A Day with Bill: Even the Most Successful Investors Have to Get Back to the Basics

 

The MarketSmith team had the privilege of attending the Level 4 Masters Program seminar this past weekend, where we took in presentations by our company founder, William O’Neil; his portfolio managers Scott O’Neil, Mike Webster, and Charles Harris; and our fellow product coach Scott St. Clair.

 

The investing method used in the Masters Program (CAN SLIM) is the same one we use in our shop. It employs historical precedent (drawing on the characteristics of the best stocks over the past 100+ years) to find the market’s next leaders.  It blends the technical aspects found in stock charts with fundamental company data. Technically, patterns are the visual manifestation of market sentiment based on supply and demand. Fundamentally, stocks must also show earnings growth, stability, and acceleration.

 

Most of the investors taking part in the Level 4 Masters Program know this investing method very well and have already achieved great success with it. So why do they need to keep attending seminars? Over time, investors—investors at every level—start to  diverge from their system—no matter which system they follow.

 

We all have plenty of excuses: “The market has changed” or “I’m tweaking the system.” And the “new rules” may actually work for several trades, but once your hybrid system fails to work, you start looking to answer why. Nothing resets your perspective and humbles your investing ego quite like listening to a man that has not only survived but thrived for five decades as a growth investor by consistently sticking to his own rules.

 

In his presentation, Mr. O’Neil stressed first the importance of fundamental strength in the stocks he picks. Many questions were asked of different stocks showing incredible technical strength, and each time, Mr. O’Neil would walk over to the left side of the screen, and first analyze the earnings growth, sales, and acceleration. If these data points were not up to par, he would not even address the technical points in the chart. To him, at that point, if the earnings are not showing strength, the chart is not worth assessing.

 

Mr. O’Neil’s persistence reminded me of the importance of getting back to the basics, which is true no matter which investing methodology you use—value, growth, or GARP.

 

Your system and its rules are not designed to work if you stick with them 70% or 80% of the time. It’s got to happen on every trade, with every stock. In the long run, in say, 50 years, your discipline will show in your portfolio.

 

As always, if you have any questions, you can reach us at (800) 424-9033.

 

Best Returns,

 

 

The MarketSmith Team