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General:

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***When I started investing, I made most of the same mistakes youve probably made.

Now its up to you to learn how to intelligently take advantage of the relentless growth opportunities
Americas freedom makes possible and that entrepreneurs keep presenting

***You are never too old or too young to start investing intelligently.

***The first step in learning how to pick big stock market winners is to examine leaders of the past.

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Forget your pride and ego; the market doesnt care what you think or want.

No matter how smart you think you are, the market is always smarter.

***A high IQ and a masters degree are no guarantee of market success.

***Your ego could cost you a lot of money.

Dont argue with the market. Never try to prove youre right and the market is wrong.

Pg 427:

***Get a job, get an education, and learn to save and invest wisely. Anyone can do it. You can do it.

Have courage, be positive, and dont ever give up.

Get yourself prepared, study, learn, and go for them.

What youll find is that little acorns can grow into giant oaks, and that with persistence and hard work,
anything is possible.

***You can do it and your own determination to succeed is the most important element.

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Dont ever get discouraged and give up on the lifetime opportunity that the stock market will provide.

***If you study, save, prepare and educate yourself, you too will be able to recognize many of the
future big winners as they appear.

You can do it, if you have the necessary drive and determination.

It doesnt make any difference who you are or where you came from or your current position in life.
Its all up to you. Do you want to get ahead?

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In the battlefield that is the market, there are the quick and there are the dead!

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When you make a mistake in the stock market, the only sound thing to do is correct it. Dont fight it.
Pride and ego never pay off; neither does vacillation when losses start to show up.

First Edition Preface:

***The stock market does not go up due to greed, it goes up because of new products, new services,
and new inventions."

The innovative entrepreneurial companies with the best quality new products that serve people's
needs are always the top stock market winners."

***"Don't be thrown off by the swarm of gloom and doomers. In the long run, they have seldom made
anyone any money or provided any real happiness. I have also never met a successful pessimist."

First Edition pg 173:

Companies with poor ratings can perform, but there are more disappointments in these lower
categories.

Even when a low-ranked company has a decent price move, one of the better-ranked stocks in the
same industry probably advanced percentagewise much more.

You need a roster of the very best players available - the ones sporting a proven record of excellence.

First Edition pg 93:

It is far better to sell early. If you are not early, you will be late; you'll never sell at the exact top, so stop
kicking yourself when a stock goes higher after you sell.

First Edition pg 93:

Remember, there are no good stocks-they are all badunless they go up.

First Edition pg 82:

The whole secret to winning in the stock market is to lose the least amount possible when you're not
right.

First Edition pg 84:

The stock does not know who you are, and it doesn't care what you hope or want
First Edition pg 89:

Letting your losses run is the most serious mistake made by almost all investors! You positively must
accept that mistakes in either timing or selection of stocks are going to be made by even the most
professional investors.

First Edition pg 241:

It can be done, and your own determination to succeed is the most important element.

HTMMSSS Foreword:

Buying without the ability to sell is like a football team that is all offense with no defense.

HTMMSSS Pg 3:

There are two sides to everythingexcept the stock market! In the stock market there is only one side,
and it isnt the bull side OR the bear side, but the RIGHT side.

24 Essential Pg 3:

Whether youre a new or experienced investor, the hardest lesson to learn is that youre simply not
going to be right all the time. And if you dont cut every loss quickly, sooner or later youll suffer some
very large losses.

24 Essential Pg 3:

Brains, education, ego, stubbornness and price are deadly substitutes for having and following sound
selling rules.

Successful Investor Foreword:

*** It doesnt take a lot of money or an advanced degree. Anyone can do it. You can do it. So go for it.
Its all up to you.

Successful Investor Foreword:

You dont subscribe to a bunch of market newsletters or advisory services, and you dont let yourself be
influenced by recommendations from analysts who, again, are just expressing personal opinions that
can be frequently wrong.
Strong RS/New Highs:
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You should buy stocks when theyre on the way up in price, not on the way down.

You buy stocks when theyre nearer to their highs for the year, not when theyve sunk so low that they
look cheap. You buy higher-priced stocks rather than the lowest-priced stocks.

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What seems too high in price and risky to the majority usually goes higher eventually, and what seems
low and cheap usually goes lower.

Stocks on the new-high list tended to go higher in price, while those on the new low list tended to go
lower.

