Wall Street provides plenty of witticisms, smart expressions and words of knowledge. Here’s a sampling.
Let the pattern be your pal. Stick with what’s genuine, not how you feel. Bulls generate income, bears earn money, pigs get slaughtered.
If you like to choose excellent stocks, please allow one more platitude. Keep 7 basic words in mind: ” What have you provided for me recently?”
Big winners go on huge runs for 3 main reasons. One, the market is jamming. Two, their fundamentals are humming. Three, institutional financiers — mutual funds, big investment consultants, banks, pension funds– bet greatly on real industry leaders.
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Consistent, long-term profits development and sales boosts power strong principles. But when development slows or comes to a stop, beware. The big funds quickly become net sellers, not net buyers. And the threat of losing cash on brand-new buys or giving up considerable paper gains shoots straight up.
Enjoy the C (present revenues and sales), A (annual development in the top and bottom lines) and I (institutional sponsorship) in the IBD seven-factor system for financial investment success, CAN SLIM. When growth shows sign of crumbling, so can a stock’s big run. If the latest breakout is a dud, then the stock is telling you that something is truly wrong.
Gilead Sciences: 2003 Vs. 2015
After the 2000-2002 dot-com crash ended, Gilead Sciences ( GILD) skyrocketed into stock exchange stardom. A March 2003 breakout past a 38.48 double-bottom buy point ( prior to stock divides) set the phase for a 500% run through a peak in August 2008. Another breakout to all-time highs in August 2012 by the HIV medicines pioneer unleashed a 333% climb to its peak near 123 in June 2015.
A swell in revenues (from a split adjusted 18 cents a share in 2003 to $12.61 in 2015) and sales ($ 868 million to $32.6 billion) clearly justified the big run. But things modification. In Q1 2016, Gilead’s earnings grew only 3% vs. a year previously, marking a 2nd quarter in a row of sharp deceleration. Sales development slowed dramatically, from 37% to 16% to 3% over the very same duration.
Then another impressive thing happened. Gilead’s growth engine stalled.
Profits fell 2%, 15%, 19%, 26%, 17%, 17%, 34%, 34%, 25%, 19% and 19% vs. year-ago levels over the next 11 quarters. Sales diminished too.
“What have you provided for me lately?” Gilead responded to in an unsightly method.
In May 2015, the biotech cleared a 107.60 buy point in a six-month dish with deal with, but acquired less than 15%. Over the next four years, Gilead shares plunged 50% from its 123.37 peak.
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