SIMON ERICKSON | From 7investing

In this episode, we peel back the layers of the stock market to uncover the secrets of successful investing in 2024. Join us as we sit down with Simon Erickson, the founder and CEO of 7investing, He's built a reputation for spotting disruptive innovations and developing trends ahead of the curve.

We discuss the curious case of the inverted yield curve, the potential for a stock picker's market in the Goldilocks economy of 2024, and the critical role of conviction in investment decisions. Simon shares his unique insights on why news coverage doesn't always translate to stellar returns and how to identify companies poised for outstanding growth.

But it's not just about picking winners; we also explore the importance of challenging your investment thesis and the value of a diverse advisory team in refining your strategy. With Simon's rich background, from technical sales to renewable energy projects, and his passion for attending conferences to stay ahead of technological advancements, this episode is a treasure trove of wisdom for both new and seasoned investors.

To complement your learning experience, 7investing is offering listeners an exclusive 15% discount on their annual membership with the promo code stocksforbeginners. Dive into a world of well-researched stock recommendations, company updates, and a community forum for ongoing investment discussions. Plus, get a taste of7investing's offerings with a special $1 trial.

Whether you're making your first investment cannonball or looking to refine your portfolio, this episode is your guide to navigating the exciting and ever-evolving landscape of the stock market. Tune in and transform the way you invest in 2024.

TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE

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Chloe: Stocks for beginners. Phil Muscatello and Finpods are authorized reps of Moneysherpa The information in this podcast is general in nature and doesn't take into account your personal situation.

Simon: People get excited and want to watch the program and elicit a response. And if you're supported by advertising, of course that's what you want versus, you know, what are the actual opportunities? And not to say that popular companies aren't good investments, it just, sometimes it's not a lined in the same way that investors think about things, we tend to look more for disconnects where either something is misunderstood or not being paid enough attention to, or the expectations are just very, very low. A lot of times it's actually a negative news story or something that's in the headlines of the media that is certainly going to get a lot of attention and maybe even cause some people to sell off to the stock. But when you think about it long term, is it really damaging to the thesis? Is it really damaging to the company's performance over a period of three to five years? If it's not, maybe that's an opportunity to buy that stock.

Phil: Hi, and welcome back to stocks for beginners. I'm Phil Muscatello. How do stock pickers look for the trends of the future? And why doesn't news coverage of a company, which we see so much of, automatically lead to great returns? Joining me to talk about all of the ins and outs of markets and the outlook for 2024 is Simon Erickson.

Simon Erickson is the founder and CEO of Seven Investing

Hello, Simon.

Simon: Hello, Phil. It's always a pleasure to be here. Thank you for having me on your show again.

Phil: Oh, uh, no problems. It's always a pleasure to have you on. Simon Erickson is the founder and CEO of Seven Investing. He's one of the stock market's most forward looking investors, focused on identifying disruptive innovation and finding developing trends before others may even be aware of them. Now, just before we get into the first question in the introduction, I did say, why doesn't news coverage of a company automatically lead to great returns, which we will be talking about. But just as I was preparing for the interview, I was looking at x and I saw someone posted that in 2000, there was only 1 hour of market commentary on tv every day. And now it's like 16 or 17 hours. Do you think this is just noise? Is this just increasing the noise, this news coverage?

Simon: Maybe there's 1 hour of signal and 16 hours of noise every day. Maybe that's how it's played out over the last two decades.

Phil: Uh, yeah, maybe ten minutes?

Simon: Yeah, I think so. I think, Phil, there's obviously a demand in the advertising and the worlds that we live in to put out more and more content. That doesn't necessarily mean that you're going to get better returns off of everything that they say.

Phil: Okay, well, let's dive right into producing better returns.

Is it as simple as recognizing great companies before the analysts do

Is it as simple as recognizing great companies before the analysts do?

Simon: I think that's what people pay us for. It's one thing to go out and just invest in an S P index fund. Hardly any fees associated with that. You can go out and buy at Amazon, buy Tesla, Microsoft know the blue chips that are out there, and that's perfectly fine for most people. But for the people like us that are the stock pickers, that it's in our blood to go out and the thrill of the chase and the hunt, we should demand a higher return than just investing in the index fund or in the S P or some of the blue chips. And so it takes a bit more work. You got to crack open some annual reports and go to some conferences and some other things. But in terms of your question of is it about finding the next great companies? Yes, that's exactly it, Phil. There are signs, if you read the tea leaves correctly, of, uh, what is developing out there, what markets are being created out there that weren't there five or ten years ago. And then even the next question that we try to answer is, who are the companies that we think are going to benefit the most from those? That, to me, is the most exciting and most fun part of stock market investing.

