I asked ChatGPT to give me the perfect US stock! Here’s what it said…
Many UK-based investors don’t actually have a US stock in their portfolio. And that may have held them back in recent years with the US stock market delivering outsized gains compared with UK and European stocks.
So, if an investor had to own just one US stock, what would it be? What is the perfect US stock? Well, I thought I’d put the question to ChatGPT.
Thereâs no truly perfect US stock, but the closest ones combine durable advantages, long growth runways, strong cash flow, clean balance sheets and reasonable valuations. Microsoft, Visa, and Costco often come closest. The âperfectâ choice ultimately depends on whether growth, stability, or income matters most to you.
This response isn’t overly surprising. These are some of the strongest, most consistently executed businesses in the US market, combining durable competitive advantages with dependable cash generation and long-term growth potential.
Personally, however, I’d highlight the importance of reasonable or attractive valuations. Palantir, for example, is an amazing company, but it trades at valuations that I simply can’t justify.
Other stocks that may meet ChatGPT’s criteria are Alphabet — the Google-parent company — and Nvidia.
Where am I looking?
Alphabet and Nvidia are already core parts of my portfolio. And Microsoft has been on my watchlist forever. I’ve simply never found an entry point that meets my own criteria for ‘good value’.
Honestly, I’m not convinced there’s a lot of good value in mega-cap stocks at this moment. Even after the recent pullback, the market remains very hot. Nonetheless, I continue to monitor/consider buying more of stocks like Uber, Duolingo, and Pinterest.
A defence stock to consider
Defence stocks are also core, long-term performers in the US market. However, many of the big names continue to look pretty expensive. For example, RTX Corporation is trading at 28 times forward earnings with a price-to-earnings-to-growth (PEG) ratio of 2.7. It’s also quite heavily indebted.
With that in mind, I quite like Innovative Aerosystems (NASDAQ:ISSC). The company’s valuation is my first point of interest. The stock trades at just 13 times forward earrings — down from around 26 times earlier in the year. The PEG ratio is just 0.3, representing a 83% discount to the sector average.
This is a clear sign of an undervaluation, and the average share price target confirms that — it’s 86% above the current price. The balance sheet is also strong, with limited debt.
The F-16 programme is a major growth engine for Innovative Aerosystems. It stems from acquiring a licence for Honeywellâs F-16 avionics lines, giving the company long-term IP, recurring support revenue, and strong order flow. Short-term margin pressure exists, but the programme underpins scale, credibility, and future military profitability.
Risks? Well, there are certainly some transient issues relating to integrations costs and margin compression. Sales growth could be choppy in the near term too after the company noted some orders were pulled forward in Q3.
Nonetheless, I think the stock looks really attractive. It’s worth considering.
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James Fox has positions in Alphabet, Innovative Aerospace, Nvidia and Pinterest. The Motley Fool UK has recommended Alphabet, Duolingo, Microsoft, Nvidia, Pinterest, Uber Technologies, and Visa. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
