While capital rotates into the SpaceX IPO, three cash-generative businesses are sitting at real discounts: a pipeline operator with a 6.6% yield, a medical devices name trading at half its GF Value, and a gaming and racing business 41% below intrinsic value estimates.

Stay with this, and you will know exactly where the value is before everyone stops looking at the rocket.

Energy

Kinetik Holdings (NYSE: KNTK), a pure-play Permian midstream operator gathering, processing, and treating natural gas in the Delaware Basin, just posted record adjusted EBITDA for Q1 2026 and somehow still trades near $50

The dividend sits at $3.24 per share annualized, which is a 6.6% yield at current prices backed by a 1.25x coverage ratio. The balance sheet is in better shape than it has been in years. Meanwhile, the Iran war has quietly made U.S. shale gathering capacity more strategically important, and Kinetik sits right in the middle of that repricing without needing any particular oil price to keep the contracted volumes flowing.

You are looking at record operations, a high yield, and a valuation gap wide enough to park a pipeline through.

Record EBITDA and Reaffirmed Guidance Signal Execution

Q1 2026 delivered record adjusted EBITDA while management reaffirmed the full-year guide, which tells you the business is running ahead of expectations rather than managing them downward. That beat-and-hold combination is what separates a real discount from a value trap, and KNTK is looking a lot more like the former right now.

62% DCF Discount and 6.6% Yield

Trading at $50 against a DCF fair value near $82 while collecting 6.6% annually is the kind of setup patient investors spend months waiting for. The risk is that Waha Hub gas pricing weakness or a Permian drilling slowdown clips throughput volumes before the valuation gap has time to close.

Healthcare

Baxter International (NYSE: BAX) is one of those situations where the headline numbers look terrible until you realize that is exactly why the stock is interesting.

The business is a major medical supplier and capital equipment maker that got hit hard in 2022-2023 from inflation and soft medical utilization. Management is guiding for mid-single-digit revenue growth and adjusted EPS of $2.45 to $2.55, which would be a real step toward restoring profitability.

The 2026 product pipeline is the real catalyst. Two years of portfolio retooling are finally expected to start showing up in operating margins, and if those launches land, the re-rating from $18 could be substantial.

New Product Launches in 2026

Management has been rebuilding the portfolio for two years, and 2026 is when the results are expected to start showing up in operating margins rather than just in strategy presentations. This is the year you find out whether the turnaround was real or just a storyline.

Narrow Moat Rating Gives the Value Case Something Solid

Morningstar’s narrow moat designation tells you this is not a business that can just be undercut by a cheaper competitor. That durable positioning provides a real floor under the fundamental case, even while the earnings recovery takes a few more quarters to fully arrive.

Consumer Discretionary

Churchill Downs (NASDAQ: CHDN) owns the Kentucky Derby, a growing network of historical racing machine venues, and an online betting operation that keeps compounding quietly while the rest of the market ignores it. The analyst consensus across 12 firms is $134.83 with a unanimous Strong Buy. This thing is genuinely cheap, and the business keeps delivering anyway.

Q1 2026 was the kind of quarter that makes the bear case hard to defend. The company then spent $85 million to acquire the intellectual property for the Preakness Stakes and Black-Eyed Susan Stakes, locking in licensing fee income on premier racing events that nobody else can replicate.

Historical racing machines in Kentucky and Virginia posted 25% EBITDA growth year over year. That is not a mature business slowly declining. That is a business quietly doing exactly what it is supposed to do.

Historical Racing Machine Venues Are Growing at 25% EBITDA

Kentucky and Virginia HRM venues drove 25% year-over-year EBITDA growth in Q1, which is exceptional for a regulated, capital-intensive business operating in a sector most people associate with a single day in May. Consistent growth in a high-barrier niche is the kind of thing that tends to get re-rated once enough people notice.

Preakness IP Acquisition Locks In a Recurring Revenue Stream

Paying $85 million for the Preakness Stakes and Black-Eyed Susan Stakes IP gives Churchill Downs a licensing fee income stream from one of horse racing’s biggest events. It makes the moat around the flagship racing franchise meaningfully wider and adds income that compounds without requiring additional capital every year to maintain.

Baxter International (NYSE: BAX) is the kind of deeply discounted medical name that tends to look obvious in hindsight once the turnaround starts working. It trades near $18 against a GF Value of $34 and an average analyst target above $37, which means the market is essentially pricing in permanent failure for a narrow-moat business that Morningstar considers one of their top Q2 2026 undervalued picks. 

The 2026 product pipeline is what the bull case rides on, with new launches expected to start contributing to operating margins after two years of portfolio retooling that the income statement has not yet rewarded.

Accumulate between $18 and $20 and size positions to reflect that this is a turnaround with a real timeline, not a momentum trade. The risk is that new product traction arrives later than expected and negative earnings drag sentiment further before the recovery becomes visible.

Kinetik Holdings (NYSE: KNTK) is a Permian midstream name doing everything right that the market has not fully priced yet, and that gap is the opportunity. Record Q1 2026 EBITDA, a reaffirmed full-year guide, a 6.6% dividend covered at 1.25x, and a Morningstar fair value of $82.11 against a current price near $50 is a setup that does not require much imagination to appreciate.

Wells Fargo upgraded KNTK to Overweight in May at $52, Clear Street is at $55 Buy, and both targets still sit below where Morningstar thinks this business is actually worth.

Buy on any pullback toward $48 and let the contracted cash flows do the compounding. The risk is Waha Hub pricing pressure or a Permian drilling slowdown cutting throughput before the valuation gap resolves.

Sirius XM (NASDAQ: SIRI) is the legacy media name everyone has given up on, which is precisely what makes it interesting right now. It trades at 8.35 to 9.25x forward earnings against a media industry median closer to 14x, and Simply Wall St’s DCF model puts it 69% below their fair value estimate.

The investment case is not about subscriber growth. It is about a capital return program through buybacks and dividends that quietly compounds equity value even when the top line stays flat.

Accumulate under $30 and let management keep buying the stock back at lower prices than the model says it is worth. The risk is that streaming competition erodes subscriber counts faster than the buyback program can absorb the pressure.

That's our coverage for today; thanks for reading! Reply to this email with feedback or any [blank] stocks you want me to check out.

Best Regards,
—Noah Zelvis
Undervalued Edge