First Edition pg 172:

Relative strength measures the cold, realistic auction marketplaces' appraisal of a stock, in spite of the
theoretical value of the company or its past popularity, name, and image.

Successful Investor Foreword:

You buy stocks on the way up in price, not on the way down. And when you buy more, you do it after
the stock has risen from your purchase price, not after its fallen below it.

Successful Investor Foreword:

You buy stocks nearer their highs for the year, not when theyve sunk so low they look cheap. You buy
higher-priced stocks rather than the lowest-priced stocks.

24 Essential Pg 48:

Just remember buying at new highs is buying into emerging strength.

24 Essential Pg 53:

What applies to buying merchandise on sale at a department store works in the completely opposite
way when dealing with stocks.

24 Essential Pg 53:

Do you want stocks that have the greatest potential for moving even higher? Then, youve got to ignore
the erroneous saying, buy low and sell higher, and replace it with buy high and sell a lot higher.

24 Essential Pg 30:
I suggest you restrict your stock selection to stocks showing a Relative Price Strength Rating of 80 or
higher, so youre selecting companies that are in the top 20% in performance.

24 Essential Pg 30:

Relative Price Strength Rating helps you cut out the vast majority of laggard, mediocre performing
companies that will hold back your overall performance.

24 Essential Pg 30:

I never argue with the market by trying to buy or hold stocks with a poor Relative Price Strength Rating
of 70 or below.

24 Essential Pg 31:

Relative price performance is a good way to tell which of the five or six stocks you own is your true
leader. If youre going to do any selling, its normally correct to weed the flower patch by selling your
worst-performing stocks first.

24 Essential Pg 31:

***I also like to note on big down days in the general market which individual stocks buck the trend
and are actually up in price and unusual amount for the day.

24 Essential Pg 32:

If a stock has been holding an RS Rating in the 80s or 90s for many months, the first time its rating
drops below 70 may be a good time to re-evaluate your position and consider selling.

Money Management:
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***And when you buy more, you do it only after the stock has risen from your purchase price, not after
it has fallen below it.

You learn to always sell stocks quickly when you have a small loss rather than waiting and hoping
theyll come back.

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If you have a 33% loss in a portfolio of stocks, you need a 50% gain just to get to your breakeven point.
Charts:
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You also acquaint yourself with charts.

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***Would you allow a doctor to open you up and perform heart surgery if he had not utilized the
critical necessary tools? Many investors do exactly that when they buy and sell stocks without first
consulting stock charts.

Charts can tell you when a stock is not acting right and should be sold.

Successful Investor Foreword:

Charts can help improve your selection of the best stocks and timing of both buy and sell decisions in
stocks, as well as the general market.

Successful Investor Foreword:

You also have to acquaint yourself with chartsan invaluable tool that most professionals wouldnt do
without but that amateurs then to dismiss as complicated or irrelevant.

Successful Investor Foreword:

A picture, they say, is worth a thousand words. But to the successful investor, a picture in the form of a
stock chart is worth a lot more. And not just in words.

Successful Investor Foreword:

Like the x-rays used by doctors, charts tell you at a knowledgeable glance if an individual stock, or the
stock market in general, is healthy or sick. In so doing, they let you know if you should be in or out of the
stock or in out of the market. And that, as you will see, makes all the difference.

Successful Investor Foreword:

***If youre not familiar with stock charts, or think theyre too technical, dont worry. You were
probably afraid of the water the first time you were taken to a swimming pool. But given a little time,
and perhaps a few swimming lessons, they couldnt get you out of the pool.

Successful Investor Foreword:


You might not take to charts with the same alacrity. But youll find that, with a little effort,
understanding the patterns that charts sketch out will dramatically improve your future investment
results.

Successful Investor Foreword:

No doctor, for example, would feel confident in making a diagnosis of your physical condition without
that x-rays or EKG or MRI. Professionals in the word of investing use charts the same way. And the most
successful ones would no more buy or sell a stock before looking at its chart than a doctor would treat
you without looking at the images he or she has to work with.

24 Essential Pg 45:

The pivot point, usually at the end of a sound basing area when the stock breaks out into new high
ground, is the point of least resistance.

24 Essential Pg 45:

This means that at this point, the stock has its greatest chance of moving even higher based on its
current price and historical price and volume activity.

