I previously worked as an equity analyst for a hedge fund with over $500 million in assets under management. I was a generalist, but focused mainly on the tech, consumer, and energy sectors. Part of my job was pitching stock ideas to my portfolio manager to get them included in the portfolio.
It was a long-short fund, but our goal was total return. While we liked strong business models with growth, we also put a heavy emphasis on valuation. As such, these would be the three stocks I’d be pitching to get into the fund today.
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Energy Transfer
Midstream master limited partnership (MLP) Energy Transfer (ET +0.71%) was a stock I pitched and got into my former fund’s portfolio many years ago. However, I think the stock may be even more attractive today.
Energy Transfer operates one of the largest and most diversified midstream networks in the country, although arguably its most prized asset today its its natural gas system in and around the prolific Permian oil basin. This gives it access to some of the cheapest natural gas in the country because natural gas takeaway from the region remains constrained, and the field has only been getting gassier.
With power demand soaring, in part stemming from artificial intelligence (AI) data centers, and its huge natural gas transmission network, Energy Transfer has a huge pipeline of high-return growth projects.
Today’s Change
(0.71%) $0.14
Current Price
$19.07
Key Data Points
Market Cap
$65B
Day’s Range
$18.90 – $19.17
52wk Range
$14.60 – $19.86
Volume
12M
Avg Vol
16M
Gross Margin
12.27%
Dividend Yield
7.00%
At the same time, the stock is cheap both compared to peers and on a historical basis, trading at a forward enterprise value (EV)-to-EBITDA ratio of just 8.7. Overall, Energy Transfer is a great combination of a solid growth stock at an attractive valuation with a 7% yield to boot.
JAKKS Pacific
Toymaker JAKKS Pacific (JAKK +3.87%) is the definition of a deep value stock with a catalyst. It trades at a forward price-to-earnings (P/E) ratio of under 6.5, which is well below that of fellow toymakers Hasbro (15), Mattel (12), and Spin Master (9.5).
The company hasn’t gotten the credit it deserves for its transformation under CFO John Kimble, who has just added a layer of discipline and accountability that the company didn’t always have before he arrived in 2019. This was evident last year, when JAKKS recorded its highest gross margin in 15 years despite tariff pressures and declining sales.
Today’s Change
(3.87%) $0.78
Current Price
$20.95
Key Data Points
Market Cap
$231M
Day’s Range
$20.09 – $20.95
52wk Range
$14.87 – $23.60
Volume
1.6K
Avg Vol
120K
Gross Margin
32.34%
Dividend Yield
4.96%
While JAKKS has worked to diversify its business and lean into evergreen content, its sales are still heavily tied to popular children’s movies, which create a lot of buzz and drive toy and costume sales. That’s a huge potential catalyst for the stock this year, as the 2026 movie slate is just filled with potential kids’ blockbusters. That makes JAKKS a stock you want to bet on this year.
GitLab
GitLab (GTLB +0.20%) is a $3.7 billion market cap company with over $1.25 billion in net cash on its balance sheet, $955 million in revenue last year, a nearly 90% gross margin, and over 12,000 customers, and is projected to grow its revenue at a mid- to high-teen pace. That values the business at an EV-to-sales ratio of 2.2. That by itself likely gets the stock at least a small position into my old fund’s portfolio.
Today’s Change
(0.20%) $0.04
Current Price
$22.61
Key Data Points
Market Cap
$3.8B
Day’s Range
$22.30 – $22.94
52wk Range
$20.20 – $54.08
Volume
1.7M
Avg Vol
6.2M
Gross Margin
87.38%
The company plays an important role in software development with its DevSecOps platform, which serves as a secure code depository. Meanwhile, it is working to transition itself to a complete software development lifecycle platform with its Duo Agent solution, which just became generally available earlier this year.
This will help transition it from a purely seat-based model to a hybrid seat-plus usage model, where customers can use consumption-based credits for autonomous AI tasks and agentic workflows, such as security vulnerability remediation, automated testing, and CI/CD (continuous integration and continuous delivery/deployment) pipeline troubleshooting.
While revenue growth has decelerated, it remains solid, and in addition to Duo Agent, the company is also looking to spur growth by increasing its sales headcount and offering more à la carte options to smaller customers that want features from its Ultimate tier, but may not have the budget to upgrade.
This stock is just too cheap to ignore, with a potential catalyst in Duo and the move to its new pricing model.
