How To Make Money In Stocks: A Winning System in Good Times or Bad - Book Review

• Book Title: How To Make Money In Stocks: A Winning System in Good Times or Bad
• Author: William J. O'Neil
• Date of Publication: 2002 (3rd Edition)

This is an excellent book on stock trading. The author, Mr William J. O'Neil, has developed a simple-to-remember yet powerful formula known as the CAN SLIM stock trading system to guide investors on how to pick the best performing stocks from among the thousands in the stock market.

Each character of the CAN SLIM stock-picking formula is actually an abbreviation of 7 the characteristics to look out for in a winning stock before it makes potential price movement.

Mr William J. O'Neil devoted a chapter each to describe these 7 characteristic of the CAN SLIM stock-picking formula. Basically, the 7 characeristics that an investor should look out for in a good stock include the company’s earnings performance, whether there’s new management in place, whether there's new products rolling out, level of institutional ownership, a company's relative strength in respect to the industry sector it belongs to etc.

Usually when someone takes this approach they have a percent of profit they are interested in earning and are willing to wait until it happens.

I personally like the chapter on characteristic "M" – concerning Market Direction. This chapter advocates the importance of monitoring the daily market trends ie. The Dow Jones Industrial Average, S&P 500 Index and the NASDAQ Index to determine the market sentiments closely. Mr William J. O'Neil also guides investors how to spot bearishness trend developing by observing days of distribution from price & volume actions. Of course, Mr William J. O'Neil also guides investors how to look for signs of possible breakout to bullish trend.

This trading book is filled with many great stock trading principles and rules. Mr William J. O'Neil teaches us the importance of setting stop loss to preserve our trading capital in case a stock stops performing and the stock price starts falling.

If you have been trading stocks using technical indicators, Mr William J. O'Neil has also included a chapter to describe a few chart patterns to look out when buying a stock. But Mr William J. O'Neil did warn that such buying charts patterns might not work in a bear market situation.

Mr William J. O'Neil took the opportunity to introduce some of the subscription services offered by his company, William O’Neil + Co.. These include the Investor’s Business Daily newspaper and web-site, IBD SmartSelect Corporate Ratings subscription etc.

I have personally subscribed to the IBD SmartSelect Corporate Ratings service, which I find useful & informative. This service provides investors with a comprehensive analysis of every stock classified under the proprietary "197 O’Neil Industry Group". By studying an individual stock's corporate ratings like Earnings Per Share Ratings, Relative Price Ratings, Sales and Return on Equity Ratings, Group Relative Strength Ratings, Accumulation/Distribution Ratings, an investor can make use of the information to determine whether a stock is currently a good performer in a strong industry group thus would probably continue to performer better or is a stock currently a poor performer and should be safely ignored.

I find this book to be important to anyone who has intention to commit his or her hard-earned money or has already invested some money in the stock market. It will surely guide you to be a better investor in picking the right stocks and at the same time preserve your trading capital in case the market turns negative or when the stocks start showing signs of weaknesses.

You can read further reviews HERE before buying it!

How The Process Of Buying And Owning Stocks Works

The stock market can seem like a confusing place, we have all seen different scenes of the exchange floor with people yelling, buying and selling. And there is some way people are making money during all this chaos. How do they do it? Let's take a look at how the stock market works.

The purpose of the stock market is to move money. Some people need to use it and others have it to be used. A company's decision to sell stock is usually based on their need for a large sum of quick cash. Usually it is for some type of expansion or building a new plant. Then the company will issue stock certificates. The common amount for a certificate is $1.00 to begin. The certificates are a piece of the company. When buying stock you are becoming a part owner. Often the people with the most stock will sit on a company's board of directors and help to make the decisions about the company’s future. Everyone who owns a share of the stock has a vote in how the company is run. It doesn't matter if they have one share or 1000.

When you decide you want to buy a piece of a company. The first thing you want to do is to research the company. Find out what they are about and find out their history of profitability. You want to make sure a company is moving in the right direction before you invest your hard earned money.

Then you need to find a reputable broker. A broker is in charge of your money while they have it, make sure it is someone you can trust or they might take your money and run. The stock broker is a go between. They match their clients with the available stock at a price they are willing to pay. You can determine the amount you are willing to pay per share. You might have to wait until it reaches that number but when it does your broker will buy for you. The same goes with selling, you can pick a predetermined number to sell and when it reaches that number it will be sold.

You can also trade in stock online and be your own broker. There are many web sites that will allow you to do this and they will charge you a small fee for every transaction you make. There are some people who make their money by spending the day in front of their computers buying and selling. The amateur stock broker is called a day trader. They are usually only interested in the short term. Hoping to buy and sell at a profit within one or two business day.

