September has historically been a poorly performing month in the stock market. No two years are the same, but the long-term cumulative trend for September has been underwhelming to say the least. Whether or not we see a market downturn this autumn nobody yet knows. But sooner or later, we will.  That could be a generational buying opportunity — and I certainly do not want to miss it! So, I am polishing up my list of shares to buy in the next crash now.

Here’s why.

Stock market returns are about valuation

A common mistake some investors make is getting obsessed with what a great business a particular company has.

Maybe it has a unique product or captive market. Perhaps it looks set to benefit from high long-term customer demand or has a smart business model, such as selling an expensive piece of kit and then also selling refills for that product (the legendary Gillette razor and blades model taught in business courses across the globe).

But that does not necessarily make for a good investment.

Over the long term, what you earn (or lose) as an investor depends on two things aside from taxation: the difference in price between what you pay for a share and what you end up selling it for, and any dividends you receive along the way. Smart investors also weigh the opportunity cost of tying up their capital while they own that share.

A share I would happily own

As an example, consider Intuitive Surgical (NASDAQ: ISRG).

Its business model is almost textbook. It makes robotic machines that can peform surgery, helping hospitals cut costs and potentially improve surgery. That is a potentially huge market, with limited competition and large budgets.

By selling peripherals (as each surgery needs new, sterile equipment), Intuitive’s installed user base generates recurring revenue streams.

Net profit margins are high (26% last year) and the market looks set to have large growth potential. The more it sells, the better Intuitive’s library of training materials becomes, making its offering even more compelling for hospitals.

The key risk I see is that AI development could lead competitors to speed up their development timeline, bringing much more competition and lower profit margins. Still, I would happily own Intuitive in my portfolio.

Waiting for buying opportunities

Yet I do not.

Why?

Simple: valuation. Loads of other investors like Intuitive for similar reasons to me. They have pushed its share price up 178% in five years, meaning it now trades on a price-to-earnings ratio of 80. That is far too rich for my tastes.

So, what do I do when I discover a share I like, at a price I do not?

I do not simply forget about it. Rather, I add it to my list of shares to buy if I can do so at what I think is an attractive price.

I am revising that list this September. Like everyone, I have no idea when the stock market will next enter a sudden dive. But when it does, as such corrections are sometimes limited in duration, I want to be ready to act immediately, shopping list of shares to buy in hand!