Phil: There are a lot of smaller companies. I mean, every big company started out as a small company. And is this what you're trying to do, is to find these companies have got the greatest possibilities for outperforming in the future?

Simon: A lot of the times they are. But then again, if you look at the magnificent seven, there's been a lot of very large companies that have really made you a lot of money in this last year as well. I think more important than anything is why is a stock undervalued? Is a question to answer. It's easier because it's inefficient if the company is smaller. If you're looking at a biotechnology micro cap stock, there's probably fewer people that are looking at that than are looking every day at Apple or Microsoft or Tesla. But it also doesn't mean that the large companies can't get larger. Either they find ways to fundamentally grow their business faster than expectations, or the masses are willing to give them the higher multiple. They're a little bit more positive on the stock. They'll pay a little bit higher in terms of earnings or cash flows for them, too. So there's a lot of reason that stocks goes up. But generally it's one of two things. Either the business is growing fundamentally, or we'll give them a higher valuation multiple based on what they're doing.

Simon Johnson's background in renewable energy led him to becoming a professional investor

Phil: Simon, tell us about your background that led to you becoming a professional investor.

Simon: I'd like to say that I've always been paid to read the tea leaves of the future. This goes back to spent my 20s in technical sales, selling special chemicals, kind of flying around. Had that same Marriott room that it felt like my room because I was always on the road four or five days every week. I went back. I got an MBA in entrepreneurship, and then I worked for Chevron in their renewable energy group. We did demonstration projects for solar, for wind, for various other alternative and renewable energies, biofuels, too, just approving if they actually had economic staying power. And then after all of that, working closely with the venture capital group from a large corporation, I went and worked for this small company called the Motley pool up in Alexandria, Virginia. I was there for seven years, worked on their stock advisor and rule breaker services, and then for four years ran a business for them called Motley Fool Explorer, which was really going out. And every month finding something innovative that was going on in the world, right? Whether it was China, whether it was SaaS companies, whether it was biotechnology, whatever it is, there's so many trends out there, Phil, that early investors can take advantage of. And that kind of led me to seven investing in 2020. I said, I want to every month publish, not only publish research and kind of have a dedicated way to share it on our own site, but also to make an actual stock pick every month and to hold ourselves accountable and transparently show our performance for everything. Because I think that ultimately, that's how you get better as an investor, is just one month at a time, go out and learn something new every month, and then kind of go back, put on your thinking cap, refine your process of how, if you were putting money to work to take advantage of this trend, what would you demand the company you're investing in to do? In a nutshell, that's kind of what investing is. I kind of looked at it from an internal perspective of projects with a large company with deep pockets, to kind of an external investor using my own money to put to work and letting others compound it. For me, it's been quite a journey.

You've put together a team of advisors to help you evaluate potential investments

Phil: And, um, of course, you've put together a team of advisors. And how's that been? Tell us about the team and also about the process of challenging each other's ideas, because that's one of the great things about having feedback, is that you can have your thesis and ideas tested. Is that the case?

Simon: It's one of the most important parts, actually. Whether we want to admit them or not. We have our own biases and we have our own blind spots as investors. And I would recommend, probably one of the biggest takeaways from anyone listening to this show is find people that you can talk to about stocks or investing, Phil being one of them, or listening to Phil's show being another, that, uh, would challenge what you already know. We certainly become better investors by having others take the opposite side of the coin. And so to your question about the advisors, we purposely have put quite a diverse group together. We've got three phds, we've got an MBA, we've got somebody who retired as a banking executive, as advisors with seven investing kind of across the spectrum, from biochemists to, uh, computer science to financial services to an energy guy like myself kind of all together and bouncing objectively our thoughts with one another. And we challenge each other and we challenge each other's ideas as investments. I think that helps not only Phil, when you recommend a new stock that we put on the scorecard, that's a new recommendation, but also to keep up with any of your investments that you have constantly challenging yourself. Don't just assume that you're going to buy something once and the company will eternally be a buy forever. Things change, and sometimes we're right at the time, and then markets change and then the company change or the leadership changes. So you've got to be fluid, you've got to be adaptable. You've got to always be challenging your ideas and looking at things objectively rather than folding, uh, into the biases that we might not even be aware that we have. Yeah, I think that's one of the.

