Page 883 - How to Make Money in Stocks Trilogy

142 HOW TO MAKE MONEY IN STOCKS SUCCESS STORIES

“I learned from Bill that, no matter how grim the economy or the market
may appear, you must always do your daily analysis of the averages and lead-
ers,” says Kevin. “This is because a new bull phase begins when things are at
their worst, and investor sentiment is quite bearish. The initial breakouts in
a new bull phase often occur in the growth stocks that end up being your
genuine leaders in the ensuing move up. So making sure you get in early in
a new trend is important. This is especially critical because once these new
leaders break out, they can run a good amount before pausing to form their
next base.
“This means if you enter after the initial breakout, you are likely entering
when the price is materially extended past its most recent base. And enter-
ing an extended stock is risky because there is no technical support below to
cushion any normal pullback that might occur.
“I learned this lesson in the July to October 1990 bear market. Instead of
doing my daily analysis, I did not look at a single chart for months. Only after
everything was obvious after the mid-January 1991 lift-off did I realize a
new bull market had begun three months earlier. As the saying goes, you
snooze, you lose.”
Learning how a market tops proved to be as important as getting in on a
new bull run. “My first triple-digit percentage month was February 2000,”
says Kevin. “I did this by holding 15–17 stocks, nearly all in the explosive
technology sector. As it turned out, this was the final blow-off phase of the
most powerful bull market in 70 years, though of course no one knew this at
the time. In early March 2000, I noticed institutions beginning to exit the
stocks that I held. This showed up on price charts as distribution days (heavy
selling) in the leadership names. By taking quick action, I moved my
account to a 100% cash position by March 14, which was two trading days
after the March 10, 2000, top. A day later, on March 15, I mentioned this in
a column of mine on a major website.”
Kevin’s long-term record has outperformed the S&P 500 by a multiple of
10 (net of a management and performance fee), according to audited
reports by Big Four CPA firm Ernst & Young LLP.
Kevin says that he is “grateful to Bill O’Neil for learning so much about
the market early in his career, because it significantly impacted my profes-
sional journey through the market. I believe Bill has influenced more of this
era’s most outstanding stock pickers than anyone else.” Kevin’s gratitude
and respect for Bill can be felt more in the silences following these state-
ments than anything else.