Page 359 - How to Make Money in Stocks Trilogy

234 A WINNING SYSTEM

I = Institutional Sponsorship. Buy stocks with increasing sponsorship
and at least one or two mutual fund owners with top-notch recent per-
formance records. Also look for companies with management ownership.
M = Market Direction. Learn to determine the overall market direction
by accurately interpreting the daily market indexes’ price and volume
movements and the action of individual market leaders. This can deter-
mine whether you win big or lose. You need to stay in gear with the mar-
ket. It doesn’t pay to be out of phase with the market.

Is CAN SLIM Momentum Investing?
I’m not even sure what “momentum investing” is. Some analysts and
reporters who don’t understand anything about how we invest have given
that name to what we talk about and do. They say it’s “buying the stocks that
have gone up the most in price” and that have the strongest relative price
strength. No one in their right mind invests that way. What we do is identify
companies with strong fundamentals—large sales and earnings increases
resulting from unique new products or services—and then buy their stocks
when they emerge from properly formed price consolidation periods and
before they run up dramatically in price during bull markets.
When bear markets are beginning, we want people to protect themselves
and nail down their gains by knowing when to sell and start raising cash. We
are not investment advisors. We do not write and disseminate any research
reports. We do not call or visit companies. We do not make markets in
stocks, deal in derivatives, do underwritings, or arrange mergers. We don’t
manage any public or institutional money.
We are historians, studying and discovering how stocks and markets actu-
ally work and teaching and training people everywhere who want to make
money investing intelligently and realistically. These are ordinary people
from all walks of life, including professionals. We do not give them fish. We
teach them how to fish for their whole future so that they too can capitalize
on the American Dream.

Experts, Education, and Egos

On Wall Street, wise men can be drawn into booby traps just as easily as fools.
From what I’ve seen over many years, the length and quality of one’s education
and the level of one’s IQ have very little to do with making money investing in
the market. The more intelligent people are—particularly men—the more
they think they really know what they’re doing, and the more they may have to
learn the hard way how little they really know about outsmarting the markets.