Dear Reader,
Good morning, and happy Thursday!
Today I wanted to talk about a lesson that’s been at the core of my investing philosophy for over 30 years.
It’s a lesson that’s saved me from countless bad decisions—and yes, it’s cost me a few big wins, too.
The single most important word in investing?
That’s right. The ability to say “no” is crucial.
In fact, 99% of the time, I pass on investing ideas.
Why?
Because most of what you’ll hear out there is just hype.
It might sound exciting, but when you dig deeper, it’s not worth your hard-earned money.
Let me share with you the four key questions I ask before I consider buying any stock:
- Do I understand the business?
- Am I comfortable with management?
- What is the business worth?
- What do I have to pay?
Today, I’ll focus on the first question: Do I understand the business?
I’ve come to realize that I’m a simple man when it comes to investing.
I like simple, straightforward businesses—consumer companies like Starbucks or Home Depot.
If I can’t wrap my head around how a business operates, I won’t invest in it.
For example, I don’t invest in cryptocurrencies because I don’t understand them.
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Bitcoin would have to go from $67,000 to $314,000 to match the 463% gains we saw with Immunogen…
It would have to go to $204,000 to match the 300% gains we saw with Viking Therapeutics.
And an upcoming FDA decision could spark a 2,400% sales surge for this tiny $4 stock.
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A little exercise I practice with my kids helps illustrate this.
When we go to a restaurant, we look at the menu and estimate what the average person orders—a drink, an appetizer, a meal.
We then figure out what the average ticket might be.
From there, I mentally calculate how the restaurant makes money, who they buy their products from, and where the pricing power lies.
This understanding is crucial.
Business is a battle for money, and if I can’t understand the business and its competitive environment, I simply say no.
And I’m okay with that.
But here’s the flip side—saying no means I’ve missed out on some great opportunities.
For example, back in 2003, I had the chance to invest $100,000 in a company called Acme Packet through a private placement.
I knew it was a hot deal, but I couldn’t for the life of me understand their business model or competitive moat.
I passed on the investment, and that $100,000 could have turned into $10 million.
It was a massive opportunity, but I’ve learned to be okay with missing out.
I have to play the game the way I understand it, following the system I’ve built over three decades.
Or the strange signal I’ve identified that appears right before huge stock market profits.
These are two strategies in my system that I know inside and out.
And that have made myself and my readers the kind of money that secures a financial future and legacy.
Every great investor I know says no to 99% of the opportunities that come their way.
They only swing at the pitches that are right in the middle of the strike zone.
It’s about discipline, understanding, and sticking to your system.
For those of you just starting out, I hope this lesson resonates.
It’s not about knowing everything—it’s about knowing when to say no.
I’ll be sharing more of these hard-earned lessons in the coming weeks, so stay tuned.
Wishing you a wonderful day ahead!
“The Buck Stops Here,”
P.S. The good news for my subscribers is that I’ve already learned enough hard lessons in investing (and life really).
And if you follow my advice, you get to skip the pain of wading through the mud and just reap the benefits.
I’m not trying to say that I’m right 100% of the time.
But Behind the Markets has an average gain of more than 50% on all closed trades so far this year.
And I’m pretty proud of that.
