Everyone says they want to buy great companies at great prices — but almost nobody wants to pull the trigger when the stock is bleeding red. That instinct gap is exactly what separates investors who build long-term wealth from those who just watch from the sidelines. Great investing isn’t just about picking strong businesses; it’s about buying them at a discount, because the price paid matters just as much as the company chosen.
Right now, in the middle of 2026’s broad pullback, six well-known companies are trading more than 25% below their all-time highs. According to independent analysis, two of them fall into what Warren Buffett would call “textbook undervalued” territory. Here’s a breakdown of the data behind that claim — organized by risk level, from safest to most speculative.
How to Actually Find These Opportunities Yourself
Spotting a genuine discount — as opposed to a stock that’s simply cheap for good reason — comes down to having the right data layer. This is where InvestingPro earns its place in the process.
Two tools inside the platform do most of the heavy lifting:
- ProPicks AI — an AI model trained on more than 50 financial signals, with strategies that have historically outperformed the S&P 500. It’s a fast way to see what the model is currently flagging as a potential opportunity.
- Fair Value — once a name is on the radar, this feature estimates upside or downside versus a stock’s underlying value, so a “cheap” price can be checked against what the business is actually worth.
As one example, ProPicks AI recently surfaced CME Group (NASDAQ:) as a top pick, with its Fair Value tool showing roughly 13% upside to reach fair value — a case where the AI flagged the opportunity and the valuation data backed it up. That combination — a signal, then a valuation check — is the same basic process behind the six stocks in this article.
This kind of analysis is normally the domain of hedge funds and institutional desks. InvestingPro puts a version of it in front of everyday investors for a fraction of that cost. It won’t tell anyone exactly what to buy — that call still belongs to the investor — but it removes a lot of the guesswork.
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Why 2026 Has Been a Choppy Year for Quality Stocks
2026 has been a volatile, tech-heavy year for markets. On the surface, the major indexes look relatively calm, but underneath, many high-quality stocks have taken a real beating. In early June, the Nasdaq suffered its worst single-day drop in over a year — down more than 4% — triggered by fears around AI chip demand. Even on days when the flirted with record highs, the average stock in the index was sitting double digits below its own 52-week high.
The core driver has been a market-wide repricing of anything tied to massive AI infrastructure spending — chips, data centers, and major cloud providers. Investors grew nervous that all this AI capital expenditure might not pay off quickly enough, and a wave of selling followed. That fear is precisely what has opened the door to potential value.
It echoes a well-known Buffett principle: what you pay for a stock and what it’s actually worth are two different things. When a strong business goes on sale purely because sentiment has turned negative, the gap between price and underlying value is where opportunity tends to live.
So without further ado, let’s dive into the list of stocks.
Tier 1: Quality Compounders on Sale
Microsoft (MSFT)
Trading around $390, Microsoft (NASDAQ:) sits roughly 27% below its October 2025 high of about $538. The primary reason: spending. Microsoft has guided to roughly $190 billion in capital expenditures this fiscal year — a jump of about 61% — while rising memory chip prices are adding an estimated $25 billion in extra costs. Wall Street reacted nervously to that outflow.
But the other side of the ledger looks strong. Azure and cloud revenue grew around 40%, and Microsoft’s AI revenue run rate reached roughly $37 billion, up 123% year-over-year. In other words, the spending appears to be tracking real demand rather than speculation.
Microsoft currently trades around 21 times forward earnings — near the low end of its historical range. Morningstar has assigned it a five-star, “significantly undervalued” rating, with a fair value estimate near $600, and has flagged it as one of the more compelling core-stock bargains in the market today. Running Microsoft through InvestingPro’s own Fair Value model is a good way to see how that estimate compares across sources before sizing a position.
Meta Platforms (META)
Meta Platforms (NASDAQ:) tells a similar story. At around $583, it’s down about 26% from its August 2025 high near $787. Meta raised its 2026 capex guidance to a range of $125–145 billion — nearly double the prior year. Yet the core advertising business remains highly profitable: Q1 2026 revenue grew 33%, operating income rose 30%, and operating margin came in at 41%.
Meta trades at roughly 18 times forward earnings, cheap by its own historical standards. Morningstar rates it four stars, “moderately undervalued,” with a fair value estimate near $850 against a share price under $600. Both Microsoft and Meta are spending heavily to build out AI infrastructure, but both are doing so from a position of financial strength rather than desperation.
Tier 2: Consumer Brands Mid-Turnaround
Nike (NKE)
Nike (NYSE:) trades around $44, down roughly 73% from its 2021 all-time high of about $179. The drop has largely been driven by weakness in China, where sales fell about 12%, along with a slower-than-hoped turnaround under new leadership.
