To say a security is "undervalued" because it's selling at a low P/E [Price-to-Earnings Ratio] or because it's in the low range of its historical P/E is nonsense. Primary consideration should be given to whether the rate of change in earnings is substantially increasing or decreasing.
Everything sells for about what it is worth at the time. If a company's price and P/E [Price-to-Earnings] ratio change in the near future, it's because conditions, events, psychology, and earnings continue to improve or suddenly start to deteriorate as the weeks and months pass.
Out of the ways a company can achieve enormous success, thereby enjoying large gains in its stock price, is by introducing new products into the marketplace. We're not talking about a new formula for dish soap. These products and companies have to revolutionize the way we live.
Bill O'Neil Quotes on Stock Market Action
The whole secret to winning and losing in the stock market is to lose the least amount possible when you're not right.
What seems too high and risky to the majority generally goes higher and what seems low and cheap generally goes lower.
The best way to measure a stock's supply and demand is by watching its daily trading volume. When a stock pulls back in price, you want to see volume dry up, indicating no significant selling pressure. When it rallies up in price, you want to see volume rise, which usually represents institutional buying.
Those who ignore what the market says usually pay a heavy price. Those who listen and who learn the difference between normal and abnormal action are said to have a "good feel for the market".
Bill O'Neil Quotes on Learning from History
It is possible to invest successfully if you are willing to study hard and learn from history.
The first step in learning to pick big stock market winners is for you to examine leading big winners of the past to learn all the characteristics of the most successful stocks. You will learn from this observation what type of price patterns these stocks developed just before their spectacular price advances.
The unwillingness of investors to set and follow minimum standards for stock selection reminds me of doctors years ago who were ignorant of the need to sterilize their instruments before each operation. They kept killing off patients until surgeons finally and begrudgingly accepted studies by researchers Louis Pasteur and Joseph Lister. Ignorance rarely pays off in any walk of life, and it's no different in the stock market.
Bill O'Neil Quotes on Facts vs. Opinions
Since the market tends to go in the opposite direction of what the majority of people think, I would say 95% of all these people you hear on TV shows are giving you their personal opinion. And personal opinions are almost always worthless … facts and markets are far more reliable.
Remember, however, that estimates are opinions, and opinions may be wrong. Actual reported earnings are facts.
Bill O'Neil Quotes on Stock Selection
It seldom pays to invest in laggard stocks, even if they look tantalizingly cheap. Look for, and confine your purchases to, market leaders.
The stocks you select should show a major percentage increase in current quarterly earnings per share (the most recently reported quarter) when compared to the prior year's same quarter.
When picking winning stocks , it's the bottom line that counts.
The number one market leader is not the largest company or the one with the most recognized brand name; it's the one with the best quarterly and annual earnings growth, return on equity, profit margins, sales growth, and price action.