Product Description

From the school of unemotional investing comes the classic How to Make Money in Stocks, by Wall Street analyst and publisher William O'Neil. Readers new to securities will find it an excellent primer, one that relies on time-honored indicators such as quarterly earnings, market capitalization, and daily indexes. O'Neil's study of winning stocks stretches back to the 1960s, and he shares his insights here, describing what characterizes a growth stock, when to cut your losses (at 7 or 8 percent, no more), and how to spot a market top.

The techniques in How to Make Money in Stocks are hardly revolutionary, but therein lies their strength, as O'Neil claims his is "a winning system in good times or bad." Investors interested in Net stocks might be disappointed--the author's first rule is that a company must show a pattern of growing profits, which disqualifies many dot coms. (Try Rule Breakers, Rule Makers for a different take.) O'Neil's approach to stocks is, above all, rational, and he pays little heed to market hype.

Those new to investing would do well to read this book before embarking, and even more seasoned traders may find How to Make Money in Stocks a refreshing return to basics. Markets may swing bull and bear, but O'Neil promises to stand firm. --Demian McLean

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Product Details

Publisher	McGraw-Hill
UPC	639785337751
ISBN	0071373616
Format	Paperback
Author	William O'Neil
EAN	9780071373616
Is Adult Product	No
Label	McGraw-Hill
Edition	3
Dewey Decimal Number	332.6322
Studio	McGraw-Hill
Number Of Pages	288
Title	How To Make Money In Stocks: A Winning System in Good Times or Bad, 3rd Edition
Publication Date	2002-05-23
Manufacturer	McGraw-Hill

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Customer Reviews

So So

Review by New Economist, 2010-07-11

I found this book misleading and mostly unhelpful. I felt compelled to write a review that balances out the bogus 5 star reviews planted by the author or publisher.

It's not all bad, but essentially, it comes down to:
1) Buy only newer innovating growth stocks where earnings have been increasing 50% each quarter (Well gee that is so easy to find)
2) Avoid solid blue-chip companies paying dividends.
3) Use chart formations to figure out when to buy. He provides examples of chart formations but does not provide any interpretation as to why they work. Also, looking at his example charts, the chart patterns he points out are not always clear cut and obvious. In fact, sometimes on the same chart there will be a similar formation and it makes me wonder, "Well why not buy over here instead? How are these two patterns fundamentally different?"
3) Sell all losers at 7% or 8%
4) Don't use limit orders.
5) Stay out of the market during bear markets.
6) Buy near the stock price high.

He goes through lists of stocks that increased hundreds of percents, but so what? Hindsight can always produce stock charts like this. The first 100 pages are stock charts of various companies from the 20's-80s that doubled or tripled in a few years. Supposedly we are supposed to study these to see how chart formations produce winners. And how often do these chart formations show up? He provides no answers, but it appears to be infrequently, especially when he shows a chart spanning 5 years.

Overall, his system seems to lead to stocks that are "Hot" at the time. Stocks that tend to have big swings up and down such as Apple (which he mentions in several places in this book).

Probably the only solid piece of advice is the stop loss, but these can be problematic at times, especially for volatile growth stocks that he recommends. Supposedly buying at the 'right time' with the right chart formation will virtually never hit your stop loss since almost always it runs up 20% from there, but it appears those lovely chart formations don't show up too often.

Oneil doesn't provide proof (brokerage statements, or trade confirmations) that he has actually made money using his own "system."

He loses credibility when he says to stay away from options because they are too risky. If used properly, options can be safer than buying the actual stock.

This book is like 450 pages and it could be condensed to about 200 if he would cut out a lot of the fluff.

He pushes the services of Investors Business Daily so much, I was thinking that I should have gotten the book for free for all the advertising I was exposed to.

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Sound Advice

Review by Scott gru-Bell, 2010-02-03

The book offers a clear system for stock selection and disposal. It is indeed a fascinating read. However, it contains too much information to allow the read to remember and apply all of it.

There are other successful investing systems. The key is to apply the appropriate system to a particular stock.

"How to Make Money in Stocks" does offer stellar warnings. One must be highly disciplined to succeed. One must let the market dictate when to buy and sell. One needs to ignore wishful thinking and sentimentality. These warnings apply to all systems of investing and trading, and therefore the prerequisite in implementing any system.

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The book does not measure up to how professional traders trade

Review by D. N. Ivanoff, 2009-07-20

This book is really basic and it will help you get an understanding on how to buy and sell stocks. However, advanced or even mid-level subjects are not covered at all. Trading is not that simple. Don't let anybody fool you. So you need to study and learn from traders like Ed Seykota, Linda Raschke, Toby Crabel. These are professional traders. Check on EBAY if there is anything for sale from them. Buy it. Study them. They dont have time to write books because trading is their job. So yes, this book is ok primer, then move on to study the real traders

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Outstanding.