Phil: Main things I've learned from making this podcast, is not to look for the good in an investment that you're considering, but actually you can save yourself so much time by saying, well, why should I not invest in this particular company?

Simon: Absolutely.

Interest rates are getting more expensive, which is constraining business growth

Phil: So let's have a look back to markets in 2023. They were a bit strange all the way through because there was the rising interest rates, which, of course, has a huge impact on markets. There was the idea that recession was on the way, but then right at the end, it seemed to come good. In late December, 2023, what was your view of the markets at that particular stage?

Simon: Well, we've gone through a prolonged period here of capital getting more expensive. And to avoid sounding like, I'm sure many other guests on this show or any other financial media show, we won't go through that whole spiel, uh, about interest rates and fed fund rates. But it is important to recognize that interest rates are getting more expensive, and that's constraining business growth. Most people don't want to fight the Fed. Most people say, I'm perfectly happy getting 5% in my bank account, so I'm going to let them figure this out, and when inflation cools down, I'll go back into stocks again. And so that's why last year, even just within american retirement accounts, you saw a trillion dollars in assets under management move from equities into money market funds. And I expect, Phil, that's not permanent. I don't think people are just saying, okay, I'm done with investing long term. I just want to park it in cash. I think that that's just kind of a sign of the times and the macro that we're in. And so now we're kind of at a unique time. It's kind of an opportunity time for people that are interested in investing, because similarly, the Fed has said, hey, we have on the table now 25 basis points, quarter of 1% rate cuts planned for 2024. Some people think it's going to even be more than that. And so it's going to push the Fed funds rate from around 5.5% to about 4.6% by the end of 2024, again in the target of getting back to the 2% inflation target. And that's really good news for people that want to get into equities, because it means borrowing costs will come down, and it's also much more conducive for businesses to grow. And so I think that what we saw, to answer your question about what happened in 2023, the first part of the year was still, we were a little bit in the hangover, those rates going up, ah, at unprecedented, uh, speeds. And now, I think, where there's just a little bit more optimism coming in, there's still problems. We've still got multiple wars going on in the world right now. There are other things that are certainly concerning, but I think that in the macro, perhaps we're getting to see a little bit of light at the end of the tunnel, and that's bringing a little bit of optimism back into the equity markets again.

Phil: The stock market is a wealth building machine. Over long periods of time, stocks have consistently outperformed any other investment option.

Phil: But how do you cope with the.

Phil: Stress, the noise, and the emotional turmoil that hits you hard every day?

Phil: What if you were able to follow.

Phil: A team of tenured advisors with three.

Phil: Phds and 100 years of collective investing experience, who provide you with two new picks and five best buys every month? A full buffet, if you will, of innovative, well researched ideas for you to choose from. Seven investing might be for you. They want you to invest for the long haul in great companies with great leaders who can compound capital for years. Seven investing are pleased to offer listeners of this podcast a free trial for a week and 15% off the annual price. If you sign up using the promo code stocks for beginners, that's only $170 per year, 15% off the regular price. Believe me, this is solid research from experienced advisors who live and breathe the markets. So go to seveninvesting.com, that's the number seven investing, and use the promo code stocks for beginners, or lowercase one word to get your absolutely free trial and discount on the annual premium plan. That's seveninvesting.com. And that code again, stocks for beginners. I receive a small commission for services that I recommend, and this helps me to keep this show trucking down the highway. I only recommend services I use myself.

Philip Frost: Innovation is the trend that continues no matter what macro

Phil: So innovation is also marching on. What's some of the innovations that you're, uh, currently looking at?

Simon: That's my favorite topic in the world to talk about, Phil, when I'm down in Australia.

Phil: Glad I was able to throw that at you.

