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  • CityBlade CityBlade Jan 19, 2000 5:27 PM Flag

    A MUST READ ARTICLE, part I

    By Thom Calandra, CBS MarketWatch
    Last
    Update: 2:11 PM ET Jan 19, 2000
    FTMarketWatch.com

    Thom's biography


    SAN FRANCISCO (CBS.MW) --
    William J. O'Neil, the stock chartist
    and financial
    newspaper publisher, has a new book.

    In it O'Neil,
    best known as founder of Investor's
    Business
    Daily, sticks with a system of sticking with
    winning
    companies. For individuals, "24 Essential
    Lessons for
    Investment Success"
    {McGraw-Hill) is a gem, one of those
    how-to
    books

    Now, just so you know: this isn't
    a book review.
    Instead, it's a quick summary of
    some of O'Neil's
    main points -- for individual
    investors out there who
    want to understand a little of
    the science behind the
    art of picking winning
    stocks -- before those stocks
    enjoy their strongest
    moves to higher ground.

    O'Neil is a big
    believer in technical indicators, things
    like
    accumulation and follow-through days and (to
    some) bizarre
    chart formations, like the vaunted
    cup-with-handle
    formation. He defines technical
    analysis as "the study
    of market movement, mainly
    with the use of
    charts." For that, O'Neil is regarded
    as among this
    age's strictest, and most successful,
    investors.

    Plus, O'Neil favors growth stocks to value
    stocks. That means he's
    looking for the stocks that
    have enjoyed year after year (or quarter after

    quarter) of strong, steady earnings growth and rising
    share prices. In that
    regard, O'Neil is enjoying
    the best of times. Growth stocks -- or what
    some
    unfairly call momentum stocks -- are the market leaders.
    Stocks
    whose price-to-earnings multiples dwarf the
    market averages --
    companies such as Microsoft
    (MSFT: news, msgs) and, before it
    tumbled, software
    maker PeopleSoft (PSFT: news, msgs) -- are the best

    examples of the triple-digit gains that O'Neil expects
    from winning
    companies' shares.

    O'Neil,
    who has been investing for more than 40 years, says
    in the book
    that he is a big believer in company
    fundamentals such as earnings and
    sales growth. He's a
    stickler for his principles. "This means buying only

    stocks that show consistent earnings improvement, have
    increased sales
    and have preferably both strong profit
    margins and a high return on
    equity," O'Neil writes
    in the new book. (The italics are his, folks,
    not
    mine.)

    Golden rules for golden
    times

    His golden rule is defensive: "You must always
    protect your investment
    account," he writes. He
    advises investors to bail on a stock if it falls 8

    percent below their purchase price. That probably is not
    the best advice
    for the past 10 years, a period
    during which "buy on the dips" has
    become kind of
    mantra for investors in American securities.


    Still, O'Neil's bread-and-butter principles are the same
    ones he discussed
    in his best-seller, "How to Make
    Money in Stocks." The new book, a
    paperback, is
    more streamlined than the original.

    "Always
    pick stocks from the leading industry groups or
    sectors," he
    advises. He says that, since 1953, the
    majority of U.S. stocks that earned
    the label market
    leaders were also part and parcel of a leading
    industry.
    "When Microsoft was an outstanding winner, so was
    PeopleSoft; when
    Dell was outperforming, so was Compaq,"
    he writes.

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    • $$$$$$$$$$$$$$$$$$$$

    • Hey yo, what are you worried about who is sitting where in class? Your dumb ass wasnt even in class you loser!

    • thefurtheradventuresofnickdanger thefurtheradventuresofnickdanger Jan 19, 2000 11:12 PM Flag

      It was unstated but assumed in my comments, and I
      agree with you, that the bulk of a portfolio SHOULD BE
      quality. But we sometimes try to get lucky with a lesser
      known, or maybe didn't do enough due
      diligence.

      Whatever, patience and discipline are extremely
      important.
      They make timing so much easier.

    • <EOM>

    • Fast crowd, big money, wonderful friends, simply an amazing vehicle to add to your research and knowledge base.

      Niksurfs

    • selection over the long run, but certainly it is
      very important. I, like you and all investors have
      bought at times only to watch it sink, but rebound
      shortly thereafter. The due diligence on the front-end
      sometimes excites us to jump in on emotion. The safest way
      to calibrate your jump into a great stock, at least
      for me is to assess where it is realtive to it's
      yearly high, what news has been released lately, what's
      anticipated and factored into the price, then factor in a
      percentage off it's high before I commit. That is not a
      foolproof formula, and sometimes you get a stallion that
      will runaway on ya like BRCM or QCOM, but if carefully
      watched you can allocate money wisely. It just takes time
      and patience, absolutely, also don't parcel it all in
      at once, hold back for further re-tracement.
      MPWR
      has an incredible track record,I have watched him
      before, during and after his calls, he is no bullshitter,
      after the fact bragging. I talk to him and and I know
      when he his going to move on some of his picks before
      he does it, he has a target and he is very
      disciplined. He is one to watch, also very proud to call him
      my friend, wonderful heart this guy.

      Niksurfs

    • Thanks for your posts. I enjoy the insight.

      I have read MPWR posts before and enjoyed his analysis and views. Where is the BTM message board?

      JCR

    • winning strategy. I do have my little play-things
      I trade now and then, and when they do well, I trim
      a little off and add to existing positions or
      establish new ones in the Gorillas that I do not have a
      position in yet.
      Clearly their are opportunistic
      trades and emerging companies that can grow quickly and
      they are fun to play but as long term investments most
      are only fools gold. The true Gold is in the leaders
      and companies that are defining the Internet,
      Wireless and Infrastructure space of which there are many
      to choose from.
      Best of Investing to you, I also
      spend some time with my buddy MPWR at the BTM board,
      drop in sometime.

      Niksurfs

    • thefurtheradventuresofnickdanger thefurtheradventuresofnickdanger Jan 19, 2000 8:23 PM Flag

      Knida like real estate - location, location,
      location. I've been such a piss poor timer, have bought so
      many things at the high, and then short term they've
      gone down. But long term, the just buy and hold
      strategy, they turn into winners, just not as good as they
      wpuld have been if bought correctly. But I've learned
      something watching that Wizard of Investing, MPWR -
      patience, patience, patience, and don't chase stocks. Sell
      into strength.

      Nik, you know the man is
      incredible. Sold 17% of CMGI at last run up at 294, 310 and
      whatever.

      GNET, WCAP, HLIT, on and on.

      You doin' ok with
      RSAS?

    • I don't get a chance to follow this message board
      that often, but when I do, I find myself reading
      though more nonsense than anything else. There are a few
      posters that routinely get into a pissing contest that
      usually prompt me to jump over to Raging Bull, but your
      post today was to the contrary. Good point made tying
      in the entry point and holding for the long term. I
      to find that discipline is the key to success. My
      strategy is to identify strong companies, buy on large
      pullbacks and hold for the long term. Very tempting to sell
      after a quick run up, but can prove fatal when trying
      to re-enter.

    • View More Messages
 
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