A tribute to William O Neil.
Creator of CANSLIM.
A tribute to William O Neil.
William O Neil passed away on 28th May, 2023. For the uninitiated, he was the father of Techno-funda Investing. In layman’s terms people who believe in having a cake and eating it too. Best of the both worlds.
We live in a world where Value investors are very good at building cults and narratives around their heroes and not enough due is given to the other streams.
This blog is an attempt to fill that void.
**Imagine a plethora of blogs you would get to read when say Warren Buffett or Charlie Munger passes away. (May god gives them the century they deserve)
Let us explain the best-of-both-worlds concept of William O Neil.
A value investor has no concept of a drawdown. He buys based on value and doesn’t know when the market will reward him for his above-average selection skill. A Value investor is willing to wait till eternity as they admit that it is impossible to time the market.
The overall upward-sloping drift in a growing economy lifts all boats and when it does, Value Investors book their profits.
A technical analyst has no concept of a company and its growth. Everything is a moving line for him. He treats MTNL as he would Bajaj finance. A head and shoulder pattern can appear on any set of data. (It can appear on any randomly generated data as well)
It is amazing how CULT culture makes a cabbage of one’s brain and how one starts hero-worshipping and throws logic and common sense in the dustbin.
William O Neil was a pioneer in breaking this status quo. This quote from him sums up his Investing strategy.
“Buy the BEST companies with Great earnings, coming out of bases.”
“Your Job is to find the next Apple and handle it well”
Essentially, what William O Neil did was instilled in us that Markets are trending in nature and IT CAN BE TIMED.
There is a method to the madness and you can clearly do stage analyses without subjectivity and ambiguity.
He taught as that as an investor We need to stay with STAGE 2 stocks. The ones that are in a clear uptrend with no supply zone.
He taught us that money has an opportunity cost and sitting and waiting for your stock to do well comes at a price (Time is money)
Consider this below statistic
WHEN Stated in Lifetime Dollar Wealth creation, the entire Net gain in US STOCK Market since 1926 is attributable to the best performing 4% of the listed stocks and the remaining 96% collectively matched one month treasury bills.
Do Stocks Outperform Treasury Bills?
Four out of every seven common stocks that have appeared in the CRSP database since 1926 have lifetime buy-and-hold…
Let that SINK IN.
You need to be in the top 4% bracket or you miss the entire ride. Indian markets are NO different. This is Pareto on steroids.
There is NO such thing as Buy and HOLD. If you are NOT timing it, you will GIVE ALL Back and then some more!!
Don’t listen to Warren Buffett folklore; you have not seen his playbook. His churn rate will shock you. He is one of the BEST timer there ever was.
The current breed of Super Performers like Mark Minervini, Jesse Stine, David Ryan and many more attribute William O Neil as their Guru, the Guy who created the framework upon which these guys built their individual nuances.
In conclusion, I would say, William O Neil taught us to challenge the status quo and remember.
Anytime someone says that market cannot be timed. he/she is either selling a product or referring to his/her shortcomings. The statement has NOTHING to do with reality.
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