Simon: Then. We're going to have a couple fosters or whatever your beer of choice is down there, and we'll talk about innovation is the trend that continues no matter what the macro is. It doesn't matter what interest rates are. You look at the things that are going on out there right now. OpenAI is now going from, what was it, $200 million to $1.4 billion in revenue in a single year, and it's just going to roll out GPT five now, right? And then you've got biotechnology and CRISPR and gene editing now using CRISPR techniques to cure things, to cure diseases like sickle cell disease and possibly, uh, beta thyalassemia. These things that were very, very difficult for patients that all of a sudden have got now cures the genetic level, and you've got quantum computing that we're talking about. You've got the space economy and satellites, especially cubesats that are going up there. I mean, all these things that are really exciting and innovative, they kind of, if you put yourself back at the time, a couple of decades ago, were things like when we were talking about the Internet, of how big a deal that was going to be, or how big of a deal e commerce was going to be, or how big of a deal the cloud was going to be. I mean, Phil, I'm sure you remember it as well as. I mean, those conversations challenged the imagination of entrepreneurs to go out and start exciting businesses upon these platforms that were being built out there. It's a similar time right now. It's just that things are happening even more quickly. As somebody who's as obsessed with innovation as I am, it's such a great time to be alive and certainly a great time to be an investor.

Phil: You're obviously very excited about it, but you do have to guard against looking at new technologies. I mean, everyone talks about the Internet and the introduction of the Internet in the 90s, but there are a lot of companies that failed as well at the time. So how do you sort of hold yourself, your excitement back, and try and bring yourself into the reality of what is possible?

Simon: The thing that will keep you grounded is recognizing that the hype cycle does exist. Typically, when expectations are the highest for something, that's the worst time to invest in it. When everyone and their dog and their grandma is talking about how big of a deal bitcoin is, or cannabis is, or 3d printing is, or whatever else it is. I mean, when Long island iced tea changes its name to Long island blockchain, that's when you say, okay, maybe it's time to get out. When Wall Street's bets is at the peak of GameStop promoting it and banging their fists across their, uh, mean, that's the worst time to be an investor. But then also, the other side of that, the interesting dichotomy of that is that the other side of it is that new technologies are unknown. Right. The innovator's dilemma is probably the best book to explain this. Uh, that when there is something like a social network out there that Facebook developed, the reason it got so big so quickly is because nobody else really knew what this was or how to do it. And so this is an opportunity for a small company like a Facebook, to beat a large company like a Microsoft, in a completely new market, in a completely new set of rules. And so the thing that's interesting about innovation. Your point is very well taken, Phil. You don't know there's uncertainties there, but that's also a huge opportunity for the companies that do it right.

Phil: If you want exposure to some of the new technologies, that you can actually get them from traditional companies as well. I mean, I always take the point of John Deere, for example, because John Deere appears in robotics etfs and artificial intelligence etfs, because you're not exactly sure where these new technologies are, uh, going to be bubling up.

Simon: They are. And some companies incorporate them well into their own businesses.

Phil: Right?

Simon: Like, we can talk about Amazon, we can talk about Netflix, the history of companies that disrupt themselves purposely and do it well, but most don't, Phil. Most just want to get better and better at serving the customers they have get higher and higher margins, until all of a sudden, there's a breaking point where their market says, we can't pay that much. Or, hey, if I can do something else for a 10th of the cost, I'm going to. Sometimes it's hard to change directions when you've got a giant juggernaut of a ship heading in a certain way that you're cash cow.

Phil: I think we should, at this point.

Phil: Just say that a lot of our conversation I've pulled from an article that's available on the seven investing website, so I will link to that as well. And some of the points that you're making are mentioned, uh, in here. And this is where we're going to be talking about 2024. And do you think that it's perfectly lining up to be a stock picker's market? The macro isn't euphoric and overzealous, but it isn't gloomy and hopeless either. It's sounding very much like Goldilocks. Simon, what do you think this means for markets this year?

