| Revenue | $42.3B |
| Free Cash Flow | $17.3B |
| Revenue Growth | 45.4% |
| FCF margin | 40.9% |
| Gross margin | 45.3% |
| ROIC | 23.4% |
| Total Debt to Equity | 21.2% |
Investment Thesis
Micron Technology, Inc. (MU) earns a Quality rating of 8.2, bolstered by staggering 1Y Return of 348.5% and intrinsic value of $419.0, indicating deep undervaluation. Revenue growth hit 45.4% with Free Cash Flow at $17.3B and an impressive FCF margin of 40.9%. ROIC of 23.4% and Gross margin of 45.3% highlight operational strength in memory chips, particularly DRAM and NAND for data centers and AI. Low Total Debt to Equity 21.2% supports resilience, making MU a high-conviction pick for memory cycle upturns in the tech sector.
Key Catalysts
- Phenomenal 1Y Return 348.5% from AI-driven memory demand.
- Strong revenue growth 45.4% and FCF margin 40.9%.
- Solid ROIC 23.4% for expansion in high-bandwidth memory.
- Market Cap $486.8B reflects scale in semiconductors.
Risk Factors
- Volatility in memory pricing cycles.
- Competition from Samsung and SK Hynix.
- Supply chain dependencies.
Stock #3: Alibaba Group Holding Limited (BABA)
| Metric | Value |
|---|---|
| Market Cap | $399.0B |
| Quality Rating | 6.4 |
| Intrinsic Value | $299.8 |
| 1Y Return | 65.0% |
| Revenue | CN¥1,012.1B |
| Free Cash Flow | (CN¥26.9B) |
| Revenue Growth | 5.2% |
| FCF margin | (2.7%) |
| Gross margin | 41.2% |
| ROIC | 10.5% |
| Total Debt to Equity | 25.3% |
Investment Thesis
Alibaba Group Holding Limited (BABA) shows a Quality rating of 6.4 with intrinsic value at $299.8, trading at a discount amid China recovery. Despite negative Free Cash Flow (CN¥26.9B) and FCF margin -2.7%, revenue growth of 5.2% and Gross margin of 41.2% indicate e-commerce stability. ROIC of 10.5% and 1Y Return of 65.0% suggest rebound potential, with Total Debt to Equity at 25.3% manageable. BABA offers exposure to cloud and digital economy growth in emerging markets.
Key Catalysts
- Strong 1Y Return 65.0% on regulatory easing.
- Improving revenue growth 5.2% in core e-commerce.
- Decent Gross margin 41.2% supporting cloud investments.
- Market Cap $399.0B for diversified tech play.
Risk Factors
- Negative FCF signaling cash burn.
- Geopolitical and regulatory risks in China.
- Slow revenue growth compared to peers.
Stock #4: AbbVie Inc. (ABBV)
| Metric | Value |
|---|---|
| Market Cap | $392.2B |
| Quality Rating | 6.3 |
| Intrinsic Value | $302.5 |
| 1Y Return | 27.0% |
| Revenue | $59.6B |
| Free Cash Flow | $20.6B |
| Revenue Growth | 7.4% |
| FCF margin | 34.5% |
| Gross margin | 76.2% |
| ROIC | 12.0% |
| Total Debt to Equity | (2,645.0%) |
Investment Thesis
AbbVie Inc. (ABBV) has a Quality rating of 6.3 and intrinsic value of $302.5, highlighting value in healthcare. Free Cash Flow of $20.6B yields a healthy FCF margin of 34.5%, with Gross margin at 76.2% from biologics. Revenue growth of 7.4% and ROIC of 12.0% support steady pharma growth, despite extreme Total Debt to Equity -2,645.0%. 1Y Return of 27.0% and Market Cap $392.2B make it a defensive pick.
Key Catalysts
- Exceptional Gross margin 76.2% from high-margin drugs.
- Positive FCF margin 34.5% for dividends.
- Reliable revenue growth 7.4% in immunology.
- Large Market Cap $392.2B with pipeline strength.
Risk Factors
- Elevated Total Debt to Equity -2,645.0%.
- Patent cliffs on key products.
- Regulatory hurdles in biotech.
