Monday, January 17, 2005

Magnum Opus

I was visiting a client yesterday when I was asked "What is the best stock market book for me to read?" by the woman's 15 year old son, a budding entrepreneur who is ready to open his first brokerage account. He knew a great deal more about the market than the average American, or most kids his age for that matter. After a fervent discussion on Bluetooth technology, Corning stock, the Sprint-Nextel merger, and my "look for the suppliers if you want to make money in the market" thoery, I told him what I tell everyone else. I could name 20 greats off the top of my head, but if you had to read one, it would be William O'Neill's How to Make Money in Stocks . Trader Mike-who runs our favorite stockblog website--agrees:
In my opinion, if you read only one book on investing it should be this one. I credit this book with changing my whole approach to investing. Before I read it I had no idea how to use stock charts or even what to look for in a company's fundamentals. O'Neil teaches that and much more in the book. The book begins with an explanation of O'Neil's CANSLIM methodology. (You can get details on CANSLIM at that link) In short CANSLIM is the result of O'Neil's study of some of the greatest winning stocks in the history of the market. CANSLIM is an acronym, and each letter represents one of the seven characteristics that O'Neil found that those great winning stocks had in common. In walking the reader through CANSLIM O'Neil shatters much of what's fed to the public as sage investing advice. Probably the best example of the 'N' in CANSLIM, which stands for 'new products, new management, and new highs'. It's the 'new high's part that is a big shocker to most people, as it was to me. We always hear 'buy low, sell high', 'buy the dips', etc., so we've been brainwashed to look for 'bargains' in the market.
For those who really want to immerse themselves in the market, my next suggestion is always to shell out $295 for a life-changing yearly subscription to Investor's Business Daily . Good luck, little fela.

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