Simon: It means the porridge is just right, Phil. It's not too hot, it's not too cold. Right? It's interesting. You said euphoric and overzealous, right? Maybe that sounds like what 2021 was like when you saw all of the SPACS, which we're not talking about SPACS anymore, but that was the four letter acronym of the day. In 2021, we saw software as a service company. SaaS. That was the other four letter acronym. That was just. It seemed like you could pay. I mean, Zoom was selling for 45 times sales at one point in 2021. It seemed like you could do no wrong. As long as you were growing revenue, it was fine. And we're certainly not there now. I mean, the interest rate hikes and everything else, 2022 and 2023 were almost the complete opposite. The porridge was too cold because every management team on conference calls was conservative. They didn't want to get hammered because they were too rosy of a forecast. They just were conservative and saying, hey, we don't really know what the economy holds in the next couple of quarters. And so even great companies got completely hammered by the market just for conservative guidance. I think we're not in either of those situations anymore. The porridge is just right now because there are concerns in the world. It's an election year for America, right? This is a good year generally for advertising because there's going to be a lot of coverage on that. And I think that that's going to not only be good for the digital advertising space, but also the companies that tend to spend money on advertising. They're going to get a better RoI this year as well. But also there's a lot of other challenges, too. We've been in, um, an inverted yield curve for a year and a half now. We mentioned kind of the political geopolitical uncertainties that are going out there. I mean, it's not like it's a slam dunk that stocks go up. It's just you have to find the ones that are performing not only well, but better than a lot of people are expecting them to this year.

The yield curve on US treasuries has inverted since July 2022

Phil: Tell us about the yield curve, which has been inverted since July 2022. And just for listeners who might be aware of it, this is the yield on us treasuries, isn't it? Can you just explain that a little bit? And then why you think that this is going to have an effect on markets?

Simon: Uh, specifically? Yeah, it is treasury. So it specifically is the ten year treasury and the two year note for the US here. And, uh, typically, if you're investing for a longer period, you demand a higher return because your money is tied up for longer periods of time. And so generally, the ten year treasury pays a better, higher, more attractive rate than the two year treasury. But since, I believe it's now, since the summer of 2022, it's been the inverse. The shorter term two year treasury has yielded a higher rate than the ten year treasury. And this is almost in all the data that we have, all the financial and economic data we have predicted within 18 months in american recession. Just the uncertainty about the economy. It's more expensive to borrow in the short term. It just kind of shows tightening in the economic cycle, which is bad. All other things considered, we haven't had that yet. This has defied history, at least in the historic norms of the yield curve and being inverted. And then within 18 months, you go through two consecutive quarters of negative gdp. So it's curious. A lot of people are saying, when's it going to happen? Other people are saying, is it going to happen? The third camp is just forgetting all of that entirely and saying, hey, rates are coming down. We're ready to start the party back up again. Let's spike the punch pole and get back on the bull train that we've been missing. Somewhere in the middle of those three is the truth of what's actually going to happen. But I think that as investors, we need to be aware, not pessimistic, but aware, that there are some strange things happening in the macro economy here in 2024.

Seven investing has created a conviction rating to help investors identify best investment ideas

Phil: Okay, so let's get back to seven investing and some of the metrics that you provide. And one of the new ones is a conviction rating. Before we talk about the conviction rating, I, uh, just always remember another guest saying that you can't buy conviction. Tell us about conviction, and why do you think it is worth having a rating for it?

Simon: That's entirely true that you can't buy a conviction. You can't borrow conviction either. If you just kind of, worst case scenario, you buy a stock once because somebody told you to, you don't know anything about the company, and then all of a sudden the stock drops 50% in a year. You now have no idea what to do. You buy more because it's on sale and it's 50% off. Or is this a falling knife, as people like to say? You need to sell it as quickly as possible. You have no idea what to do with this. There's no conviction you have in the company. We're trying to challenge that by saying we want to be long term investors and we want to continue to give updates on the companies that we recommend. Right. And so we've got a large scorecard, Phil. We've been making stock picks since March of 2020. We've actually now sized up more than 300 companies. We have more than 100 active recommendations, unique company recommendations on the scorecard today. And we said if we were starting from scratch and you didn't want to be so intimidated by more than 100 companies to choose from, what are your very best ideas? What are the ones that you have the highest conviction in that I should start my research in? And so we came up with the idea of a conviction rating which spans everything from Best Buy to strong buy, to buy, to hold, to sell, to kind of represent this continuum about how do we feel about everything that's on our active recommendations list. That's the short story of why we've created conviction. It's basically to help our seven investing members navigate the scorecard that we have and maybe find some of their best ideas.

Phil: If someone is using seven investing, how much time do you think they should be devoting to following the research and working on their portfolios?