Gregg Hall is an author living in Navarre Florida. Find more about this as well as stock market news at http://www.businessandstocknews.com

Selling Stocks

Selling a stock at appropriate time requires practice. There factors effecting markets include the general economical conditions of the particular country, demand for the product sold by the company in which the investment is made, results of the company, their projections for future performance and so on.

A company may have done well in the past but there is no certainty that this will continue for ever. If the targets have not been achieved by the company for a certain period, the stock value might decrease. So also if their projections are not attractive, demand for that particular stock could be effected.

Bearing in mind some of these factors, one can fix a target where he is ready to sell in case of stocks increasing in value over a period of time. After a decent percentage of profit has been achieved, it would be wise to sell a portion of shares held in that company instead of holding the entire stock. Some other stocks in other companies may be at a loss which can be made up by this method. If the loss making stocks are too bad, further loss can be prevented by selling off the existing stocks.

If the company is known for its stability, by virtue of its financial position, one need not worry even if the stock dips below a certain limit, as it has the potential to rise in future. This exercise can be developed over a period of time with practice. In any case selling a portion of stocks that are profit making is advisable, some stocks can be still held for the future.

One should not become over greedy to make excessive profits as it might suddenly drop and the investor might lose more than expected. To make up the loss, it could take a long period of time.

In the present day, with the availability of internet and on-line trading facilities, one can trade from their homes at leisure, after careful study. Keeping in touch with financial journals, papers, magazines and TV provide information about companies and their shares. The latest informations help the investor to take proper action, whether to sell their stock, or a portion of them at a particular time.

Chandrabhaga Handrabhaga Madhava Rao

Finance Manager: Stocks

The job of a finance manager is a huge balancing act that requires a vast pool of knowledge. Knowing about stocks, dividends, bonds and maturity levels is the just the beginning of the job requirements. A company and organization wants to make sure that anyone who holds shares in the company will be able to profit considerably from the success of the company. The financial manager is in charge of making all this happen.

Financial managers oversee the preparation of financial reports, direct investment activities, and implement cash management strategies. Their duties vary with their specific titles, which include controller, treasurer, credit manager, and cash manager.

The role of the financial manager, particularly in business, is changing in response to technological advances that have significantly reduced the amount of time it takes to produce financial reports. Financial managers now perform more data analysis and use it to offer senior managers ideas on how to maximize profits. They often work on teams, acting as business advisors to top management. Financial managers need to keep abreast of the latest computer technology in order to increase the efficiency of their firm’s financial operations.

The goal for the financial managers is to maximize shareholders (owners) wealth, not just increasing it or not just profit.

The financial manager stands between the firm’s operations and the financial (or capital) markets, where investors hold the financial assets issued by the firm. The financial manager’s role is illustrated in the next figure, which traces the flow of cash from investors to the firm and back to investors again. The flow starts when the firm sells securities to raise cash. The cash is used to purchase real assets used in the firm’s operations. Later, if the firm does well, the real assets generate cash inflows which more than repay the initial investment. Finally, the cash is either reinvested or returned to the investors who bought the securities.

The duties of financial managers vary with their specific titles. A financial planner works under the direction of a manager, performing various financial or budget analyses. The senior financial planner supervises the staff in performing financial/economic analyses of new projects and analyses of merger and corporate growth policies. The manager of financial planning directs the staff responsible for performing analyses in several functional areas including profit planning, capital expenditures, acquisitions, and budgeting. The Chief Financial Officer (CFO) advises the president of the organization with respect to financial reporting, financial stability and liquidity, and financial growth. The CFO also directs and supervises the work of the Controller, Treasurer, and sometimes the Internal Auditing Manager. Other duties may include strengthening relationships with stockholders, financial institutions, and the investment community. Frequently, the CFO is a member of the Board of Directors and/or the Executive Committee and as such, contributes to overall organization planning, policy development, and implementation.

In addition, financial managers perform tasks unique to their organization or industry. For example, government financial managers must be experts on the government appropriations and budgeting processes, whereas healthcare financial managers must be knowledgeable about issues surrounding healthcare financing. Furthermore, financial managers must be aware of special tax laws and regulations that affect their industry.

Although the stockholders own the corporation, they do not manage it. Instead, they vote to elect a board of directors. In theory, when the financial manager acts in accord with Stock Trading, the shareholders benefit through cash dividends and share price gains. With respect to employees, however, Stock Trading is not always in their best, personal interest. For example, when a company announces a layoff to cut costs, stock share price often increases, as the secondary market reacts to the news as an appropriate and proactive approach to reducing costs and increasing cash flow for other priority projects. From an employee's perspective, it's a loss of job and income.