24 Essential Pg 45:

The objective is not to buy at the cheapest price when the probability of the stock having a huge move
may be only so-so. The objective is to buy at exactly the right timethe time when the chances are
greatest the stock will succeed and move up significantly.

24 Essential Pg 55:

You want to buy a stock exactly at its pivot point as it breaks out of a sound pattern. Dont chase it up
more than 5% past its pivot. If you do, you will be buying more extended in price. (It always pays to start
exactly right and not be late.) Your risk of being shaken out on a normal price correction will
substantially increase.

Earnings:
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Explosive earnings have accompanied big stocks moves throughout the stock markets great history.
If you look down a list of the markets biggest winners year-in and year-out, youll instantly see the
relationship between booming profits and booming stocks.

There is absolutely no good reason for a stock to go anywhere in a big, sustainable way if its current
earnings are poor.

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Concentrate on stocks with proven records of significant earnings growth in each of the last three years
plus strong recent quarterly improvements. Dont accept anything less.

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Older and larger organizations are usually characterized by slower growth, and many of them should be
avoided.

A standout stock needs both a sound growth record in recent years and a strong current earnings
record in the last several quarters. Its the powerful combination of these two critical factors, rather
than one or the other, that creates a super stock, or at least one that has a higher chance for true
success.

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Primary consideration should be given to whether the rate of change in earnings is substantially
increasing or decreasing.

First Edition pg 171:

Since earning power and earnings growth are the most basic measures of a firm's success, EPS rank
should be invaluable for screening the true leaders from the poorly managed, deficient, and lackluster
laggards in today's emerging age of tougher worldwide competition.

24 Essential Pg 19:

Im not interested in promises that losses or mediocre earnings will improve in the future. The vast
majority of our successful historical models all had strong, accelerating earnings before their huge price
increases began.

Sales:
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Strong and improving earnings should always be supported by sales growth of at least 25% for the
latest quarter or at least acceleration in the rate of sales percentage improvement over the last three
quarters.

Companies can inflate earnings for a few quarters by reducing costs or spending less on advertising,
research and development, and other constructive activities.

To be sustainable, earnings growth must be supported by higher sales.

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Take particular note if the growth of both sales and earnings has accelerated for the last three quarters.
You dont want to get impatient and sell your stock if it shows this type of acceleration. Stick to your
position.

24 Essential pg 19:

Sales should either be accelerating in the last few quarters or be up 25% or more from the same
quarter one year earlier.

24 Essential pg 19:

I also prefer to select companies that are #1 in their particular fields in terms of recent sales and
earnings growth, profit margins, and return on equity.

24 Essential pg 24:

Weve found that strong sales and earnings were among the most important characteristics of winning
stocks. This becomes obvious when you see what really great companies looked like before they
launched price increase of 200% to 1000% or more.

24 Essential pg 24:

Youre looking for strong increases in quarterly sales and earnings compared to the same quarter the
year before.

ROEs
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Our studies show nearly all the greatest growth stocks of the past 50 years had ROEs of at least 17%

This shows how efficiently a company uses its money, thereby helping to separate well-managed firms
from those that are poorly managed
24 Essential Pg 19:

Return on equity (ROE), is an indicator of financial performance. It measures how efficient a company is
with its money. Most of the big winners in our study had ROEs of 20% or more.

New Products
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The way a company can achieve enormous success, thereby enjoying large gains in its stock price, is by
introducing new products into the marketplace.

PE Ratios Not Important


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Our ongoing analysis of the most successful stocks from 1880 to present shows that, contrary to most
investors beliefs, P/E ratios were not a relevant factor in price movement and had very little to do with
whether a stock should be bought or sold.

To say that a security is undervalued because its selling at a low P/E or because its in the low end of
its historical P/E range can be nonsense.

Successful Investor Foreword:

***You pay far less attention to a companys book value, dividends, or PE ratiowhich for the last 50
years have had little predictive value in spotting the worlds most successful companiesand focus
instead on more important proven factors such as profit growth, price and volume action, and if the
company is the number 1 profit leader in its field.

Market Direction
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If youre wrong about the direction of the general market, and the direction is down, three out of four
stocks will plummet along with the market averages, and you will certainly lose money big time, as many
people did in 2000 and again in 2008.
Dont ever let anyone tell you that you cant time the market.