Simon: It's a tough question to answer because as the people doing this for our careers, we should be the ones that are spending the 10 hours a day reading through the articles and the market forecasts and the ten ks we don't want people to. It's great. If you do have the time to do that, that's fantastic. I'd encourage everybody to do as much as you can. Learning compounds, just like wealth compounds over time. But perhaps if you've got a full time job or you're in retirement or you have kids or whatever, you might not have that much time every day to devote to things. And so we try to structure it that if you just have five minutes a month, read the recommendations and see if it fits the style or the criteria that you'd be interested in an investment. If you have an hour a month, listen to our deep dive conversations like you mentioned earlier, where advisors are bouncing ideas off of each other and read the report itself. Read through the full report. It shouldn't take more than 15 minutes for the report, 30 minutes for the deep dive conversation, and then on top of that, if you say, hey, huh, I want more, maybe you want to add to an existing position, or maybe this is the one that you think would be a larger percentage in your portfolio. That's where we offer other things like the company updates, like an ongoing discussion, community forum, where for 24/7 it's always on. You can always discuss with our advisors and also other investors about each of their recommendations. I mean, that's kind of how you build up conviction over time, is you just kind of take a small bite. First you dip your little toe into the shallow, into the pool, and then all of a sudden you learn more and more and more. And then all of a sudden you realize, wow, I really know this company well. I'm ready to start managing my own finances. I'm ready to take control of my portfolio. And it can be life changing. For me personally, it was life changing to become an investor and take control of a lot of these things.

Phil: There's a million ways to invest in stocks. It can be confusing, stressful, and costly. But by following a few simple rules, you can avoid many common investment traps and unwanted anxiety. What if you were able to follow a team of tenured advisors with three phds and 100 years of collective investing experience who provide you with two new picks and five best buys every month. A full buffet, if you will, of innovative, wellresearched ideas for you to choose from. Um, seven investing might be for you. They want you to invest for the long haul in great companies with great leaders who can compound capital for years. Seven investing are pleased to offer listeners of this podcast a free trial for a week and 15% off the annual price if you sign up using the promo code stocks for beginners, that's only $170 per year, 15% off the regular price. Believe me, this is solid research from experienced advisors who live and breathe the markets. So go to seveninvesting.com. That's the number seven investing, and use the promo code stocksfor beginners or lowercase one word to get your absolutely free trial and discount on the annual premium plan.

Seven investing allows investors to personalize their investments

That's seveninvesting.com. And that code again, stocks for beginners. I receive a small commission for services that I recommend, and this helps me to keep this show trucking down the highway. I only recommend services I use myself.

Phil: And of course, the seven investing advisors cover many sectors of the markets, and I think it's important as well for people who are investing to personalize their investments. And seven investing allows this by providing, uh, very much an overview of the sectors that are available in the markets.

Simon: Yeah, it is. We try to specialize and we try to look at different things because it is good to bounce styles off of each other. Right? Maybe a dividend investor or an income investor might be demanding higher margins to pay out dividends, whereas a growth investor would, say, no, reinvest that right back into the business. But there's also so much nuance. I have become a better investor from chatting with my team yesterday. There was a company, selective Biosciences had merged with another company called Cartesian Therapeutics. Right? And so this is a company that's taking two completely different approaches to immune tolerance. The nitty gritty of it is the industry as a whole is getting away from the vector. It was being used for drug delivery, and it was Dana. Dana has the phd in biochemistry on our team that pointed out a lot of these very, very technical things of why this merger that they had in the past month didn't make a whole lot of sense. They were not complementary technologies to each other. And that kind of influenced our decision to basically say, no, stay away. This is not an opportunity right now for investors. The same thing with AI seeing. Anirban has got a phd in computer science, and the way that he sizes up AI companies is a lot different than a lot of the financial media I've seen out there. And Luke, having a career in Christophe, reads multiple hours every day. Just so well rounded. Our team has got such a breadth and depth of talent looking at things differently than I think that a lot of those who might size up companies, we do it in a different way. And I really enjoy that part of this.

Seven investing. com creates best buys portfolios based on recommendations from subscribers

Phil: Phil, tell us about the best buys portfolios. How are they configured?

