Don’t Buy Nvidia Until You See This

Dear Reader,

Before we get into the hottest stock in the market — you know what I’m talking about — I want to touch on an important investing topic that tends to fly under the radar.

It’s called buy what you know.

This concept hearkens back to your old grade school lessons.

Remember when you had writer’s block back when you were first learning to write?

The teacher would always tell you to just “write what you know.”

Of course, that’s easier said than done. (A lot of writers spill ink on topics about which they know nothing, and that’s OK.)

But the point is to get the creative juices flowing.

The same is true with investing.

If you’re new to investing, a lot of financial “experts” will tell you to just buy the indexes or exchange-traded funds that track certain sectors.

And there’s nothing wrong with that at all. I’m a firm believer that the bulk of your invested capital should be tucked away in low-cost index funds. You really can’t go wrong if you consistently invest, dollar-cost average, and reinvest the dividends using a dividend reinvestment plan (DRIP).

But when you have a little extra cash that you want to play with and add some risk into your portfolio, a lot of investors have no idea where to start.

So I would say to invest in what you know.

Do you like cars?

Invest in car stocks.

Do you like golf?

Invest in a golf manufacturer.

Do you like gaming?

Invest in, well, a company that creates the graphics cards for video games.

You get the point.

With regard to that last example, I’m talking, of course, about Nvidia (NASDAQ: NVDA).

Where Were You When You First Heard About Nvidia?

This will be a question for the ages now that the popular graphics card company has skyrocketed in value.

In the last year alone, the stock’s up nearly 300%.

Since 2014, it’s up 20,000%!

It’s minting millionaires every single day.

And look, don’t kick yourself if you didn’t invest in it.

It’s just to show you that profitable trades like this happen all time.

You just have to invest in what you know…

The Worst Mistake of My Career

Last year, I wrote about the worst trade of my career: Icahn Enterprises (NASDAQ: IEP).

And this is a prime example of why you shouldn’t invest in something you don’t intimately understand.

Here’s what I wrote…

Back in 2020, I looked for the best — and highest-yielding — dividend-paying companies on the market at the time.

I found a lot of options. What I wanted was a good mix of monthly and quarterly dividends. One of those was the JPMorgan Equity Premium Income ETF (NYSE: JEPI), paying $0.42 a share per month. Another was Realty Income Corp. (NYSE: O), paying $0.25 a share per month.

Then there was Icahn Enterprises (NASDAQ: IEP), paying $2 a share per quarter. I found the company intriguing, but not just for its dividends.

First, Icahn Enterprises is owned by famed activist investor Carl Icahn. Say what you want about the man, but he’s one of the richest and most successful investors on the planet. He’s up there with Buffett, Munger, etc. Icahn is known for buying companies for cheap and turning them around to sell for a profit. He’s extremely good at what he does, which is why he’s a multi-billionaire. His fund gives you the opportunity to invest with a successful businessman with a long-term track record of success.

Second, it’s a well-diversified holding company that operates in the investment, energy, automotive, food packaging, real estate, home fashion, and pharma businesses.

Third, with one of the highest dividends on Wall Street, it pays enough money, in time, to pay the bills…

You know what happened next?

The stock dropped 40% in two days.

I didn’t have a trailing stop in place (which you absolutely need to have, and I can get into more detail at a later time) and I got screwed.

But reading back what I wrote is eye-opening: “It’s a well-diversified holding company that operates in the investment, energy, automotive, food packaging, real estate, home fashion, and pharma businesses.”

I know next to nothing about food packaging or home fashion. And I’m not an expert on energy, real estate, or the automotive industry.

I wasn’t sticking to my thesis: Invest in what you know.

The Most Obvious Trade of My Career

I was so fed up with Wall Street that I decided to follow my own advice and invest in something that I was familiar with… video games.

On April 26, 2023, I bought 10 shares of Nvidia — the leader in graphics cards for gaming computers. You see the name all over the place if you’re buying a gaming laptop or new computer.

Now, admittedly, I didn’t hold on to those initial shares, so this isn’t me telling you I made 10 grand on this trade, which I could have. (I’ve since been swing-trading it with great success.)

The point is I made the right decision by choosing a stock of a company whose products I own right now — and chances are you do too.

The Next Nvidia

With all the hype around the company now, it’s in volatile territory.

If you decide to buy it, you’ll have to set up a stop-loss in case there’s a massive sell-off.

That’s because the run-up has already come and gone, and it’s looking frothy.

What you want to do is simply look for the next big winner.

That’s what we’re good at here… some would say we’re the best.

That’s why you come to us.

Just check out my colleague Jason William’s recent track record of monster winners.