Learning when its wise to raise cash is very important for you so study and learn how to successfully
use this technique for your advantage.

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If you want to learn anything about fish, sit in front of a fishbowl and look at fish. If you want to learn
about the market, you must observe and study the major indexes carefully.

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There are really only two things you can do when a new bear market begins: sell and retreat or go
short.

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Youre better off staying on the sidelines in cash until a new bull market really starts.

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You need to stay in gear with the market. It doesnt pay to be out of phase with the market.

Successful Investor Foreword:

The market is made up of millions of people acting almost 100 percent on human emotion and
personal opinion. It is crowd psychology on daily display. Andespecially when it comes to the hopes
and fears and pride and ego that drive so many investment decisionshuman nature is pretty much the
same now as it was in 1929 or 1636.

Successful Investor Foreword:

In the market, who you are and what you think mean nothing. Repeat: nothing. The markets going to
do whatever its going to do. And arguing with it can only cost you money.

Successful Investor Foreword:

The only law the stock market obeys is the law of supply and demand.

Successful Investor Foreword:

Until you as an investor, come to grips with this reality and learn to move with the market rather than
against it, youll be plagued by results that are mediocre at best.

Successful Investor Foreword:

The stock market doesnt care who we as individuals are, what we think, or how we feel.

Successful Investor Foreword:


The stock market is a beast like no other: indifferent to human desires, oblivious to common wisdom,
maddeningly contrary, and seemingly bent on confounding the majority at every turn.

Successful Investor Foreword:

Personal opinions, feelings, hopes and beliefs about the stock market are usually wrong and often
dangerous. Facts and markets, on the other hand, are seldom wrong. The law of supply and demand
works better than all the opinions of all the analysts on Wall Street or off.

A/D Rating:
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Professional investors wield a huge amount of influence over a stocks price. Thus, its essential that
you buy the better stocks that mutual funds are buying and that you sell or avoid the ones that may be
selling on a heavy basis.

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Its always best to buy stocks showing strong earnings and sales and an increasing number of
institutional owners over several recent quarters.

24 Essential Pg 38:

***Funds are just like elephants jumping into a bathtub. They are simply so big the water rises and
splashes all over the place. Our ratings enable you to easily track the institutional elephants.

Industry Groups:
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The majority of the leading stocks are usually in leading industries.

Roughly half of a stocks move is driven by the strength of its respective group.

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Its important that you be able to recognize what industry group within the sector is acting the very
best, since this knowledge can mean the difference between superior and mediocre results.

To increase your odds of finding a truly outstanding stock in an outstanding industry, concentrate on
the top 20 groups and avoid the bottom 20.

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Of the most successful stocks, nearly two out of three were part of group advances.

24 Essential pg 31:

If you cant find any other stocks in the group or, as a group, an industry is underperforming, perhaps
you may want to rethink your selection. It usually pays to buy in a leading industry group.

24 Essential pg 34:

Its clear that stocks tend to move in groups or sectors. When I buy a stock, I always like to see at least
one other stock in the same group that is also showing strength.

24 Essential pg 35:

The top 20% of the 197 industry groups are usually best, and I recommend avoiding the bottom 20%.

IBDs main stock tables include the stocks Industry Group Relative Strength Rating on an A to E scale
with A being highest. A and B rated stocks are preferred.

24 Essential pg 92:

You will have a better chance of succeeding if you stick to stock purchases among leading groups and
sectors.

Peter Lynch:

Lynch Pg 11:

My experience shows you dont have to be trendy to succeed as an investor. In fact, most great
investors I know (Warren Buffett, for starters) are technophobes. They dont own what they dont
understand.
Lynch Pg 31:

***Any normal person using the customary three percent of the brain, can pick stocks just as well, if
not better, than the average expert.

Lynch Pg 32:

Ignore the hot tips, the recommendations from brokerage houses, and the latest cant miss suggestion
from your favorite newsletter.

Lynch Pg 32:

***If you stay half-alert, you can pick the spectacular performers right from your place of business or
out of the neighborhood shopping mall, and long before Wall Street discovers them.

Lynch pg 285-86:

You can make serious money by compounding a series of 20-30 percent gains in stalwarts.

***Just because a company is doing poorly doesnt mean it cant do worse.

Buying a company with mediocre prospects just because the stock is cheap is a losing technique.

