MARKET WIZARDS – WILLIAM O’NEIL (BY JACK SCHWAGER)


Last time we talked about the computer trading pioneer, Ed Seykota. Today, we will instead focus on William O’Neil, who is the author of the book How to Make Money in Stocks, which I’ve made a summary on previously. He’s also the founder of the business newspaper Investors Business Daily. The rules help you, because it’s a lot easier if you don’t have to go by “how do I feel?”, “well I like this stock” and well, that’s nice, but it better be something else that you can hang your hat on. The rules that William O’Neil emphasizes as the most important ones have been summarized in a neat framework called CAN SLIM. Each letter in the acronym represents a specific condition that should be met before William O’Neil wants to buy a stock. C – Current earnings per share The quarterly earnings per share of the company must be up by at least 20 to 50 percent on a year-to-year basis. A – Annual earnings per share Look at the compounded earnings growth rate during the last five years. In William O’Neil’s studies, they concluded that the best performing stocks have an increase of 24% on a year-to-year basis, and ideally each consecutive year has beaten the year before. N – something New New refers to either a new product, a change in the industry or new management for the company. It makes sense that for a stock to reach new highs, something new must happen or have happened recently to support that price increase. S – Shares outstanding Most companies have less than 25 million shares outstanding at the time of their greatest performance. Simply put – elephants don’t gallop. L – leader or laggard. If a stock is a leader, it has been outperforming most other stocks during the last 12 months. If it’s a laggard it has, on the contrary, been forming worse than the rest of the pack. Pick only leaders that have been outperforming at least 80% of their peers. I – Institutional sponsorship The biggest source of demand comes from institutional investors. Look for companies where there are institutional owners, where some of them are among the top performers of the asset management industry, and where the number of institutions owning the stock has increased in the last year. When a fund establishes a new position, chances are that it will add to that position later and that will cause an increase in the price. M – Market direction Three out of four stocks will go in the same direction as the market averages. It’s therefore very useful, according to William O’Neil, to learn how to interpret price and volume in the market averages to look for signs that the market has topped, or maybe it has bottomed. That was everything for William O’Neil. Next up will be Michael Marcus, who, during the time he was working for Commodities Corporation, was able to produce the same amount of profits as all the other traders at the firm – COMBINED. See you then!

3 thoughts on “MARKET WIZARDS – WILLIAM O’NEIL (BY JACK SCHWAGER)”

  1. What do you think of the CAN SLIM entering system? Could some of the variables be improved? Which one of them is most difficult to determine? Share your thoughts in the comments! 👇

    🧙‍♂️ All Market Wizards 🧙‍♂️

    – Paul Tudor Jones (part 1/7): https://bit.ly/2YvvEsy

    – Richard Dennis (part 2/7): https://bit.ly/2FAG5m2

    – Ed Seykota (part 3/7): https://bit.ly/2FHCofE

    – William O’Neil (part 4/7): https://bit.ly/2JLM24R

    – Michael Marcus (part 5/7): https://bit.ly/2WyhRjp

    – Bruce Kovner (part 6/7): https://bit.ly/2FKc9oT

    – Michael Steinhardt (part 7/7): https://bit.ly/2V0MZHV

  2. Really good content my friend, all these summarys are really useful, i dont like to follow other persons systems, but i like to fill my toolbox with good tools from the best. Keep up the good work! Grüße aus Deutschland

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