Three US Market Opportunities Trading at Significant Discounts in a Rallied Market

Market Context: Finding Value When Stocks Surge

The US stock market has experienced robust gains recently, with the S&P 500 advancing nearly 15% and the Nasdaq-100 Index climbing over 20%. This rally has pushed valuations higher across the board, making quality opportunities increasingly scarce. However, a closer examination reveals several US-traded stocks that remain priced well below their intrinsic value—a noteworthy situation for income-focused investors.

Energy Transfer (NYSE: ET): Exceptional Income at Basement Valuations

Energy Transfer presents one of the most compelling opportunities in the energy midstream sector. The master limited partnership trades at less than 9 times earnings, a stark contrast to sector peers averaging around 12 times earnings multiples.

This exceptionally low valuation translates to a dividend yield exceeding 8%—roughly seven times the S&P 500’s current 1.2% yield. While the MLP structure brings tax complexity through annual Schedule K-1 forms, this administrative burden doesn’t fully explain the discount relative to comparable midstream operators.

Energy Transfer maintains one of the strongest balance sheets in its corporate history and commands significant market share within the energy infrastructure space. The company’s growth pipeline is substantial: it maintains a multi-billion-dollar backlog of commercially secured expansion projects currently under construction, with additional development-stage projects in the pipeline. This positioned activity should sustain healthy cash flow growth over coming years, providing consistent support for its high-yielding distribution policy.

Realty Income (NYSE: O): A Premier REIT Trading Below Its Peers

Realty Income is currently valued at approximately 13 times earnings—a notable discount to the 18x average multiple commanded by large-cap REITs within the S&P 500. This pricing gap has compressed the company’s dividend yield to 5.7%, despite its operational excellence.

The REIT’s valuation discount appears unjustified given its track record. Over the past one-, three-, and five-year periods, Realty Income has delivered superior total returns—combining dividend distributions with funds from operations (FFO) per share growth—compared to blue-chip REIT competitors. The company maintains one of the sector’s strongest financial profiles, affording management significant flexibility for continued portfolio expansion into income-generating real estate assets.

With over 30 consecutive years of dividend increases, Realty Income has demonstrated an uncommon commitment to shareholder returns. This consistency, paired with its financial strength, suggests the current discount may represent a temporary market inefficiency rather than a fundamental concern.

UPS (NYSE: UPS): Operational Realignment May Unlock Value

United Parcel Service shares have declined more than 50% from levels reached three years ago, reflecting operational challenges in a shifting logistics environment. The company has faced headwinds including tariff-driven market disruptions and strategic reductions in Amazon volume. Consequently, recent financial performance shows compression in revenue, earnings, and free cash flow generation.

Through the first nine months of this year, UPS generated $2.7 billion in free cash flow—insufficient to cover its $4 billion annual dividend commitment without drawing on reserves or accessing capital markets. The apparent dividend sustainability concern has contributed to the stock’s weakness.

However, the company is executing a strategic operational realignment aimed at right-sizing its network for current demand levels while simultaneously emphasizing higher-margin service lines, particularly healthcare logistics solutions. Early indicators suggest progress: management targets $3.5 billion in cost savings by year-end, which should meaningfully improve profitability metrics.

Wall Street analysts anticipate per-share earnings of $7.00 or higher for the upcoming year, compared to $6.44 in 2024. This projection implies a forward valuation of approximately 13 times earnings—substantially below the S&P 500’s forward PE multiple of 21x, suggesting considerable discount pricing.

The Broader Opportunity

In a US market where valuations have broadly expanded, Energy Transfer, Realty Income, and UPS collectively represent compelling opportunities. Each trades at a significant multiple discount relative to peer groups or broader indices. For investors prioritizing current income alongside potential capital appreciation, these positions offer the dual benefit of attractive dividend yields locked in at discounted entry points—a combination that could amplify total returns as market conditions normalize.