Selling an outstanding fast grower because its stock seems slightly overpriced is a losing technique.

A stock does not know that you own it.

Dont become so attached to a winner that complacency sets in and you stop monitoring the story.

If a stock goes to zero, you lose just as much money whether you bought it at $50, $25, $5, or $2
everything your invested.

***You wont improve results by pulling out the flowers and watering the weeds.

24 Essential Lessons:

24 Essential Pg 18:

Rather than limiting yourself, you must consider both fundamental information about the strength,
quality, and soundness of the company and its products and the technical side of how a stock is
performing in the marketplace.
24 Essential Pg 18:

Buy only stocks that show consistent earnings improvement, have increased sales and have preferably
both strong profit margins and a high return on equity.

24 Essential Pg 19:

You should understand what the company youre investing in makes or does.

24 Essential Pg 19:

Knowing how many of the better-performing mutual funds, banks, and other institutional investors
have a bought a stock can serve as your personal research department. The top institutions usually do
thorough fundamental analysis before they buy large stock positions.

24 Essential Pg 24:

***Youre objective is not to be right all the time. Its to make big money when you are right and to get
out early when you appear to be wrong.

24 Essential Pg 24:

***To make big money, youve got to buy the very best. Companies that are #1 in their fields are the
real market leaders.

How to Make Money Selling Stocks Short

How to Make Money Selling Stocks Shorts Foreword:

***I dont see how anyone can really do well in the market and protect assets if they dont learn how,
when, and why stocks should be sold.

If an investor doesnt know how to recognize when a stock has topped and should be sold, how can she
be sure that the very stocks she is buying arent actually giving off indications that they should be sold?

Buying without the ability to sell is like a football team that is all offense with no defense. To, win you
must understand and execute both.

I have never subscribed to market letters and never made any money listening to analysts or
economists.

You can learn more about the market by reading a couple of good books, studying the few successful
investors or groups you know in the market, and plotting and analyzing on charts all of your own past
decisions.
The Successful Investor

Successful Investor Foreword:

Lack of sell rules and the ability to spot major selling indicators in a stocks price and trading volume
action, and in general market indexes, constitute one key reason so many people lost so much more
than they should have.

Successful Investor Foreword:

***Highly successful investing has nothing to do with your emotions or personal opinions.

Successful Investor Foreword:

The stock market doesnt care who we as individuals are, what we think, or how we feel.

Successful Investor Foreword:

The stock market is a beast like no other: indifferent to human desires, oblivious to common wisdom,
maddeningly contrary, and seemingly bent on confounding the majority at every turn.

Successful Investor Foreword:

Personal opinions, feelings, hopes and beliefs about the stock market are usually wrong and often
dangerous. Facts and markets, on the other hand, are seldom wrong. ***The law of supply and demand
works better than all the opinions of all the analysts on Wall Street or off.

Successful Investor Foreword:

You learn to always sell stocks quickly when you have a small loss rather than waiting and hoping theyll
come back.

Bill in IBD:

***Too many investors use their personal opinions rather than using rules for timing the general market
and individual stocks.

***If you miss the first base, pay attention. Leaders can build a later base and opportunity.

For the best prospects, do a price and volume check of each week within the stocks base to help you
conclude if the stock is showing sound accumulation or too many price and volume defects. Next, do a
fundamental analysis checking for excellent earnings, sales and return on equity.

Dont be intimidated you can learn how to take advantage of the many innovative new leaders in
every new cycle.
***The market isnt easy it doesnt wait until everyone is ready, prepared and certain.

***Its wake-up time. History constantly repeats stock patterns in the market. Maybe its time you get
determined to always recognize and never miss another base-on-base or cup pattern in the future. You
can do it.

Its not easy, it takes time, but you can learn to do this if you have a strong desire and are determined.

You cant go by opinions or how you feel. You need to have and follow sound, proven rules.
Learning to accurately read charts can directly lead to more success in the stock market. It takes time
and study but, if done properly, can have life-changing effects on your financial future. Isnt that worth
it?

Diversification: Broad diversification is a hedge for lack of knowledge, or ignorance. The best results are
usually achieved through concentration: by putting your eggs in just a few baskets that you know a great
deal about and continuing to watch those baskets very carefully.