Page 274 - How to Make Money in Stocks Trilogy

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• C HAP T E R •

C = Current Big or Accelerating

Quarterly Earnings and

Sales per Share

Dell Computer, Cisco Systems, America Online—–why, among the thousands of
stocks that trade each day, did these three perform so well during the 1990s,
posting gains of 1,780%, 1,467%, and 557%, respectively?
Or for that matter, what about Google, which started trading at $85 a
share in August 2004 and didn’t stop climbing until it peaked at over $700 in
2007? Or Apple, which had emerged from a perfect cup-with-handle pat-
tern six months earlier at a split-adjusted $12 a share and reached $202 in 45
months?
What key traits, among the hundreds that can move stocks up and down,
did these companies all have in common?
These are not idle questions. The answers unlock the secret to true suc-
cess in the stock market. Our study of all the stock market superstars from
the last century and a quarter found that they did indeed share common
characteristics.
None of these characteristics, however, stood out as boldly as the large
percentage earnings per share increase each big winner reported in the lat-
est quarter or two before its major price advance. For example:
• Dell’s earnings per share surged 74% and 108% in the two quarters prior
to its price increase from November 1996.
• Cisco posted earnings gains of 150% and 155% in the two quarters end-
ing October 1990, prior to its giant run-up over the next three years.
• America Online’s earnings were up 900% and 283% before its six-month
burst from October 1998.

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