Page 891 - How to Make Money in Stocks Trilogy

148 HOW TO MAKE MONEY IN STOCKS SUCCESS STORIES

doesn’t have a profit cushion. The stock then proceeded to double but did-
n’t offer a good entry point. Kier was patient and waited for First Solar to
form another base, and then he bought the stock again. He sold the stock
when it once again dropped below the 10-week line on heavy selling vol-
ume, locking in a gain of 83%.
In 2008, Kier formed a hedge fund and significantly outperformed the
general market by being almost entirely in cash for much of that year’s bear
market. The Nasdaq was down 40% that year, and Kier kept the losses in his
fund to under 5%. The rules of CAN SLIM pushed Kier to seek the safety
of cash during that devastating market correction.
Kier’s investment rules for his new fund would be very similar to what he
had learned from his years of teaching for IBD. His top-down approach
would include the health of the general market, followed by searching for
dynamic companies with new products or services that were in leading
industry groups. The fund would focus on top-notch earnings and sales
numbers followed by technical analysis of chart patterns and price and vol-
ume as an indicator of demand for leading stocks. The overall goal of the
fund was to isolate the top 1 to 2% of stocks in the market that could
become true market leaders.
He made rules that the fund could hold up to 15 positions at a time, but
the market exposure would increase only as previous positions showed prof-
its. Margin would be used when the fund was fully invested and showing sig-
nificant gains. The concentration level on any given security would be up to
30%.
Other rules for the fund included taking most profits at 20 to 25%,
although true market leaders could be held for larger moves. Risk manage-
ment rules would be strictly adhered to in order to protect against losses,
such as a strict sell rule 7 to 8% below the initial cost of the equity. Cash lev-
els could be as much as 100% to protect assets in difficult markets. These
rules were time-tested by Bill O’Neil since the 1960s and have led to better
results in the market.
In 2009, Kier underperformed and found that buying off the bottom was
difficult. The market had gone through a very turbulent time, and most
traders were cautious. He found most base patterns were badly damaged,
“making it difficult to see what was setting up properly.”
In 2010, Kier was able to find leading stocks more easily that were work-
ing in conjunction with the overall market. Some of the stocks Kier was able
to notch decent gains in were Priceline, Apple, and Chipotle Mexican Grill.