William O’ Neil Webinar Review: Leaders

 

Whenever we have William O’Neil in the studio, it’s a privilege. Not many people have access to an investing icon, particularly one as committed to sharing his deep knowledge of the market.

Recently Mr. O’Neil sat down with his son, Scott O’Neil, president of MarketSmith, and Scott St. Clair, a product coach, to share his thoughts on the current market and the importance of studying market leaders. To illustrate his points, he referred to two outstanding leadership stocks from his model book studies:  eBay in 2002 and Amgen in 1990-1991. 

Core to Mr. O’Neil’s investing methodology is this rule: Pay attention to what leading stocks are doing–in any market. There are usually anywhere from five to 15 true leaders in every cycle, and they will lead the market on the way up and the way down. Thus leading stocks are important to have in your portfolio, but they should also be studied, along the market index charts, to determine overall market direction.

Identifying authentic leadership stocks is the “L” in Mr. O’Neil’s CANSLIM system. Some leadership traits to look for include strong earnings and sales, liquidity, institutional sponsorship, and relative strength. Since leaders are the first stocks to recover new highs when a general market decline is over, finding these stocks becomes even more crucial during a market correction. (Further details on how to separate leaders from laggards can be found in chapter 7 of Mr. O’Neil’s bestselling book, How to Make Money in Stocks.)

Once you have identified several market leaders , what’s next? As a MarketSmith subscriber, you can create a leadership watch list by using the ”Add to List” feature near the upper right-hand corner of your screen (shown above). By keeping these stocks in a separate list, you have a better chance of properly initiating or adding to a position in a leading stock, while also staying in tune with the market’s overall health.

During this special conversation, Mr. O’Neil reminded us that the market is designed to fool the masses. In other words, trying to predict what the market will do, or should do, is a waste of time. Instead, you should stay focused on the market’s daily action, particularly the action of leading stocks, so that you are always ready to react. To learn more, listen to the entire conversation here.

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