The One Stock Set to Skyrocket? Let's Get Real

You've probably seen the flashy YouTube thumbnails and CNBC headlines: "This stock is set to skyrocket!" or "99% of investors are overlooking this golden opportunity!"—and honestly, I cringe every time. If someone claims they can predict the next breakout stock in the short term, they're either lying or delusional (probably both). Successful investing isn’t about hype—it’s about principles, numbers, and discipline. Let’s break it down.

The Three Stocks Everyone's Talking About

Right now, the market is obsessed with three names: Nvidia, Palantir, and Tesla. These are undeniably great businesses, but there’s a crucial principle in investing: A great story can become a bad investment if you pay the wrong price.

Nvidia (NVDA)

• Market Cap: $3.3 trillion
• Free Cash Flow (5-Year Average): $18 billion
• Free Cash Flow (Last Year): $56.5 billion
• Net Income (5-Year Average): $20 billion
• Net Income (Last Year): $63 billion
• Debt: Practically None

Nvidia is a powerhouse. Over the past five years, its stock has skyrocketed, pulling in massive free cash flow growth. The company operates with virtually no debt, making it incredibly financially stable. But with such a high valuation, is it still a good investment?

Palantir (PLTR)

Palantir mirrors Nvidia in terms of strong free cash flow growth. Their business model is solid, and they continue to perform well in terms of revenue generation. However, the key question remains: Is the price justifiable?

Tesla (TSLA)

Tesla is where things get interesting. Many argue that Tesla is more than just a car company—it’s a tech company. But let’s consider a recent announcement: BYD is now offering its self-driving software at no extra charge. If Tesla's premium valuation is based on its software capabilities, what happens when competitors start giving that away for free?

• Gross Profit Margin: 18%
• Average Software Company Margin: 65-80%
• Price-to-Sales Ratio: 12.4 (Compared to 0.5-1 for traditional automakers)

Tesla trades like a software company while generating the majority of its revenue from car sales. If it walks like a duck and quacks like a duck—it’s a car company. And at these valuations, that’s a problem.

The Dangers of Hype and Momentum Investing

Let’s take a trip down memory lane with Tattooed Chef (TTCF) and Nikola (NKLA).

• Tattooed Chef had massive short-term gains, yet it was ultimately delisted.
• Nikola hit an all-time high of $2,800 (split-adjusted), only to crash to 43 cents per share. Their CEO is now serving jail time for fraudulent claims.

The point? In the short run, stocks are a voting machine—driven by hype, speculation, and emotions. But in the long run, they are a weighing machine—measured by actual financial performance.

EV Mania: Lessons from Lucid and Rivian

The electric vehicle (EV) hype was the AI of 2021. Let’s look at two prime examples:

Lucid (LCID)

• All-Time High (Feb 2021): $65 per share
• Current Price: $22.74 per share
• Decline: 95% from its peak

Rivian (RIVN)

• All-Time High (Nov 2021): $180 per share
• Current Price: $12.84 per share
• Decline: Over 90% from peak

Both companies had moments of massive returns (166% in a month for Lucid, 202% for Rivian), but the long-term fundamentals did not support those valuations. These were companies driven by a story rather than financial metrics.

Investing is Like a Relationship

Think about it: A bad month in a marriage doesn’t mean divorce, and a great month doesn’t mean everlasting happiness. The same applies to stocks. A company will go through ups and downs, but what matters is the fundamentals.

If you buy a stock, you will likely see it drop in value at some point. The key question is: Can you see beyond the short-term noise and focus on long-term fundamentals? If so, you’re an investor. If not, you’re a speculator.

The Importance of Community and Education

I wasn’t always an investor—I was a hype-driven speculator 28 years ago. But over time, I learned the importance of discipline, skepticism, and patience. And now, with the internet and platforms like YouTube, access to financial education has never been easier.

That’s why we created Everything Money—to provide investors with tools, education, and a community of like-minded individuals who focus on principle-driven investing.

Everything Money is Not an Investment Advisor: Everything Money (including Paul, Mo, and Any other person including, but not limited to, other staff members, guests, personalities, etc.) is not an investment adviser, and it is not registered as such with the U.S. Securities & Exchange Commission or any other state or federal authority under the Investment Advisers Act of 1940 or any other law. The investments and strategies discussed in Everything Money’s YouTube videos and on Everythingmoney.com are not and should not be considered investment advice and may not be suitable for you. They do not take into account your particular investment objectives, financial situation, needs, or personal circumstances and are not intended to be specific to you. Before acting on any investment or strategy discussed, you should always do your own research and make your own independent decision about whether it is suitable for your particular circumstances. You should also consider seeking advice from your own legal, financial, tax, accounting, or investment advisers. Everything Money does not provide such advice.

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