Simon: Yep. So the best buys are basically even an extension of the conviction said, you know, okay, if you were at a cocktail party right now and you could only pick one company out of all of them that we've recommended that you want to tell your buddies about over a beverage, which one are you talking about? Which one are you most excited about right now? So the best buy was born. You only get one every month. Every advisor gets one best buy. And we say, okay, we're going to track them. We're going to put those in a portfolio. And so seveninvesting.com portfolios, you can see right there on display, every pick that we've made, we do a pitch on our subscriber calls every month where we actually talk about why it's our best buy. No restrictions. Could be large cap, could be small cap, could be healthcare, could be AI, whatever you want it to be. But you've got to have a convincing reason on why this is your favorite stock to invest in.

Phil: And just a reminder, seven investing is the number. Seven investing. One word, isn't it?

Simon: Yes, that's right. If you do type out seven, we'll redirect you to the homepage as well.

Phil: That way too. Uh, you've got that worked out.

Why doesn't news coverage always equate to great returns

So at the beginning we talked about the noise, the noise that the financial media generates. Now, some of the best known companies generate a lot of noise. Why doesn't news coverage always equate to great returns?

Simon: Yeah, I mean, similar to the hype cycle like we just chatted about a moment ago, Phil, I mean, what is going to get people excited and want to watch the program and elicit a response? And if you're supported by advertising, of course that's what you want versus what are the actual opportunities? And not to say that popular companies aren't good investments, it's just sometimes it's not aligned. In the same way that investors think about things, we tend to look more for disconnects where either something is misunderstood or not being paid enough attention to, or the expectations are just very, very low. A lot of times it's actually a negative news story or something that's in the headlines of the media that is certainly going to get a lot of attention and maybe even cause some people to sell off to the stock. But when you think about it long term, is it really damaging to the thesis? Is it really damaging to the company's performance over a period of three to five years? If it's not, maybe that's an opportunity to buy that stock.

Tell us about the ways that you look for trends of the future

Phil: Tell us about the ways that you look for trends of the future.

Simon: Well, I think going back to my traveling days, maybe it's just because I've longed to see that same Marriott room over and over. Nostalgic perhaps, but I like to do a lot of traveling, Phil. For me, it's conferences. I've gone to a lot of technical conferences. There was actually a period once over a, uh, four year period that I went to a conference every month except for two months. So that's 46 conferences in 48 months. One was the birth of my daughter I missed, and the other was a Christmas, uh, month that I missed. But it was just being there, seeing phds on stage, interviewing them for our seven investing podcast afterwards. I mean, I don't pretend to know everything, but I can get an advantage if I can get in the same room and talk to people that are living their craft on a daily basis. And then I try to pull that as to insight, I say, okay, here's the technical side of it. Let's blend in, some valuation, some financial things out of this, and then ultimately say, okay, if I'm investing in this trend, one, is it interesting? Two, is it investable? And then what's the company? You put some leadership and some other layers on top of that, too, and then kind of ultimately that defines, okay, this is where we're going to actually put our money to work. So a lot of it's traveling, a lot of its conferences, a lot of its reading. I'm a big fan of the MIT tech review. That's a publication that tends to really, really get into some of the most exciting things that are going on out there.

Phil: Yeah, it's a really good way of getting insights, isn't it? This is what I find with ceos, although you've got to understand that ceos are also salespeople as well, and you've got to take everything with a grain of salt. But when you're able to look them in the eye and see the whites of their eyes, you do can get a sense of whether it is something that's worth investing in.

Simon: Yeah. And hopefully if you're a CEO, you do have conviction in what you're doing, right? You're not just doing it because you have nothing else to do. I mean, you're so dedicated, you probably have some ownership in your own business and certainly your time is devoted to it. You've got a reason for it, you believe in it. Certainly they're biased because they want you to be allied with what they're doing. But it's know, not just throwing darts. These people have got reasons for what they're doing out there.

M yeah, I've just got a note about a technology letter

Phil: M yeah, I've just got a note here that you put in the script about a technology letter. Tell us about that technology letter. That sounds quite interesting.

Simon: Yeah. So this is a friend that I've made in the industry over the years is Tiernan Ray. I read him as a tech reporter for Barron's years ago. He's gone on to start his own newsletter. It's called the technology Letter. Tiernan's been on our show a couple of times on the seven investing podcast. We've talked about quantum computing, we've talked about silicon carbide into electric vehicles. But just a respected know, he's a journalist that really knows the ins and outs of the technologies that are out there. Just a long term friendship with somebody else who is as excited about it as innovation as I am.

