ValueWorks founder Charles Lemonides argues that investors are too fixated on dominant companies, missing significant value in smaller, overlooked rivals.
Lemonides, whose firm manages approximately $400 million through a hedge fund and other investment strategies, made his case in a recent interview.
He told MarketWatch that “there’s a winner-take-all fallacy in certain industries, and there are opportunities among overlooked upstarts.”
His three picks share a common thread: each trades at a meaningful valuation discount to its larger, better-known competitor in the same sector.
Lemonides favors Lyft (LYFT) over Uber (UBER), pointing to a stark difference in how the market values each company’s revenue.
According to FactSet consensus figures, Lyft trades at roughly 0.7 times forward enterprise value-to-sales, compared with 2.4 times for Uber, a substantial gap by any measure.
He noted that “Lyft has been growing its top line faster than Uber,” adding that “Lyft also has a cleaner balance sheet with $900 million in total debt versus $23.5 billion for Uber.”
FactSet projections show Lyft’s revenue climbing from $4.4 billion in 2023 to $7.4 billion in 2026, representing a 68% increase that outpaces Uber’s projected 55% revenue growth over the same period.
Lemonides also favors Maplebear (CART), the parent company of Instacart, over the considerably larger DoorDash (DASH) on valuation grounds.
MarketWatch figures put Instacart’s forward EV-to-sales ratio at 2.5 times, compared with 4.1 times for DoorDash, while Instacart’s forward EV-to-EBIT multiple of 13.1 times compares favorably to DoorDash’s 45.9 times.
Lemonides argued that Instacart’s established grocery-delivery infrastructure creates a meaningful competitive moat that would be costly for any new entrant to replicate.
He said: “If you tried to do a grocery business [as] a startup tomorrow, you would have to make a tremendous investment to develop the infrastructure and the people to do it, and then spend a ton on marketing to get a customer base.”
His third underdog pick is Rivian (RIVN), which he favors over Tesla (TSLA) based on a dramatic valuation difference between the two electric vehicle makers.
Rivian trades at 1.9 times forward EV-to-sales while Tesla commands 10.7 times, with Tesla’s forward EV-to-EBIT multiple sitting at a striking 190.4 times.
Lemonides sees Rivian’s upcoming R2 SUV, currently listed at a starting price of $44,990, as a potential catalyst for meaningful improvement in the company’s profitability.
Rivian began delivering the R2 to customers in the second quarter and expects total vehicle deliveries to reach between 62,000 and 67,000 units this year.
Whether these underdogs can close the gap on their dominant rivals remains to be seen, but Lemonides believes patient investors willing to look beyond market leaders stand to benefit.
