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StoryShots Summary and Review of How to Make Money in Stocks: A Winning System in Good Times and Bad by William O'NeilWilliam O'Neil's Perspective William O'Neil is a noted stockbroker, writer, and entrepreneur. He founded the stock brokerage firm William J. O'Neil & Co. Inc. in 1963. He is also the founder and chairman of Investor's Business Daily, an influential investment publication. Born in 1933, O'Neil was one of the first investors to include computers in his investment research and decision-making process. At 30, he became the youngest person to sit on the New York Stock Exchange (NYSE).
Introduction How to Make Money in Stocks has sold over 2 million copies worldwide. O'Neil's CAN SLIM Investing system makes it easy for investors to pick good stocks. He also shares tips to help budding investors to choose the best mutual funds and ETFs. The book aims to show you how to make intelligent investments, even if you haven't owned stocks before. As a new investor, you'll have many questions, such as where do I start? What should I look for in a stock? This guide has you covered.

StoryShot #1: Learn to Read ChartsCharts help track the daily price changes of stock based on supply and demand in the stock market. Learning to decode price movements on charts is key to making money in the stock market in the long run.

Don't buy a stock solely based on its fundamental characteristics (cash flow, ROI, history of profit retention, etc.). Charts present a stock's price and volume history to you to decide if the stock is strong and worth buying or weak.

Always carry out a technical analysis of a stock using its price chart before investing. An analysis helps determine when a stock is worth buying at a price point and when to sell. You should also learn to spot patterns on the price chart to predict price movements. Price patterns and technical indicators give you a great idea of strong entry and exit points.

StoryShot #2: How to Pick Quality Stocks Using the CAN SLIM StrategyThe CAN SLIM strategy, created by O'Neil, makes it easy for a new investor to start investing. Each letter of the CAN SLIM acronym represents an essential factor in buying stock. Each factor is based on research of the best-performing stocks of the past century.

C: Current Big or Accelerating Quarterly Earnings and Sales per ShareOne of the best indicators of a good stock is accelerated quarterly earnings. Excellent earnings have always boosted stock prices in the stock market. So, choose stocks with a significant percentage increase year-on-year. 

To do this, check the Earnings Per Share (EPS) number. You can calculate EPS by dividing a company's total after-tax profits by the number of common shares. The quarterly percentage change in EPS is a critical metric in your analysis. The higher the percentage increase, the better. Comparing EPS of the same quarters gives a more accurate reading and avoids seasonal fluctuations.

A: Annual Earnings IncreasesTo make sure the latest quarterly growth is not a fluke, check the company's annual earnings growth rate over the previous years. An annual growth rate of at least 25% is a good starting point. https://www.investopedia.com/terms/r/returnonequity.asp#:~:text=Return%20on%20equity%20(ROE)%20is%20the%20measure%20of%20a%20company's,efficiently%20it%20generates%20those%20profits. (Return on Equity) (ROE) is another helpful metric that measures how well a company uses its money. You can calculate the ROE by dividing net income by shareholders' equity. Focus on stocks with significant earnings growth in the last three years.

N: Newer Companies, New Products, New Management,...

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DISCLAIMER: This is not financial advice. Please consult a professional before taking any action.

StoryShots Summary and Review of How to Make Money in Stocks: A Winning System in Good Times and Bad by William O'NeilWilliam O'Neil's Perspective 

William O'Neil is a noted stockbroker, writer, and entrepreneur. He founded the stock brokerage firm William J. O'Neil & Co. Inc. in 1963. He is also the founder and chairman of Investor's Business Daily, an influential investment publication. Born in 1933, O'Neil was one of the first investors to include computers in his investment research and decision-making process. At 30, he became the youngest person to sit on the New York Stock Exchange (NYSE).

Introduction 

How to Make Money in Stocks has sold over 2 million copies worldwide. O'Neil's CAN SLIM Investing system makes it easy for investors to pick good stocks. He also shares tips to help budding investors to choose the best mutual funds and ETFs. The book aims to show you how to make intelligent investments, even if you haven't owned stocks before. As a new investor, you'll have many questions, such as where do I start? What should I look for in a stock? This guide has you covered.


StoryShot #1: Learn to Read Charts

Charts help track the daily price changes of stock based on supply and demand in the stock market. Learning to decode price movements on charts is key to making money in the stock market in the long run.


Don't buy a stock solely based on its fundamental characteristics (cash flow, ROI, history of profit retention, etc.). Charts present a stock's price and volume history to you to decide if the stock is strong and worth buying or weak.