Do you have a word of advice for first time investors

Phil: So do you have a word of advice for first time investors? And I see you've got one word that you've chosen.

Simon: You said, word of advice, Phil. So I said cannonball.

Phil: Thank you for taking me so literally.

Simon: I answered the question as posed.

Phil: Why?

Simon: Yeah, I mean, cannonball is, uh, my daughter is six and so she's been doing cannonballs off of the diving board. And so it got me thinking of that. But really it is like so many other crafts, investing is something that you just kind of have to jump in and read a little bit more every day and just immerse yourself. Buy your first stock. You will love it. Once you get bit by the investing bug, you will never see the world in the same way. And you will also keep getting better and make fewer mistakes. And so I think if there's one thing I hear over and over and over again, it's too hard to get started. I don't have the time to get started. I've got plenty of other things going on. You've got to cast all that aside and just say, I'm going to take five minutes today to learn something about investing, and I'm m going to do the same thing tomorrow. And then before you know it, just again, like so many other crafts, it's something that compounds over time. So cannonball is jump into the deep end, off the diving board and buy your 1st $20 worth of stock. You can do that now with fractional trading. Follow your first quarterly report, listen to your first conference call, or read your first seven investing recommendation report. I mean, anything to take that first step, do that first cannonball, I should say. That's the key to starting somewhere. And before you know it, you might be, uh, spending hours a day on this, like so many of our members.

Phil: Do, and also test that conviction that you may have on that at every opportunity.

Simon: It compounds. Not only does wealth compounds, knowledge compounds too.

You have a generous offer for listeners to this podcast

Phil: So you have a generous offer for listeners to this podcast. What's the special deal?

Simon: Certainly, Phil? Well, uh, we certainly appreciate your support of seven investing, too. And so we've worked out a partnership here with stocks for beginners, and we've got a promo code that you can offer for anybody that uses your promo code will get a 15% discount to our annual membership. So rather than 199 a year, it will be 170 a year. And it goes for perpetuity. There's no expiration for it. It's not a one time upfront kind of thing. Any renewals, you'll keep getting that same rate. And Phil, what is that code that you'd like to offer for your listeners?

Phil: Stocks for beginners, all lowercase and one word, just like the name of this podcast.

Simon: Yeah. And then in addition to that, we're going to give also the buyer's guide. We've also, in addition to the seven investing recommendations that we come out with every month, we're also kind of given a nice little, uh, report right up front. It's got seven proven stock market investing strategies and seven companies today that we think incorporate those strategies. We're going to give that away right at the moment of subscribing and you can even get started for $1, the annual option. We really wanted to make it as risk free as possible. And we said if you go in, we wanted you to see everything that seven investing has to offer. We want you to see the subscriber calls and we want to see the reports and everything else. But if it's just too much or it's not for you, that's totally fine, too. You don't have to commit to the full year. You can just pay one dollars to see everything. And then if you're happy. Please stick with us. But investing it for us is a long term game. Like we said, the cannonball, we want to have it all provided for you for as much as you'd like to put in every single month. M to compound that knowledge and that wealth over time.

Phil: And I'll just add at this point that the FTC requires me to say that I'll be making a small commission out of this as well. But I only recommend things that I use myself where I've met and feel the services that I'm recommending are, uh, providing something of value, which I think seven investing definitely is. And it really helps to keep this podcast on the road as well, because I can't do it for free.

Simon: We're glad to support that, Phil. We're on the line and the mission of helping investors over the long term. Glad to be a partner with you.

Phil: And glad to be a partner with you.

Simon Erickson: Thanks for listening to stocks for beginners podcast

So that promo code again is stocks for beginners, all lowercase one word. And the website is seven investing with the number seveninvesting.com. Simon Erickson thank you so much for joining me today and looking forward to talking to the other advisors as well on the podcast and helping listeners to improve their investing outcomes.

Simon: Thanks very much for having me, Phil. I had a great time.

Chloe: Thanks for listening to stocks for beginners. If you enjoy listening, please take a moment to rate or review in your podcast player or tell a friend who might want to learn more about investing for their future.

Thanks for having us Phil.

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