One of the questions I receive most often is surprisingly simple.
What’s the best stock to buy today?
The answer to that is simple: Buy exceptionally strong businesses at a decent price.
That’s exactly where long-term returns are made.
The Financial X-Ray isn’t designed to find the cheapest stocks.
Its job is much harder. It tries to identify the point where an exceptional business still offers an attractive long-term return.
Sometimes that means buying.
Sometimes it means doing absolutely nothing. In the current setup we see the Financial X-Ray selection (stocks with a strong X-Ray score) increasing their outperformance vs the MSCI world index.
That discipline often feels uncomfortable.
When a company is making new highs, investors naturally assume they’ve already missed the opportunity.
Equally, when a company continues delivering exceptional results quarter after quarter, it becomes increasingly difficult to stay patient.
Nobody likes watching a great business while waiting for a better opportunity.
This week I’d like to show you one example.
Not because it’s a bad company. Quite the opposite.
It’s one of the highest-quality businesses the Financial X-Ray currently follows.
Yet it isn’t in the Selection portfolio above which has performed so well over the past 3 years.
Let’s ignore the company name for a moment.
Instead, look at the Financial X-Ray executive summary that balances opportunities and risk for you.
Without knowing the company, what would you conclude? Strong financial health. Strong growth. Solid Management. A durable competitive position. Yet it still hasn’t earned it’s place in the Financial X-Ray Selection portfolio.
So what’s missing?
Valuation.
That’s one of the biggest misconceptions in investing.
People often believe valuation is simply about buying “cheap” companies.
It isn’t.
Investors must ask: Does today’s price still leave enough room for attractive long-term returns?
Sometimes the answer is yes.
Sometimes the answer is almost.
This is one of those cases.
The business already meets almost every requirement.
A modest improvement in valuation, or continued business progress while the share price stands still, could be enough for the Financial X-Ray to allocate capital.
That’s a very different mindset from chasing momentum or trying to predict the next earnings report.
It’s simply waiting for the odds to improve.
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