In this video, Chuck Carnevale—co-founder of FAST Graphs and known as Mr. Valuation—explains why investors should avoid paying premium prices for stocks, why buying overvalued stocks Is risky – even when the businesses themselves are high quality. His central question: why buy an overvalued stock with average growth prospects when you can buy a fairly valued or undervalued stock with equal or better growth potential?
Chuck begins with a comparison between Visa and Fiserv. Both are top-tier payment processors, but Visa trades at a lofty valuation (P/E over 30) with a low earnings yield of about 3%. By contrast, Fiserv trades at a much more attractive valuation, with double the earnings yield and stronger projected growth. The takeaway: investors buying Visa today risk long-term underperformance, while Fiserv offers the same quality but better returns at a cheaper price.
He then highlights FedEx versus McDonald’s. Despite FedEx’s cyclical nature, it’s priced attractively with higher growth expectations and nearly 8% earnings yield. McDonald’s, however, trades at a steep premium with slower growth prospects, putting investors at risk of losing money if the valuation normalizes.
Chuck also compares utilities, showing how American Electric Power and Eversource illustrate the importance of valuation even in conservative sectors. Overvaluation in utilities has historically led to years of poor returns, while fairly valued utilities can provide strong dividends and double-digit returns.
From there, he reviews a series of popular but overvalued companies—including Novo Nordisk, Align Technology, Ball Corporation, Brown-Forman, and Estée Lauder. Each example demonstrates the same principle: no matter how great the business, when the stock price gets too far above intrinsic value, investors eventually face painful corrections. Some of these corrections erased 50–60% of investor value in just a few years.
The pattern is clear: earnings and fundamentals drive stock prices in the long run, but emotions drive them in the short run. Investors chasing “hot” overvalued stocks may feel like geniuses in a bull market, but when momentum fades, they risk devastating losses. Buying at or below fair value not only reduces risk but positions investors to recover quickly if prices dip.
Chuck closes by reinforcing his core principle: valuation matters—a lot. FAST Graphs can help investors see whether they’re buying into value or simply chasing price. Overpaying for quality may seem safe, but it’s like playing musical chairs—when the music stops, only fundamentals provide a chair to sit on.
In this video Chuck will cover Visa Inc (V), Fiserv Inc (FI), FedEx Corp (FDX), McDonalds (MCD), American Electric Power (AEP), Eversource Energy (ES), Novo Nordisk (NOV), Align Technology (ALGN), Ball Corp (BALL), Estee Lauder Companies (EL)
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Disclosure: Long FDX and ES
Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.
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