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Stock #5: Bank of America Corporation (BAC)
| Metric | Value |
|---|---|
| Market Cap | $389.7B |
| Quality Rating | 6.3 |
| Intrinsic Value | $60.2 |
| 1Y Return | 16.5% |
| Revenue | $188.8B |
| Free Cash Flow | $35.6B |
| Revenue Growth | (1.9%) |
| FCF margin | 18.8% |
| Gross margin | 55.4% |
| ROIC | 16.7% |
| Total Debt to Equity | 120.7% |
Investment Thesis
Bank of America Corporation (BAC) scores a Quality rating of 6.3 with intrinsic value at $60.2. Strong Free Cash Flow $35.6B and FCF margin 18.8% pair with ROIC of 16.7% and Gross margin of 55.4%. Despite slight revenue decline -1.9%, 1Y Return of 16.5% and Market Cap $389.7B reflect banking resilience, with Total Debt to Equity at 120.7% typical for the sector.
Key Catalysts
- Robust FCF $35.6B for buybacks.
- High ROIC 16.7% in lending.
- Solid Gross margin 55.4%.
- Market Cap $389.7B as systemic bank.
Risk Factors
- Negative revenue growth -1.9%.
- Interest rate sensitivity.
- High Total Debt to Equity 120.7%.
Stock #6: 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) has a Quality rating of 5.1 but impressive 1Y Return of 76.3% and intrinsic value of $92.3. ROIC stands at 166.8% with Gross margin 57.4%, offsetting zero Free Cash Flow and revenue decline -44.8%. Market Cap $304.0B and Total Debt to Equity 49.4% position it for global banking recovery.
Key Catalysts
- Outstanding 1Y Return 76.3%.
- Exceptional ROIC 166.8%.
- Strong Gross margin 57.4%.
- International Market Cap $304.0B.
Risk Factors
- Zero Free Cash Flow.
- Sharp revenue growth -44.8%.
- Exposure to emerging markets volatility.
Stock #7: Toyota Motor Corporation (TM)
| Metric | Value |
|---|---|
| Market Cap | $295.1B |
| Quality Rating | 6.5 |
| Intrinsic Value | $565.1 |
| 1Y Return | 18.8% |
| Revenue | ¥49.4T |
| Free Cash Flow | ¥147.8B |
| Revenue Growth | 6.4% |
| FCF margin | 0.3% |
| Gross margin | 18.0% |
| ROIC | 8.8% |
| Total Debt to Equity | 103.7% |
Investment Thesis
Toyota Motor Corporation (TM) features a Quality rating of 6.5 and intrinsic value of $565.1. Revenue of ¥49.4T with growth of 6.4% and Free Cash Flow ¥147.8B show auto sector strength. ROIC 8.8% and 1Y Return 18.8% align with Market Cap $295.1B, despite low FCF margin 0.3% and Total Debt to Equity 103.7%.
Key Catalysts
- Steady revenue growth 6.4%.
- Hybrid/EV transition momentum.
- Global Market Cap $295.1B.
- Positive 1Y Return 18.8%.
Risk Factors
- Thin FCF margin 0.3%.
- High Total Debt to Equity 103.7%.
- Auto industry competition.
Stock #8: The Goldman Sachs Group, Inc. (GS)
| Metric | Value |
|---|---|
| Market Cap | $290.5B |
| Quality Rating | 6.3 |
| Intrinsic Value | $1,040.9 |
| 1Y Return | 47.8% |
| Revenue | $125.1B |
| Free Cash Flow | ($30.4B) |
| Revenue Growth | (1.8%) |
| FCF margin | (24.3%) |
| Gross margin | 45.7% |
| ROIC | N/A |
| Total Debt to Equity | 495.2% |
Investment Thesis
The Goldman Sachs Group, Inc. (GS) rates 6.3 in Quality with intrinsic value $1,040.9. 1Y Return 47.8% shines despite negative Free Cash Flow -$30.4B and revenue growth -1.8%. Gross margin 45.7% and Market Cap $290.5B highlight investment banking prowess, with high Total Debt to Equity 495.2% sector-norm.
Key Catalysts
- Strong 1Y Return 47.8%.
- Trading and advisory revenue potential.
- Solid Gross margin 45.7%.
- Elite Market Cap $290.5B.
Risk Factors
- Negative FCF -$30.4B.
- Revenue contraction -1.8%.
- Elevated Total Debt to Equity 495.2%.
