Ignoring the Warning Signs
Welcome to issue #14 of The Davem Dish. Every two weeks I share what actually works in investing based on my 20 years of wins, losses and expensive lessons. You’ll also get my thoughts on solopreneurship and life in general because the same principles apply — keep it simple, stay consistent and focus on what matters.
Recently on three separate occasions I watched an ambulance get blocked. Lights flashing, siren blaring and drivers just kept driving, no attempt to slow down, move over — nothing. One car turned directly into its path.
Were they inexperienced drivers who didn’t know the rules? Or people that are distracted and have heard so many sirens they’ve stopped hearing them at all.
Reminds me of the market right now.
Everyday brings fresh warnings about a meltdown, especially in tech. First it was DeepSeek, then tariffs, then sky high valuations, then speculative companies skyrocketing, then circular deals…
The sirens never stop and investors have seemingly stopped listening because for all the talk of a bubble, the market continues to climb.
Is it FOMO? Everyone else is getting rich and I’m not, so I should join the party.
Is it inexperience? I’ve only known a bull market.
Overconfidence? I’m crushing it so I’ll continue to do so.
Perhaps a combination of the three.
My $NVDA position is up +108% since April. During that time, if I listened to the countless opinions of why $NVDA is about to crash, I would have missed out on that gain.
If your portfolio is up big this year, congratulations. You haven’t been listening to the noise but now what?
The trick isn’t to ignore all warnings or heed all warnings. It’s having rules for what to do at any given time.
Option 1: Trailing stop orders
Let winners run while protecting profits. Simple concept in theory but there are risks. Trailing stops work best with large companies with high liquidity. There is gap risk with trailing stops and smaller, more speculative companies are more vulnerable to gaps. So, trailing stops won’t work perfectly every time.
Option 2: Pre-determined selling
In a bull market (or even bubble) there is nothing wrong with selling at pre-determined levels. If you own a stock that’s gained 75% or even 100% in less than a year and you’re concerned about letting those gains slip away — sell. You’ll have a great profit and enjoy peace of mind. However, I wouldn’t suggest pre-determined selling for any gains under 50%. You’re not letting your winners run and trailing stops would be a better strategy to lock in profits.
You notice I didn’t mention trying to time the market. You won’t catch the exact top. Market timing is a fool’s game — don’t waste your energy.
And, if you’ve missed out on big gains so far, what should you do now?
Don’t chase. There are a lot of good companies but they are only good investments at the right price. Buying without understanding what the company “should” be worth and how to estimate future growth is a recipe for losses.
There are still good buying opportunities in this market, even with some of the companies that have had massive runs. But, again, you need a valuation process. How to determine yourself what a company is worth based on historical financial data and estimates of future growth. Not a price target made up by a finfluencer.
Bottom Line:
You should heed the warnings of an emergency vehicle but not the media. Ignore the noise.
There will always be conflicting news and if you consume too much information you’ll second guess your decisions.
Develop a process, trust it, and tune out everything else.
What are your biggest challenges in this market?
What have you tried that’s not working?
Davem Earnings Recap
Let’s take a look at winners and losers over the last two weeks…
Key Takeaways:
$FIX and $CLS keep doing exactly what quality companies do — beat expectations, raise guidance and watch their shares climb. This boring predictability is why we want to own these companies.
On the other hand, there are the occasional quarterly misses. This is when you can find opportunities! But you still have to be disciplined. A big price drop doesn’t automatically mean the company is in a buy zone. An example is online education company $LRN . Shares tanked -54% after they beat expectations for the current quarter but lowered full year guidance, blaming slowing student enrollment on an IT platform issue. Operating margins significantly dipped also. All of these factors plus a heavy short interest, add unpredictability and make calculating fair value a challenge so I’m staying on the sidelines for now.
Remember a 50% drop doesn’t necessarily mean a 50% discount. It might mean the company is worth 50% less.
Companies I’m watching closely:
$DECK has had a rough year, down -52% from persistent tariff and economic uncertainty fears. Despite a surprise fiscal Q2 earnings beat, growth has been slowing, but is still above my 10% threshold. I see an opportunity if the stock consolidates ~$80.
$BMI quarterly revenue and earnings growth are back above my 10% threshold, along with an earnings beat (after missing the last 2 of 3 quarters). Based on the current valuation, I see an opportunity if the stock continues to fall ~ $170.
Enjoy your week and invest well!
Cheers,
Andrew
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The content provided are personal opinions and presented for educational purposes only, as of the date published or indicated. Davem Advisors LLC is not a bank, licensed securities dealer, broker or investment advisor. Displayed returns are unaudited. Nothing stated constitutes a recommendation or advice as to whether any investment is suitable for a particular investor. You alone are solely responsible for determining whether any investment, strategy or service is appropriate for your objectives. Past performance is no guarantee of future results. Inherent in any investment is the risk of loss.