The one thing a legendary Wall St. analyst says you should focus on when picking stocks

December 2, 2021, 3:00 PM UTC

Picking stocks is…complicated. Mark Mahaney, Evercore ISI’s senior managing director and head of Internet research, has long been a source worth turning to on the subject. His new book, Nothing but Net, offers lessons that should help any investors (or investor wannabes) eyeballing the markets.

Mahaney stepped onto the stage at the Fortune Brainstorm Tech conference in Half Moon Bay, Calif., on Wednesday to serve up some advice.

“The single biggest mistake I’ve seen investors make is to get stuck on trading around tech stocks rather than investing in high-quality stocks,” said Mahaney.

And that mistake is what pushed him to write his book, which offers, as the subtitle says, 10 Timeless Stock-Picking Lessons From One of Wall Street’s Top Tech Analysts.

But if there’s just one tip investors should follow, Mahaney said, it’s “think DHQ. Not DQ—that’s Dairy Queen. DHQ, dislocated high-quality stocks. Hunt for these.”

Yes, the tip does encapsulate many of Mahaney’s other nine tips, as several help define his take on what makes a high-quality stock. “Companies facing large TAMs [total adjustment markets] that show relentless and successful, hopefully, product innovation, compelling customer value props, and great management teams.”

Following the rule of DHQ and you “do at least one of the two things we’re trying to mitigate when we invest: get rid of the risk or, at least, minimize it.”

So, said Mahaney, wait for stocks to get dislocated as “they all get dislocated. They trade off 20% to 30% either on company-specific steps or on the market. Every single high-quality name has gotten dislocated. That gives you a chance to buy it or add to positions. Dislocations happen to the best of us.”

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