Stock #9: Intel Corporation (INTC)
| Metric | Value |
|---|---|
| Market Cap | $233.1B |
| Quality Rating | 4.7 |
| Intrinsic Value | $76.4 |
| 1Y Return | 132.2% |
| Revenue | $52.9B |
| Free Cash Flow | ($4,949.0M) |
| Revenue Growth | (0.5%) |
| FCF margin | (9.4%) |
| Gross margin | 35.1% |
| ROIC | (1.2%) |
| Total Debt to Equity | 36.9% |
Investment Thesis
Intel Corporation (INTC) has a Quality rating of 4.7 but 1Y Return of 132.2% and intrinsic value $76.4. Negative Free Cash Flow -$4,949.0M and revenue growth -0.5% contrast with turnaround efforts in chips. Market Cap $233.1B and Total Debt to Equity 36.9% offer recovery upside.
Key Catalysts
- Impressive 1Y Return 132.2%.
- Foundry and AI chip investments.
- Manageable Total Debt to Equity 36.9%.
- Scale via Market Cap $233.1B.
Risk Factors
- Negative ROIC -1.2%.
- Cash flow burn (-9.4% margin).
- Competitive pressures from TSM/MU.
Stock #10: Thermo Fisher Scientific Inc. (TMO)
| Metric | Value |
|---|---|
| Market Cap | $218.5B |
| Quality Rating | 6.0 |
| Intrinsic Value | $648.3 |
| 1Y Return | -4.6% |
| Revenue | $44.6B |
| Free Cash Flow | $6,293.0M |
| Revenue Growth | 3.9% |
| FCF margin | 14.1% |
| Gross margin | 39.5% |
| ROIC | 8.4% |
| Total Debt to Equity | 73.7% |
Investment Thesis
Thermo Fisher Scientific Inc. (TMO) scores Quality rating 6.0 with intrinsic value $648.3. Free Cash Flow $6,293.0M and revenue growth 3.9% support life sciences leadership. ROIC 8.4% and Gross margin 39.5% offset 1Y Return -4.6%, with Market Cap $218.5B.
Key Catalysts
- Positive FCF margin 14.1%.
- Steady revenue growth 3.9%.
- Healthcare demand resilience.
- Strong Market Cap $218.5B.
Risk Factors
- Negative 1Y Return -4.6%.
- Total Debt to Equity 73.7%.
- Biopharma funding cycles.
Portfolio Diversification Insights
This 10-stock watchlist balances technology (TSM, MU, BABA, INTC ~40%), financials (BAC, HSBC, GS ~30%), healthcare (ABBV, TMO ~20%), and autos (TM ~10%). High-quality leaders like TSM and MU complement stable names like ABBV and BAC, reducing sector risk. Pairing semiconductor growth with banking yields and pharma defensiveness creates synergy—tech drives upside, financials offer dividends, per Value Sense metrics. Allocate 10% per stock for optimal spread, emphasizing high intrinsic value gaps and ROIC.
Market Timing & Entry Strategies
Consider entry on pullbacks to 80-90% of intrinsic value, monitoring earnings for revenue acceleration. For cyclicals like MU/INTC, time with AI demand signals; defensives (ABBV, TMO) suit volatility. Scale in over 3-6 months using dollar-cost averaging, watching macro factors like rates impacting banks (BAC, GS). Value Sense tools aid backtesting for optimal positioning.
Explore More Investment Opportunities
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FAQ Section
How were these stocks selected?
These stocks were chosen using Value Sense's criteria: high intrinsic value discounts, strong Quality ratings, positive ROIC, and sector diversity from automated fundamental scans.
What's the best stock from this list?
MU leads with 348.5% 1Y Return and 8.2 Quality rating, but TSM offers the highest Market Cap and ROIC for balanced quality.
Should I buy all these stocks or diversify?
Diversify across sectors as shown in Portfolio Insights to mitigate risks; this collection provides built-in balance without over-concentration.
What are the biggest risks with these picks?
Key risks include negative FCF (BABA, GS, INTC), high debt (ABBV, GS), and cyclical/geopolitical exposures (TSM, HSBC)—review per stock.
When is the best time to invest in these stocks?
Target dips toward intrinsic value, post-earnings confirmation of growth, using Value Sense screeners for timing signals.