Stock Tips are Financial Poison
Welcome to issue #7 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.
Before getting to stock tips, a quick note about career advice …
A few months back, I heard an interview with a new Fortune 500 CEO where he gave the most basic career advice imaginable. When asked what guidance he had for young people entering the workforce, he said, “Find something you're passionate about and follow it.”
That’s it. No follow-up story about what he enjoys or what he did early on in his career. No specifics about how to actually find your passion.
Newsflash. Not one single person on this planet is passionate about an entry-level corporate job. The work is boring and you’re generally treated like crap by older people doing the same job but making three times your salary.
But you have to start somewhere. You have a steady paycheck, even if it’s small. You learn about how to work with people and get things done. You also learn what you don’t want to be doing the rest of your life.
If you’re lucky, you stumble onto activities you actually do like and you find these activities by volunteering for projects outside your core work.
Early in my career, I managed construction contracts. I quickly realized the corporate ladder climbing game wasn’t for me.
But I did have the opportunity to work on related projects like auditing and developing credit risk profiles for vendors. And what I found was I actually enjoyed digging in the numbers and analyzing finances. I was in my element.
Something I could do every day that didn’t seem like work. Progress reports and status meetings on the other hand were torture and did feel like work.
A true passion is just that — something that doesn’t feel like work. You just enjoy everything about it. The process, the challenges, even the occasional failures.
Those early experiences didn’t land me a promotion, but they were invaluable in a different way. I had already started my investing journey and they helped solidify the data driven approach that became the Davem Method.
Turns out my true passion was investing. Finding quality companies and making disciplined decisions based on what the numbers that matter actually tell you.
Your passion probably won’t announce itself. It’ll sneak up on you when you realize you’re doing something you would choose to do anyway.
Never Trust a Stock Tip
Along with simplicity and consistency, I talk often about investing scams. Why? Because they’re everywhere and watching people get suckered by BS advice genuinely bothers me.
One of the biggest scams out there masquerading as advice is stock tips.
Here’s a recent gem:
“These stocks are going to outperform the markets this year and will make new all-time highs…
Don’t miss out on these once in a lifetime opportunities…
ABC stock will be $500+
XYZ stock will be $100+”
Quite the prediction along with a guarantee.
Data to back it up? Nothing. No analysis. Not even economic stats to support the prediction. Or a link for more information.
I see these posts every single day. Pedaling the same low-quality stocks.
Look, if you want to speculate and understand the risks, go for it. Similar to sports betting and slot machines, it can be entertaining. You might hit a winner and get some bragging rights with friends.
But let’s be honest — this isn’t investing, it’s gambling.
The mantra “no risk, no rari” might get you a matchbox car in the long run when you’re chasing these “guaranteed winners”.
If you’re a serious investor, you should require a documented process and a long-term track record of success. A documented process that is easy to understand. A consistent record of beating benchmarks and a plan to mitigate risk.
Short term results are meaningless by themselves. Everyone gets lucky occasionally. And when luck strikes, the Dunning-Kruger effect kicks in. You start thinking you’re a genius, take bigger positions, assume more risk, and eventually tank your portfolio.
Hunches are not a process. Following “expert” opinions isn’t a process either.
The Davem Method is one process. The core concept is straightforward:
Use a quantitative model to find and value quality companies
Only invest at attractive prices based on valuation and simple technical analysis
Utilize disciplined selling tools to lock in profits and limit losses
Through this process, I can help you spot attractive opportunities and provide disciplined tools for when to buy and sell. The decisions are yours.
Other proven processes exist too. Ultimately though you shouldn’t follow anything blindly.
Use any process as a guide to think for yourself.
Everyone wants the silver bullet to get rich quick. It just doesn’t exist.
Building real wealth requires compounding returns over time. This means staying in the market long-term. Blindly following stock tips won’t get you there.
Want to learn more specifics about the Davem Method? Check out my free guide Stock Selection Simplified.
Davem Watchlist Insights
Novo Nordisk ($NVO) dropped 28% yesterday after cutting full-year guidance. Slow US sales were to blame, hurt by copycat versions of Wegovy and Ozempic. NVO said it now expects full-year operating profit to grow 10% to 16% down from its prior guidance of 16% to 24%. Full-year revenue is anticipated to increase 8% to 14%, compared with 13% to 21% growth previously expected.
On the surface, slowing growth and lowered guidance aren’t good signs, but if looking closer, the midpoint of revenue and profit estimates are still above my thresholds.
With a strong record of financial performance, a P/E of 19, a 2.4% dividend yield and the stock trading near a three-year low, NVO may be a good opportunity ~$54.
Check out the snapshot below and tell me what you think.
Building an Online Empire
Entrepreneurship is romanticized, especially these days. Your corporate or even government job isn’t safe, so why not start your own digital business? You own your time, your work and your income potential is limitless.
While there are wonderful benefits of being an entrepreneur it’s also hard. If it were easy everyone would do it. In reality only about 15% of the working population in the US are entrepreneurs.
If you’re serious about building something real, here’s my advice as a 2x founder who’s learned the hard way.
1. Passion Isn’t Optional
You must be genuinely passionate about what you're building. Not something you’re good at or something that seems profitable. Something you truly enjoy.
Fitness, gardening, writing, teaching, gaming — doesn’t matter what it is. You can build a successful business around almost any service.
“But my market is saturated!”, you might say. In truth, markets are full of people putting in the minimal effort expecting maximum results. Minimal effort is the saturation, not the product or service.
Passion is what gets you through the inevitable obstacles, panics and failures. Without it, you’ll quit when times get tough. And they will get tough.
2. Mindset Beats Tactics (But You Need Both)
The key to building a sustainable business is having the right mindset and a plan of action.
Hire someone to help you get started. Yes, online business gurus love bashing other online business gurus, but the tactical advice is mostly the same. There are only so many ways to build a business.
What you can’t replicate is someone’s mind. Their unique experience. Their way of packaging information, their communication style.
Work with someone you actually like. Someone who’s been where you are recently, not some guru who forgot what struggling feels like 10 years ago. Someone who will help you build the right habits and mindset to be successful.
Speaking of gurus, I heard one say last week, “Never follow advice from anyone unless they have a big online audience. Audience size proves credibility.”
That’s terrible advice. Follow people you like and trust. Someone who’s been in your shoes and actually cares about your results.
3. Go All In
Set aside 6 months of expenses to go all in on your business. Don’t try to start a side hustle.
You only have so much energy. Trying to balance the demands of a 9-5 job with your family, friends, hobbies and starting a side business is just not sustainable for most people. You will get burnt out.
Also, don’t have a Plan B. You’ll hedge and take the path of least resistance, which might be your current job that you hate.
Give yourself at least 6 months or runway and put everything into building your business. It takes time to gain traction and generate revenue. That's normal, don’t panic.
Real Talk:
Accept daily discomfort. You’ll be outside your comfort zone constantly. Get used to it.
Develop the habit of “always selling”. There are countless ways to share what you do without coming across as a snake oil salesperson. Find your style.
Market research is overrated. Don’t focus on what other people are doing. Focus on developing clear offers that will help your clients.
Celebrate your wins.
Be proud of yourself. Most people talk about starting a business. You are doing it.
Building a business from scratch can be one of the most rewarding experiences of your life. Have fun with it.
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.