Page 275 - How to Make Money in Stocks Trilogy

C = Current Big or Accelerating Quarterly Earnings and Sales per Share 153

• Google showed earnings gains of 112% and 123% in the two quarters
before it made its spectacular debut as a public company.
• Apple’s earnings were up 350% in the quarter before it took off, and its
next quarter was up another 300%.
But this isn’t just a recent phenomenon. Explosive earnings have accom-
panied big stock moves throughout the stock market’s great history in Amer-
ica. Studebaker’s earnings were up 296% before it sped from $45 to $190 in
eight months in 1914, and Cuban American Sugar’s earnings soared 1,175%
in 1916, the same year its stock climbed from $35 to $230.
In the summer of 1919, Stutz Motor Car was showing an earnings gain of
70% before the prestigious manufacturer of high-performance sports
cars—you remember the Bearcat, don’t you?—raced from $75 to $385 in
just 40 weeks.
Earnings at U.S. Cast Iron Pipe rose from $1.51 a share at the end of
1922 to $21.92 at the end of 1923, an increase of 1,352%. In late 1923, the
stock traded at $30; by early 1925, it went for $250.
And in March of 1926, du Pont de Nemours showed earnings up 259%
before its stock took off from $41 that July and got to $230 before the 1929
break.
In fact, if you look down a list of the market’s biggest winners year-in and
year-out, you’ll instantly see the relationship between booming profits and
booming stocks.
And you’ll see why our studies have concluded that

The stocks you select should show a major percentage increase in current
quarterly earnings per share (the most recently reported quarter)
when compared to the prior year’s same quarter.

Buy Stocks Showing “Huge Current Earnings Increases”
In our models of the 600 best-performing stocks from 1952 to 2001, three
out of four showed earnings increases averaging more than 70% in the lat-
est publicly reported quarter before they began their major advances. Those
that did not show solid current quarterly earnings increases did so in the
very next quarter, with an average earnings increase of 90%!
Priceline.com was showing earnings up “only” 34% in the June quarter of
2006, when its stock began a move from $30 to $140. But its earnings accel-
erated, rising 53%, 107%, and 126%, in the quarters that followed.
From 1910 to 1950, most of the very best performers showed quarterly
earnings gains ranging from 40% to 400% before their big price moves.