Lubin Investment · Blog

S&P 500 record June 2026: are the best quality stocks still cheap?

2026-06-16 ·

The S&P 500 closed above 7,600 points for the first time on June 2, 2026. But a rising index tells you nothing about individual stocks. Some companies rated 10/10 in our screener did not participate in this rally and remain at low valuations. Quality and price are two separate things.

The context: an S&P 500 at 7,609 points

On June 2, 2026, the S&P 500 closed above 7,600 for the first time in its history, at exactly 7,609. That was the 24th all-time high of the year, with the index up 10% since January 1. The main driver: AI-linked technology stocks, carried by strong results from companies like Hewlett Packard Enterprise and enthusiastic announcements on artificial intelligence infrastructure.

The question I ask immediately when I see such a record: did my files keep up? Not all of them. And that is exactly where the opportunity lies.

A record index does not mean everything is expensive

The S&P 500 is a market-cap-weighted average. A handful of tech giants (Nvidia, Microsoft, Apple, Amazon) represent an enormous share of the index on their own. When these giants rise, the index rises. But hundreds of other quality companies, less covered, less present in passive ETF portfolios, may not have moved as much.

The overall market valuation, measured by the forward P/E ratio, stands at 23x against a historical average of 18x. That is elevated. But it is an average. Specific sectors and companies can still trade at reasonable or even low multiples relative to their own history.

Top-quality stocks that did not follow: what the numbers show

The most striking example I observe in June 2026 is Qualys (QLYS). It is a cybersecurity company that generates FCF per share of 8.05 dollars. Its stock trades around 112 dollars. That gives an EV/FCF ratio of 12x: you are paying in the market the equivalent of 12 years of generated cash. The 10-year historical median for this same ratio for this company is 25x. Qualys is therefore today at a valuation 51% below its own historical average, even as the S&P 500 hits records.

Another example: Napco Security Technologies (NSSC), rated 10/10 in our screener. The company has an FCF margin of 30%, revenue growth of 11.8% last quarter (Q3 2026, March 2026), and a P/FCF around 23x. That is not cheap, but it is consistent with the quality of the file, and below its own historical peak from 2022-2023.

The divergence between quality and market valuation

This phenomenon illustrates exactly why I systematically separate quality from price. The market buys themes (AI, technology, US consumption) en masse. It neglects everything that does not fit the current narrative. A profitable but discreet cybersecurity company, or a physical security systems manufacturer with moderate growth, does not attract speculative flows.

What the S&P 500 record says about our method

Our method is designed precisely for these moments. It does not try to follow the index: it tries to find excellent companies at a reasonable price, regardless of macro noise. An S&P 500 at 7,609 does not tell us that Qualys at 12x its FCF is expensive. It tells us the market as a whole has been bought massively, but capital allocation remains uneven.

The real question is not whether the market is expensive. It is whether MY file is expensive. To answer that question, you need a tool that analyzes each stock individually. That is what I built our screener for.

FAQ

Does the S&P 500 at 7,609 mean you should sell?

Not necessarily. A high index reflects average market valuation, not the valuation of each stock. Our method looks at each file individually. Some quality companies remain undervalued relative to their own history, even when the index hits records. This is not investment advice.

How do you compare a stock's valuation to its own history?

I look at the current P/FCF (price divided by cash generated) and compare it to the 5 or 10 year historical median. If the current P/FCF is well below its own median, the stock is cheap relative to what the market was willing to pay in the past.

Are 10/10-rated stocks automatically good deals?

No. A 10/10 score measures business quality, not price. A company can be excellent and trade at a very high P/FCF, making it expensive. Our method always separates the two: quality first, price second.

What is the EV/FCF ratio mentioned for Qualys?

EV/FCF (Enterprise Value to Free Cash Flow) is a variant of P/FCF that accounts for the company's debt and cash to give a more precise picture of what the buyer is really paying. For a company like Qualys that carries little debt, the EV/FCF of 12x is very close to P/FCF.

Why can the market neglect quality companies?

The market often buys themes en masse (AI, semiconductors, consumption) and neglects what does not fit the current narrative. An excellent company in an unfashionable sector can stagnate for months or years. That is uncomfortable, but it is an opportunity for the fundamental investor thinking long-term.

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About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I have analyzed stocks through their fundamentals for several years and invest my own money with this method. I codified it into a tool that judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).