Review by Austin Somlo, 2009-06-24

This is my second reading (the other was the 2nd edition) of How to Make Money in Stocks within two weeks. What is different this time is that I made extensive notes from each chapter and typed them up. Now, I will begin studying the CAN SLIM system and start applying them to see if it works. The biggest improvement of this book from the 2nd edition is the introduction of Investor's Business Daily newspaper and website and how they work. I just recently enrolled myself for a free trial for both, and I like the website but haven't received a copy of the paper yet. So far, I really like the book, and I can see the wisdom contained within the book. I haven't yet begun buying stocks on a full-scale because I want to be a student of the market first in order to arm myself with necessary knowledge and tools. All in all, I am glad to have discovered How to Make Money in Stocks the first time around at a cheap price which was a buck and the more I read the book, the more informative it is.

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A comprehensive (and demonstraby successful) investment approach - beyond mere stock screening

Review by William L. Lyman, 2009-06-14

The CANSLIM stock investing methodology outlined in "How to Make Money in Stocks" is a time tested method that incorporates how the equity (stock) market(s) really work - for the passive, minority, outside investor. It is a 80/20 approach (with William O'Neil's approach, proprietary metrics and tools you can achieve 80% of the success with 20% of the effort) and explicitly rides the coattails of the market (read and react - don't fight/argue with the market). This system *IS* designed for the individual investor and small professional investor - I'm not sure it would scale for $250 million portfolios and above (but I'm not sure that it wouldn't either).

CANSLIM is part fundamental (here earnings growth is the primary focus), part structural, part timing/technical and part money/risk management (this part is **crucial** to investment success). The vast amount of other investing books will typically provide only a screening/selection approach, but "How to Make Money in Stocks" provides a comprehensive investment approach including stock selection, portfolio composition, selling criteria and money/risk management.

In short - buy stocks that have a reason to go up (a new product/management catalyst, a leading stock in one of the top 20% of the 196 IBD industry groups, strong earnings growth (>25%), solid Return on Equity (> 17%), reasonable leverage, etc.) when the stock is poised to breakout (strong and increasing institutional shareholder support, has outperformed at least 80% of the market over the previous 52 weeks, the stock is consolidating after a price run-up and breaks-out on trading volume that is significantly higher than the average trading volume over the last 50 days, etc.) and finally - and this is important - scale into your positions, pyramid up in the first 5% or price appreciation and cut you losses when the stock moves against you at 7-8% from your purchase price - NO QUESTIONS/NO EXCUSES/NO RATIONALIZATION.

Check out the independent and unbiased American Association of Individual Investors [...]) - they have tracked the monthly performance of 56 stock screens since January 1998 (now 11+ years) and the CANSLIM screen is consistently in the top 3 screens with a compounded annual growth rate (CAGR) over that time in excess of 25%. While the AAII "recipe" for CANSLIM (and other screens for that matter)is a simplified approach and does not implement a strict constructionist approach (and contains buy rules only - no sell rules, just monthly re-screening - and no money/risk management techniques), it is an OUTSTANDING educational tool to learn about the pros and cons of the various stock screens and provides a starting point for anyone considering CANSLIM for their portfolios.

I personally have used CANSLIM with tremendous success since the late 1980s and participate in our local Meetup [...]) where we utilize the CANSLIM approach. While most people assume this approach generates outstanding returns in the go-go bull markets (and it does), it really earns its keep in the down markets by utilizing the 7-8% stop loss on a stock by stock basis as part of a concentrated portfolio. It was a financial life safer in 1999/2000 and again in 2008/2009. Value investors (mutual funds), by contrast, were obliterated in 2008 - down some 50-60%! If that great "margin of safety" doesn't pay off in that environment - when does it?!

This growth/momentum approach differs substantially from a valuation driven approach (e.g., the Morningstar 5-star system based Morningstar's estimate of "fair value" of the stock compared to its current stock price). But if you trade based only on your (or a 3rd-party's) estimate of fair value, be prepared for some roller-coaster rides. In fact, check out Morningstar's own performance of their 5-star ranking system for the 2,000+ stocks that they cover and for their tortoise and hare portfolio - it pales in comparison to CANSLIM. The valuation only approach is for full-time professionals only - and even then - only the best of the best have been able to produce reasonable returns over time. Like the choice embedded in the title of Ned Davis's book "Being Right or Making Money", CANSLIM allows you to make money, while the purist value investors will argue about "being right" with *their8 discounted cash flow calculations (if only the market marched to that tune).

And finally, yes, the book discusses the Investors Business Daily (IBD) newspaper (and of course, CANSLIM) as the IBD newspaper and associated website ([...]) have the tools to easily implement the CANSLIM methodology (SmartSelect(TM) ratings and other proprietary metrics). And William O'Neil is not just another financial author - he is a very successful investor, entrepreneur and financial data services provider.

I wholeheartedly endorse this book and methodology - and recommend it to EVERYONE who is considering investing directly in common stocks. Even if they pursue another style of investing, there are many excellent lessons to embrace from "How to Make Money in Stocks".

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