Still, there are early signs of progress: North America revenue grew about 3%, the company beat earnings estimates last quarter, and the 2026 World Cup represents a major catalyst for a brand built around global sport. Morningstar rates Nike four stars, undervalued, with a fair value estimate more than double the current price.
One caveat worth noting: part of last quarter’s earnings beat came from a one-time tariff recovery, and management’s forward guidance remains flat. This is better described as a turnaround in progress rather than a completed comeback. This is exactly the kind of name where checking ProPicks AI’s current read is useful — the model updates its view as new earnings and guidance come in.
Lululemon (LULU)
Lululemon (NASDAQ:) is one of the cheaper names on this list by traditional valuation measures. At around $118, it’s down roughly 77% from its late-2023 high near $511, and trades at just 9–10 times earnings — less than half the S&P 500’s multiple and well below its own historical average.
The company cut its full-year guidance, tariffs are pressuring margins, and sales in the Americas have been soft for several quarters. Even so, the underlying business remains premium: gross margins around 55%, roughly $1.5 billion in net income, minimal debt, and a long runway for international growth. Morningstar’s fair value estimate sits near $295 against a current price near $118, though broader Wall Street sentiment on the stock is more cautious, leaning toward a “hold” rating. This is the higher-conviction pick of the two consumer names.
Tier 3: High-Risk, High-Upside AI Infrastructure Plays
These two names represent the “picks and shovels” layer of the AI buildout — the companies constructing the data centers and compute capacity that AI models run on. The potential upside is large, but so is the risk.
Applied Digital (APLD)
Trading around $34, Applied Digital (NASDAQ:) is down about 30% from its May 2026 high near $50. The bull case centers on its role building AI data center capacity, including major leases with CoreWeave and more than a gigawatt of contracted capacity. Wall Street’s average price target sits around $73 — more than double the current price.
The risk side is significant, though. The company is not yet profitable and burned roughly $720 million in cash in a single quarter, meaning it can’t fund its buildout independently. Additionally, around 69% of its contracted revenue is concentrated in a single customer. This is a high-volatility name that could move sharply in either direction.
IREN (IREN)
IREN (NASDAQ:) trades around $39, down nearly 50% from its November 2025 high near $76. The company started as a Bitcoin miner, giving it existing access to two things AI infrastructure needs most — power and data center capacity — and it’s now pivoting that infrastructure toward AI cloud services, anchored by a $3.4 billion Nvidia cloud contract.
The stock has been cut roughly in half due to a combination of factors: concern that Meta’s expansion of its own AI cloud could pressure pricing for smaller players, a large stock grant to management that drew shareholder criticism, and continued correlation with Bitcoin’s price movements. Like Applied Digital, this is a speculative, high-volatility position.
A Framework for Thinking About These Picks
A useful way to approach these six names is to think in tiers, matching position size to risk:
- Base of the pyramid — quality compounders (Microsoft, Meta): Strong, profitable businesses facing what looks like temporary market fear. This is where the largest allocation typically makes sense for a value-oriented dip buyer.
- Middle — quality turnarounds (Nike, Lululemon): Established brands working through real, identifiable problems, priced at a discount if the turnaround succeeds. These require higher conviction and more tolerance for uncertainty.
- Tip of the pyramid — speculative plays (Applied Digital, IREN): Significant upside tied to continued AI infrastructure demand, but real risk of substantial loss. These warrant the smallest position sizes.
Three Rules for Buying the Dip
- A lower price isn’t automatically a discount. A true discount means the underlying business is still sound and the drop is driven by temporary sentiment. If the business itself is broken, a falling price isn’t a bargain — it’s a trap.
- Buy in pieces, not all at once. Timing the exact bottom is nearly impossible. Dollar-cost averaging into positions over time reduces the risk of committing everything on a single bad day.
- Size positions according to risk. The more speculative the name, the smaller the position should be. This is how upside potential is captured without risking outsized losses.
Put the Data to Work
Every stock above was screened the same way: a signal from ProPicks AI, then a Fair Value check to confirm the discount is real rather than a value trap. That two-step process is available to run on any stock on a watchlist, not just the six covered here.
InvestingPro’s summer sale — up to 60% off — is on now, and readers get a golden opportunity to subscribe through the link below at the lowest price of the year.
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Disclaimer: This article is for informational purposes only and is not financial, legal, or investment advice. “Investing Simplified – Professor G” is owned by NGFINCO, LLC. Always do your own research and consult a licensed professional. We are not responsible for any losses or decisions made based on this content.
