Gamma Sigma Capital Watchlist: 3 Under-the-Radar Stocks with Strong Upside Potential

Three Undervalued Equities Positioned for Strategic Repricing

In today’s macroeconomic climate—where market sentiment is largely dictated by headlines, algos, and herd mentality—real opportunities lie hidden beneath the surface. At Gamma Sigma Capital, we are not in the business of chasing momentum. We are in the business of anticipating it.

While the broader investing public remains fixated on a narrow cohort of mega-cap names, we dedicate our research resources to uncovering asymmetric setups, unrecognized value, and inflection points that haven’t yet been priced in by the market. Our weekly watchlist highlights three names we believe are entering critical phases, where a convergence of fundamentals, sentiment shift, and institutional behavior may trigger significant revaluation.

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1. Chewy, Inc. (CHWY) – Structural Growth Hidden in Plain Sight

Ticker: CHWY | Current Price: $31.47 | Market Cap: ~$13B

Chewy, the online pet retail behemoth, has experienced a sharp pullback of over 21% from recent highs. For most, this may appear as weakness. For us, it’s a window of strategic entry into a fundamentally sound company executing on a powerful recurring revenue model.

In Q4, 80.6% of Chewy’s net sales were attributed to Autoship—their subscription-like service that delivers pet supplies on a recurring basis. That equates to $9.4 billion in Autoship sales out of $11.9 billion in total revenue for fiscal 2024. This model has grown not only in revenue contribution but in margin efficiency, reflecting Chewy’s increasing operational leverage and pricing power.

What makes Chewy exceptional is the stability of demand in a volatile consumer environment. The long-term tailwinds tied to pet humanization and e-commerce penetration continue to support their secular growth story. Furthermore, Chewy has established a moat through customer loyalty that few online retailers can replicate.

Valuation remains compelling: the current market cap does not fully reflect the predictability and quality of its revenue streams. As operating margins expand and customer acquisition costs stabilize, we anticipate improved free cash flow generation that will likely surprise to the upside.

Key Catalysts to Watch:

• Earnings revision cycle driven by margin improvements

• Enhanced institutional positioning if FCF outpaces projections

• Continued growth in Autoship penetration and retention metrics

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2. Arm Holdings (ARM) – The Silent Giant Powering the AI Boom

Ticker: ARM | Current Price: $87.64 | 52-Week Low: $84.39

After peaking in January, Arm Holdings has undergone a 44% correction, now trading near its 52-week lows. This pullback, in our view, is a valuation reset—not a structural breakdown. The fundamentals remain as strong as ever, especially for long-term investors seeking exposure to the picks-and-shovels of the AI economy.

Arm licenses the chip architecture used by virtually every major tech name—from Apple and Qualcomm to Nvidia and Amazon. Its role is not to manufacture chips but to design the intellectual property that powers them. This asset-light model translates to exceptional margins, with a gross margin of 94.04%—a figure almost unheard of in semiconductors.

The company’s relevance in cloud and AI computing is growing rapidly. ARM-based CPUs already dominate the mobile ecosystem, but its expansion into data centers is the real story. Market share in data center CPUs is expected to surge from 15% in 2024 to 50% by 2025, driven by increased adoption of ARM-based Graviton processors at AWS.

Despite a high trailing P/E, the forward valuation reflects accelerating earnings and revenue visibility. This is a long-duration growth asset, and current prices offer what we believe is a rare second chance entry.

Key Catalysts to Watch:

• Further Graviton adoption across hyperscalers (AWS, Google Cloud, Azure)

• Entry into AI-specific compute markets through custom processor IP

• Margin expansion via new licensing deals and royalty growth

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3. Berkshire Hathaway Inc. (BRK.B) – Defensive Power, Offensive Flexibility

Ticker: BRK.B | Current Price Pullback: -6.89% | Cash Reserves: $334B

As macroeconomic risks begin to crystalize—rising tariffs, decelerating global trade, and tightening financial conditions—investors are seeking durability and strategic optionality. Berkshire Hathaway offers both.

With over $334 billion in cash and equivalents, Berkshire maintains an unmatched capital position in the public markets. This war chest allows for not only downside protection during periods of volatility but also opportunistic deployment into distressed assets—something Warren Buffett’s team has mastered over multiple economic cycles.

Its collection of wholly owned businesses—ranging from GEICO to BNSF Railways to Berkshire Hathaway Energy—are positioned to perform across economic regimes. These are companies providing essential services with recurring cash flows, low cyclicality, and high pricing power.

Meanwhile, the public equity portfolio, which includes significant stakes in Apple and Coca-Cola, adds an offensive layer to the balance sheet. When markets correct, Berkshire typically benefits both from mark-to-market drawdowns (creating buying opportunities) and from an investor flight to safety.

As recession odds are now estimated at 40–60% by leading macro institutions, Berkshire may serve as one of the most intelligent hedges in equity form.

Key Catalysts to Watch:

• Deployment of cash reserves into high-return acquisitions

• Accelerated buybacks under revised valuation models

• Enhanced defensive allocation in retail portfolios amid risk-off shifts

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DisclaimerThe information provided in this blog post is for educational and informational purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always conduct your own research or consult with a licensed financial advisor before making any investment decisions.