The results
A framework is only as good as the results it produces, that’s why I like to start with the facts first:
Stocks that were selected by the Financial X-Ray have returned 141% since inception in June 2023. The S&P 500 has returned 85% over the same period.
The portfolio consists of 40 stocks with no position larger than 3%
This is not proof that I found a magic formula because 3 years is not 20 years. But it is evidence enough that this framework deserves attention.
The approach
The Financial X-Ray approach is as simple as it can be - find quality stocks at attractive prices without chasing hype.
Therefore, I screen 800+ stocks for financial health, management quality, growth outlook and a fair valuation.
Each category contains several metrics that are tested for stability, evaluated over time and in comparison with peers. A low PE ratio means little if profitability breaks, growth is less important if debt accumulates and a strong margin can be deceptive if the capital spending is simply too high to maintain it.
The key: we have to read financials together as a system.
The Financial X-Ray was designed to interpret and balance hundreds of raw metrics for you and to return a simple traffic light assessment per category.
Details on what metrics were analysed (margins, cash flows, capital efficiency, share based compensation etc) can be found when you click on “view report” .
So basically anyone is welcome to sanity check a stock in seconds.
The tool is accessible to you on my website.
The selection
Now what companies are truly worth owning according to the framework? Of course, everyone likes to find the next 100 bagger, but the probability of finding these consistently is close to zero. Instead we can find quality stocks with limited downside risk trading at attractive prices.
So what’s inside the portfolio? I like to flag 3 positions here.
Vertiv is up 80% since its addition about a year ago. The company provides digital infrastructure solutions such as power management, cooling, and monitoring for data centers and communications. It’s competitive position is outstanding and characterised by strong margins, high ROE, and stable revenue growth. Free cash flow aligns with sector averages, underscoring commercial strength and the importance of ongoing capital discipline.
Trane Technologies up 210% since its addition in June 2023. It designs, manufactures, and services HVAC and transport refrigeration systems globally. While cash generation is only average, Trane’s strong ROE, stable revenue growth, strong capital efficiency and strong balance sheet support its position as a market leader.
The Travelers Companies is up 130% since it was added in June 2023. It is a major property and casualty insurer, serving commercial and personal clients in the U.S. and internationally. Even though Travelers displays average net margins for the sector, its strong return on equity, high premium income growth stability, and operating excellence across all three business segments make Travelers stick out.
Closing words
In all cases you see that financial statements actually reveal a lot about an economic moat, a true strength. A company without pricing power cannot show superior margins over time. One without an efficient use of its capital will hardly grow over time.
It is intentional, not to focus on the most recent quarter, the next growth leg or news.
Eventually, quality sits in the numbers, and shows up consistently over time. That’s where I believe private investors can find better returns at reasonable risk.
You can see the entire portfolio of stocks and the ones that are rated “cheap” here:
Paid subscribers benefit from full platform access to sanity check more than 800 stocks, build and roast their portfolio and get full transparency on portfolio movements - all based on the same framework.
Thanks for reading.
Nick