Page 944 - How to Make Money in Stocks Trilogy

Grandmaster: Legendary Investor Bill O’Neil 193

winners for that new cycle. Some may look good, but they may not work.
You have to cut the ones that aren’t performing well that you buy when
other stocks in your portfolio are acting strong. It’s like weeding a garden:
you are pruning to find the very best stocks. If you’re keeping your rules and
looking for stocks with the strongest earnings and sales with truly innovative
products setting up in the right chart patterns, you’ll end up with the next
Google or Apple.
“I make a lot of mistakes, but if a stock doesn’t work out, I sell it, period.
If the general market is right and you’re buying top quality merchandise,
your stocks should be working, particularly in the beginning of a new bull
market.
“The biggest winners should make themselves obvious to you. Apple was
our best performing stock for the last eight years. We didn’t necessarily
catch onto it right away because the prior three years to the company taking
off, Apple hadn’t done tremendously well in terms of earnings. But once the
earnings began to go up sharply and we began to understand their out-
standing products better, we realized that this was a very unusual and inno-
vative company.
“Every new bull market cycle brings in a new industry group. Part of your
job as an investor is to uncover what it is leading the market. Look for IPOs
that are gaining market share and showing big earnings and sales far above
other stocks in the current market. Many of these stocks will show up in the
IBD 50.”

• KEY POINTS ON MONEY MANAGEMENT •

• Figure out which stocks are the true market leaders and
put the most amount of money into them.
• Shift money from your lesser performing stocks into your
winners.
• Consider using margin to enhance your performance, but
only after you have more experience in the market and only
in a healthy bull market.