Are the top rated stocks cheap in 2026?
2026-07-25 · By Lubin Danilo, founder of Lubin Investment
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Among the 59 stocks rated 10/10 by my quality filter that have a 5 year valuation history, 26, or 44%, trade today below the 20th percentile of their own history, meaning close to their personal cheapest point. These discounts concentrate mostly in application software and P&C insurance, but a low price versus one's own history is not automatically a bargain.
A different question from 'which sector is cheapest'
Comparing several companies' prices against each other (as I do in my study on the cheapest sectors) answers one question: among the top stocks, which cost the least RELATIVE TO EACH OTHER today? But there is a second, equally useful and often more telling question: is a given stock cheap relative to ITS OWN recent history? A stock trading at 20 times its annual cash may look expensive in absolute terms, but if it has always traded between 30 and 50 times over the past five years, that same 20 times is actually a rare personal low.
This is exactly what the valuation percentile measures: I take a company's P/FCF (share price divided by cash generated per share) history over its trailing five years, and place the current level within that distribution. A percentile of 10 means the current P/FCF has been lower only 10% of the time over that period: the stock is trading near its personal floor. A percentile of 90 means the opposite: it is trading near its highest level ever paid.
The number: 44% of top performers trade near their personal low
Of the 89 stocks that pass every criterion in my quality filter as of July 2026, 59 have enough price history (at least five years of reliable data) to calculate this percentile; the other 30, often foreign tickers recently added to my tracked universe, do not yet have enough history. Among these 59, 26, or 44%, trade today below the 20th percentile of their own five year history: each, in its own way, is near the lowest valuation level ever observed for itself over that period.
This is a notable proportion: nearly one in two stocks among my filter's top performers, the ones that already check every profitability and financial discipline box, is trading today at a price level rarely seen for itself over five years. In other words, quality and low price, which do not always go together, currently coincide for a good chunk of my tracked universe.
Where these discounts concentrate
| Sector | Stocks below 20th percentile | Examples |
|---|---|---|
| Software Applications | 6 | Intuit, Autodesk, Salesforce, Paylocity, Bentley Systems, Roper |
| Property & Casualty Insurance | 4 | Progressive, Mercury General, Kinsale, Cincinnati Financial |
| Medical Devices | 3 | Dexcom, Haemonetics, STERIS |
| Software Infrastructure | 2 | Qualys, GoDaddy |
| Travel Services | 2 | Booking Holdings, Airbnb |
| Other sectors (1 each) | 9 | MercadoLibre, ResMed, Chipotle, Doximity, Collegium, RenaissanceRe, Frontdoor, Badger Meter, Cal-Maine Foods |
The application software sector dominates this ranking by far, with 6 of the 10 stocks in the sector that pass my quality filter already trading below their personal 20th percentile. This is consistent with a market backdrop where investors have marked down, over recent quarters, the premium they were willing to pay for software growth, after several years of historically elevated multiples fueled first by post pandemic euphoria and then by expectations of an AI boom still slow to fully show up in the revenue of many traditional software vendors. P&C insurance, already identified as the cheapest quality sector in absolute terms in my sector study, also has 4 of its 8 rated 10/10 names near their own low, a sign that the sector's discount is not only relative to other sectors, but also relative to its OWN recent history.
Why a personal low is not automatically a bargain
A low price relative to its own history can have two very different origins, and telling them apart is the whole job of an investor. The first: the market wrongly doubts a company whose real fundamentals remain solid, which creates a genuine opportunity (the classic example being Adobe, which I have already covered, valued at a five year low on fears of generative AI disruption that, in my view, were excessive at the time). The second, far more common than people think: the market correctly anticipates a real slowdown ahead (growth plateauing, intensifying competition, an aging product), and the low price is then not a bargain but a fair adjustment, what is known as a value trap.
A low percentile is therefore never a conclusion in itself, only an INVITATION to dig deeper: why did the market push this particular stock's price down toward its personal floor? The answer lies in recent growth numbers, in management commentary about upcoming quarters, in the evolution of competitive positioning, never in the percentile level alone. A stock that checks every one of my quality criteria AND trades near its personal low deserves to be looked at first, but the work starts there, it does not end there.
How I use this in my method
I systematically cross reference two pieces of information before seriously looking at a stock: the quality score (which judges the business, never the price) and the valuation percentile (which places the current price within the company's own history, never in absolute terms). A 10/10 stock near its personal low enters my list of candidates to study in depth; it never automatically enters a buy thesis without me first understanding why the market pushed it to that level. You can find my full method for telling a genuine opportunity from a value trap in my article on the value trap, and how I combine quality score and price percentile in my article on how to spot an excellent and cheap stock.
- 44% (26 of 59) of stocks rated 10/10 with enough price history trade today below the 20th percentile of their own 5 year valuation, meaning near their personal low.
- These discounts concentrate in application software (6 of 10 in the sector) and P&C insurance (4 of 8), two sectors where the market has marked down the growth or valuation premium in recent quarters.
- 30 of the 89 stocks rated 10/10 lack enough price history (5 years) to calculate a percentile, often foreign tickers recently added to the tracked universe.
- A low price relative to its own history has two possible origins: a genuine opportunity if the market wrongly doubts solid fundamentals (the Adobe case), or a fair adjustment if the market correctly anticipates a real slowdown (value trap). The percentile is an invitation to dig deeper, never a conclusion.
- Method: systematically cross reference the quality score (judges the business) and the valuation percentile (places the price within the stock's own history) before considering a stock an opportunity.
FAQ
What does a valuation percentile of 20 mean for a stock?
It means the stock's current P/FCF has been lower only 20% of the time over the trailing five years: the stock is therefore trading close to its personal valuation floor, independent of the price of other stocks in the market.
How many 10/10 rated stocks trade near their 5 year low in 2026?
26 of the 59 stocks rated 10/10 with enough price history, or 44%, trade below the 20th percentile of their own 5 year valuation history.
Why does application software dominate this ranking?
6 of the 10 stocks rated 10/10 in the application software sector trade below their personal 20th percentile, consistent with a markdown of the software growth premium after several years of historically elevated multiples.
Is a price near its 5 year low always a good deal?
No: it can be a genuine opportunity if the market wrongly doubts solid fundamentals, or a fair adjustment (value trap) if the market correctly anticipates a real slowdown. You must always understand WHY the price fell before concluding anything.
What is the difference between this ranking and the study on the cheapest sectors?
The sector study compares stock prices AGAINST EACH OTHER today. This ranking compares each stock's price to ITS OWN 5 year history, a different and complementary question.
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About the author
Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).