William O’Neil's - Golden Nuggets

Noted to be one of the most important thinkers of the investing world in the last 30 years, William O’Neil is the publisher, chairman and founder of business newspaper Investor’s Business Daily, in the US. He is also the author of best sellers such as 24 Essential Lessons for Investment Success and How to Make Money in Stocks.

O’Neil blends a mixture of quantitative and qualitative strategies in his performance-oriented investing approach. His investment style is to seek out only those growth stocks that have the greatest potential for swift price rises from the moment they are purchased. He summarised his criteria for identifying a stock that’s about to head for the stratosphere in his well-known acronym CANSLIM:

C- Look for companies that have just announced increase in quarterly earnings.

A- Look for companies with at least five years of prior growth, at a compound rate of not less than 25 per cent.

N- The best stocks have a new story behind them, such as new and exciting products or new directors. They are also breaking out to new highs.

S (Supply and demand) - The less stock there is to buy, the more any buying will drive up the price.

L- (Leaders and laggards) - Stick with those stocks that outperform and shed those that underperform.

I– Identify the 3-10 best performing institutional investors. Check out the stocks they are buying as candidates for your own portfolio.”

M- Determine market direction by reviewing market averages daily.

Below are some of the golden nuggets from him:

• “Consider selling stocks that have not risen 20 per cent or more after 13 weeks. And consider holding those that have risen 20 per cent in 4-5 weeks. These may go on to be the biggest winners of all.”
• “Diversification is a hedge for ignorance. I think you are much better off owning a few stocks and knowing a great deal about them.”
• “The whole secret to winning and losing in the stock market is to lose the least amount possible when you’re not right.”
• “What seems too high and risky to the majority generally goes higher and what seems low and cheap generally goes lower.”
• “Even the most successful investors make mistakes. Poor decisions lead to losses, some of which can become quite awful if you are not disciplined and careful.
• You must positively accept that rule number one for the highly successful individual investor is always cut short and limit every loss.”

Link to the article -http://www.thehindubusinessline.com/iw/2008/04/20/stories/2008042050801300.htm