Always carry out a technical analysis of a stock using its price chart before investing. An analysis helps determine when a stock is worth buying at a price point and when to sell. You should also learn to spot patterns on the price chart to predict price movements. Price patterns and technical indicators give you a great idea of strong entry and exit points.


StoryShot #2: How to Pick Quality Stocks Using the CAN SLIM Strategy

The CAN SLIM strategy, created by O'Neil, makes it easy for a new investor to start investing. Each letter of the CAN SLIM acronym represents an essential factor in buying stock. Each factor is based on research of the best-performing stocks of the past century.


C: Current Big or Accelerating Quarterly Earnings and Sales per Share

One of the best indicators of a good stock is accelerated quarterly earnings. Excellent earnings have always boosted stock prices in the stock market. So, choose stocks with a significant percentage increase year-on-year. 


To do this, check the Earnings Per Share (EPS) number. You can calculate EPS by dividing a company's total after-tax profits by the number of common shares. The quarterly percentage change in EPS is a critical metric in your analysis. The higher the percentage increase, the better. Comparing EPS of the same quarters gives a more accurate reading and avoids seasonal fluctuations.


A: Annual Earnings Increases

To make sure the latest quarterly growth is not a fluke, check the company's annual earnings growth rate over the previous years. An annual growth rate of at least 25% is a good starting point. Return on Equity (ROE) is another helpful metric that measures how well a company uses its money. You can calculate the ROE by dividing net income by shareholders' equity. Focus on stocks with significant earnings growth in the last three years.


N: Newer Companies, New Products, New Management, New Highs Off Properly Formed Bases

Most winning stock in the past century has benefited from changed circumstances. These could be products and services or the introduction of revolutionary technologies. For example, Apple's stock prices increased dramatically after releasing the new iPod. This significantly boosted the company's stock price at the time. 


Companies involved in innovation or launching new products will always see a boost in stock prices. Also, consider companies with new and credible management or improved industry conditions. 


Once you've found a contender, buy their stocks in times of price consolidation and price breakouts for the best return. Price consolidation means the price of the stock has stopped moving up or down after it has broken through support (the lowest recorded stock price) or resistance (the highest recorded stock price) levels. Price breakouts happen when a stock’s price moves beyond those two limitations. 


StoryShot #3: What You Should Look for in a Quality Stock

It's important to understand the fundamental concepts of the stock market. These are essential factors encompassed in the second half of the CAN SLIM strategy.


S: Supply and Demand

The best way to measure a stock's supply and demand is by watching its daily trading volume. The stock's trading volume is an excellent indicator of its fundamental buying and selling pressure. Higher trading volumes are preferable as they show buying pressure from institutions. 


Stocks with a smaller supply are more likely to be better performers due to their higher room for growth. Small-cap stocks are also more volatile due to lower liquidity, causing price fluctuations. Keep an eye out for companies that buy their own stock in the open market. This reduces the number of shares and tells you the company is confident moving forward.   


L: Leader or Laggard

Leaders are the best-performing stocks in a given sector. Those that fall behind their competitors are the laggards. In any sector, buy the top two or three stocks, which will be industry leaders in their respective fields. This doesn't necessarily mean the largest or most popular companies. Instead, the ones with the best fundamentals. Focus on stocks with the best annual earnings growth, the highest return on equity, and the widest profit margin.


Avoid sympathy plays and impulse stock purchases. For example, if news from a competitor affects a company's stock prices, it's a sympathy play and a sign of risk. 


Sell the worst performers in your stock portfolio when the loss is small. Hold on to your good performers to see if they grow into your best-winning stocks. Holding your losers, hoping for a recovery, and selling your winners will always lead to more considerable losses. If you invest in laggard stocks and lose money, exit and cut your losses at 8% below your buying price.


I: Institutional Sponsorship 

Institutional sponsorship refers to shares of any stock owned by institutional investors. This includes hedge funds, state institutions, mutual funds, and insurance companies. Institutional sponsorship is beneficial for two main reasons: 

It provides buying support when you want to sell your investments. It provides continuous liquidity, thereby maintaining a steady market. 


Having said that, be wary of stocks "over-owned" by institutions. Excessive institutional sponsorship could translate into large-scale selling. You'll usually see this in a bear market (when stock prices fall). Hence, only buy stocks with at least a few institutional sponsors with strong recent performance records. Selected stocks should have also added institutional owners in recent quarters.


M: Market Direction 

You're likely to lose money if you're wrong about where the market is heading. Having said that, you don't need to be psychic to survive in the market. Focus on what the market has done in the past by reading price charts and checking volume indicators. This will give you enough understanding of long-term trends to make a profit in the stock market. 


StoryShot #4: When Should You Sell Your Stock?