Page 1072 - How to Make Money in Stocks Trilogy

58 HOW TO MAKE MONEY IN STOCKS—GETTING STARTED

A 17% return on equity is the minimum benchmark, but stocks that go on
to make monster moves often sport an ROE of 25%, 35% or more. The big-
ger, the better. The following table shows why that’s true.

ROE of Leaders in 2009–2012 Bull Cycle
ROE at Start Year
Company Name of Big Run Run Started Subsequent % Gain

Green Mountain 21% 2009 1,104% in 30 months
Coffee Roasters
Apple 27% 2009 381% in 38 months
Lululemon Athletica 30% 2010 196% in 10 months
Priceline.com 42% 2010 182% in 21 months
Herbalife 69% 2010 173% in 21 months
Chipotle Mexican Grill 19% 2010 186% in 20 months
SolarWinds 43% 2011 137% in 11 months

■ ✔ New products, service or management

“Out with the old, in with the new.” That could be the official mantra for
the stock market, which is always looking ahead in search of companies with
new, paradigm-shifting products and services.
Such leaders emerge in every bull market cycle, and here are some quick
ways to see if your stock has the “N” in CAN SLIM:
• Check the company’s website and press releases.

• Read IBD stories about the stock on Investors.com. Pay special attention
to The New America section (Chapter 7), which profiles innovative com-
panies every day.
• Learn what companies featured in IBD lists actually do. Pay particular
attention to stocks highlighted in the IBD 50 and Sector Leaders lists.

As we saw in the earlier CAN SLIM case study, Apple is an example of an
established company that rejuvenated itself—and its stock—with new, inno-
vative products.
More often, you’ll find groundbreaking innovations in younger, entrepre-
neurial companies—often those that had their initial public offering (IPO)
within the last 15 years, many within the last 7 to 8 years.