However, it is also in the best interest of the company to attract and retain a skilled workforce. If a company has a reputation for paying poorly, implementing excessive rounds of layoffs, or other unattractive human resource policies, retaining a skilled workforce will be difficult, and will have a negative effect on shareholder value as operational efficiencies, product quality, and speed to market decline. Here, financial managers may consider benefits such as employee stock grants and discount stock purchase plans (or stock options) (Online, Financial Managers). In this way, the organization can align the priorities of the employees more closely with those of the stockholders.

Most of the responsibilities of the financial manager are not straightforward decisions with respect to maximizing shareholder wealth. Beyond Stock Trading, financial managers also have the responsibility of acting ethically, particularly in today's financial markets with increasing media coverage and regulatory scrutiny over corporate financial scandals, like ENRON and MCI WorldCom. When Enron and WorldCom went belly-up in 2002 (two of the largest bankruptcies ever) no one demanded that their stockholders put up more money to cover the companies’ debts. Stockholders can lose their entire investment, but no more.

In summary, the task of the financial manager can be broken down into the investment, or capital budgeting, decision and the financing decision. In other words, the firm has to decide what real assets to buy and how to raise the necessary cash. Shareholders want managers to increase the value of the company’s stock, they are the owners of the corporation; the managers work for the owners.

How?: by surviving, avoiding distress and bankruptcy, beating the competition, maximizing sales or market share, minimizing costs, maximizing profits, and maintaining steady earnings growth.

The usual method of maximizing the wealth of the stockholders is to maximize the price of the corporation’s common stock. However, neither managers nor stockholders can set the price of the common stock; the market determines the price.

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Stocks - Getting Started in the Market

Hollywood loves the stock market. The chaos of the stock exchange floor, the tension of boiler room day-trading, devious power brokers making back room deals; it all makes for great drama. Then you have the true-to-life stock market stories in the news: insider trading, big money IPOs, the dot com bust. All of it is enough to make you steer clear of the market for good and travel down a safer investment path. But don’t be frightened, history shows that long-term, there’s no better place to put your money to watch it grow. Here are a few tips to get you started.

Stocks 101

Simply put, when you purchase stock in a company, you become part-owner of that company. Along with other shareholders, you all combine as investors in the business, and therefore reap its rewards, or suffer its losses. Stocks are most commonly divided into separate categories depending on the size and type of the company (e.g., mid-cap, small-cap, energy, tech, etc.). While speculation can drive stock prices in the short term, it’s long-term company earnings that determine a stocks gains or losses. Speaking of short term, that’s when stocks are extremely volatile. Over a span of just a few months or years, stocks can climb to astronomic heights or drop to pitiful lows. But, since 1926, the average stock has returned over 10 percent per year. That’s better than any other investment vehicle out there, and that’s why stocks are your best bet for long-term investment.

Picking Stocks

Before you dive head-first into the market, there are a few things you should know about picking stocks. First, the market’s performance as a whole is not necessarily a reflection of its individual stocks. Good stocks can keep growing even in a down market, while bad stocks have the frustrating tendency to drop or remain stagnant in a strong market.

Also, remember that history is not indicative of a stock’s future performance. Even solid stocks can slip from time to time. Remember that stock prices are based on a company’s earnings outlook, not its past performance. If the future looks bright for a company, a $100 dollar stock is probably a good buy. If earnings look less than promising, even a $5 stock can be a waste. Finally, investors determine a stock’s value by measuring a handful of primary criteria, most notably cash flow, earnings, and revenue.

“Diversify”

It’s the rallying cry of all smart investors. When compiling an investment portfolio of stocks, it’s smart to own shares in companies from several different industries. Consider it a “hedge bet”. When one part of the economy experiences a downturn, you’ll have other stocks in your portfolio to put your faith in.

When building your portfolio, the safest bet is to pick from financially strong businesses with earnings growth above the average. Surprisingly, that limits the lot to choose from, as only around 200 stocks today fit that bill. A solid portfolio features somewhere in the ballpark of 20 stocks selected from seven or more industries. A general rule of thumb is to invest in stocks with an above-average rate of growth and reasonable valuations.

Buy and Hold

Day trading is a great way to lose your nest egg, but quick. As we noted before, stocks over the short term are highly volatile. Sure, brokers today are offering cheap trades, but beware. There are a ton of hidden fees and taxes involved with day trading, not to mention the amount of attention required by you to monitor the blow-by-blow proceedings of the market. Our recommendation: buy and hold. A ten percent return over the long term is nothing to sneer at.

Joseph Kenny writes for the Loans Store and offer more information on personal loans and other loan topics available on site.
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