The UNTHINKABLE is About to Happen to Stocks (but most will invest wrong)

Summary

Tom Nash argues that investors can benefit from long-term stock-market growth by following a repeatable system rather than reacting to headlines, short-term price moves, or market-timing predictions. His central idea is to view stocks as ownership stakes in businesses: focus on fundamentals and business quality, make decisions in advance, and stay invested through ordinary volatility.

He contrasts this approach with what he describes as emotional investing: buying at peaks, selling too early, and repeatedly trying to time exits and re-entries. He says long-term returns depend on choosing strong businesses and allowing gains to compound, while acknowledging that the path can be volatile.

Investing Framework and Rules

• Evaluate the business, not just the share price. Consider profits, revenue growth, competition, debt, risks, and whether the business is improving. If a stock’s price is flat while its business improves, Nash advises assessing the fundamentals rather than guessing at short-term market direction.
• Set decisions in advance. Establish entry, exit, and buying rules while calm so decisions are not improvised during a selloff or a surge.
• Take partial profits according to stated rules:
  • At a 50% gain, sell 10% of the position.
  • At a 100% gain, sell 20%.
  • Nash suggests using some proceeds for spending and returning some to a dollar-cost-averaging (DCA) fund—over roughly one year after the first rule and 2–3 years after the second.
• Increase DCA purchases during declines:
  • For broad indices such as the S&P 500 or Nasdaq, double the normal purchase when the index is down 10% or more from its annual high. Continue until the drawdown narrows to 9%, then return to the usual contribution.
  • For individual stocks, use a 20% decline threshold. Nash’s example is a stock falling from $100 to $79.
• Reduce purchases after sharp rises. If a stock rises more than 20% in 30 days or less, use “half-move averaging”—for example, invest $50 instead of $100 for a normal monthly purchase.

Company-Quality Scorecard

Nash describes a 125-point test covering:

• Cash relative to debt
• Revenue growth and operating margin
• Short interest and institutional ownership
• Scalability—whether revenue grows faster than expenses
• Five-year performance versus the S&P 500
• Competitive moat, CEO quality, resilience in recessions, long-term trends such as AI, company culture, and talent

He gives these scoring examples and thresholds:

• Cash/debt: More debt than cash scores 0; more cash scores 5; at least twice as much cash scores 10.
• Revenue growth: Below 10% scores 0; 10–20% scores 5; above 20% scores 10.
• Operating margin: Below 10% scores 0; 10–25% scores 5; above 25% scores 10.
• Scalability: Revenue up 20% while operating expenses rise 5% is considered scalable; revenue up 7% while expenses rise 15% is not.
• Five-year performance: Outperforming the S&P 500 by more than 20% scores 10; outperforming by 10–20% scores 5; underperforming scores 0.

Nash describes a score of 125 as “once-in-a-lifetime,” 100–125 as exceptional, roughly 75–100 as watchlist territory, and lower scores as poor candidates. He recommends buying the S&P 500 rather than an individual company that does not qualify as exceptional.

Market Context, Performance Claims, and Risks

• Nash claims company profits were rising quarter by quarter despite crash warnings. He argues that falling profits—not negative headlines alone—would be a more meaningful warning sign.
• He says the S&P 500 rose 54% in the 18 months after the April 2025 market selloff associated with tariffs, compared with an average annual return of about 10%. These are claims made in the video.
• He describes market declines as normal: approximately 5% several times a year, 10% at least once a year, and 20% every few years. He says investors should expect volatility rather than assume it can be avoided.
• He cites a study of portfolios worth $1 million or more, reporting that they held approximately 13% cash, had 83% focused on U.S. stocks, were 99% never fully liquidated, and kept 92% of money in long-term assets versus 8% in trading.

Examples and Self-Reported Results

The following performance figures are the speaker’s claims:

• Palantir (PLTR): Nash says the stock rose about 2,600% after his earlier bullish call and that $10,000 invested at the time would have grown to $270,000. He describes a price path from around $6–$10, through declines and later gains to about $209, including a move from $137 back to an all-time high.
• Nvidia (NVDA): He says it gained about 1,500% after an October 2020 recommendation. He gives an example of a volatile path from $20 to $150, down to $94, and later around $130.
• Datadog (DDOG): He says it was added to the academy in January and generated about 120%, citing prices of $133, $105, $188, and $293 along the way.
• Bloom Energy (BE): He says it gained about 80% in February and cites moves from $156 to $119 and later $280.
• Self-reported portfolio: Nash says that since September 2023, his portfolio held 40% Palantir, 40% S&P 500, and 20% Tesla (TSLA). He reports gains of 1,300%, 75%, and 78%, respectively, and a weighted return of 565%, versus 75% for the benchmark. He says the portfolio was not intended to be copied and might not suit other investors.

These examples and returns are attributed to Nash and his academy. Nash also promotes the academy, so the performance examples are presented in a promotional context.

Assets and References Mentioned

• Stocks: Palantir (PLTR), Nvidia (NVDA), Datadog (DDOG), Bloom Energy (BE), Tesla (TSLA)
• Indices: S&P 500, Nasdaq
• Sector/theme: Artificial intelligence (AI)
• People cited or referenced: Michael Burry, Peter Lynch, and Warren Buffett. Nash notes that some quotes attributed to Buffett may be uncertain.
• No bonds, commodities, or cryptocurrencies are discussed.

Promotion and Disclaimer

Nash promotes a free, one-hour live masterclass scheduled for Saturday, October 17 at 2:00 p.m. Eastern Time; the year is not specified in the subtitles. He says it will not be recorded or replayed, that places are limited, and that he will reveal his methodology and discuss two stock ideas he has not previously covered.

The video description states that the content is for educational and entertainment purposes only, is not financial, legal, or tax advice or a solicitation to invest, and recommends doing independent research and consulting a licensed professional.

Presenter/source: Tom Nash. Examples and claims are attributed to him and his academy.