Page 943 - How to Make Money in Stocks Trilogy

192 HOW TO MAKE MONEY IN STOCKS SUCCESS STORIES

What to Look for in a Big Winner

• Is the product something people want or need? Are the earnings and
sales increasing? This will show you that there is a desire for the product
or service. What is their competitive edge in the market? How unique are
the company’s products or services? Do they dominate, or are they easily
copied? Look for a company that has something that is completely inno-
vative and revolutionary that the masses will want to buy.

• Volume is a measure of supply and demand and can be seen on a chart.
Look for spikes in volume that are well above average, showing institu-
tional buying in a stock. This will signal to you that the professional
investors are committing serious capital in the company (free charts can
be found at Investors.com).
• Institutional money is the only thing that will drive a stock’s price higher,
so always look for volume, the higher the better.
• Return on equity in many big market leaders will often be 30%, 40%, 50%,
or higher. This shows how efficient a company is with its money and is often
an indicator of how successful a stock may be if other key fundamental fac-
tors are in place, such as double- or triple-digit earnings and sales.
• Increasing quarters of earnings and sales is another indication of
strength. (This fundamental data can be found in Stock Checkup at
Investors.com.)
• Bill remembers similar base patterns and what they looked like in previ-
ous bull markets. Study chart patterns at IBD University for free at
Investors.com to learn what the basic chart patterns look like.

• Focus on the very liquid stocks that trade at least one million shares per
day, because these are companies the institutional investor can enter.
They must establish large positions and cannot put money into thinner
traded companies.

When Bill is asked how he always finds the biggest winner in every cycle, he
says modestly, “I never thought of it that way, but here’s what I look for:
After 4 to 6 weeks of a strong new uptrend, you’ve identified stocks that
have the big earnings and sales and are setting up in the proper chart pat-
terns, but you still may not know which one or ones will be the big market