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This book is an elaboration on the investment techniques in Mr. O'Neil's prior book, How to Make Money in Stocks. The elaboration focuses on additional insights into avoiding losses and using technical analysis (examining stock price and volume charts) to pick optimal stocks and times to buy and sell. If you haven't already read How to Make Money in Stocks, this book will lack context. I suggest that you not read this book until you have read that one. If you have read that one, this book will be valuable to you only if you plan to do your own stock picking and wish to use the Momentum Growth Investing model that Mr. O'Neil recommends in that book, and supports in Investors Business Daily. If this book is not yet right for you, based on these qualifications, you need read no further. If this book fits, then, let me go on to provide some caveats. First, it is often hard to limit your losses in the kinds of stocks recommended by this technique. Following a company warning about earnings, it is not unusual for these stocks to fall 15-40 percent without ever trading at any price in between. So your losses may well be larger than he suggests here. Second, technical analysis is a field that is filled with ambiguity. Your success in reading charts will not be as good as these examples suggest. Many academic studies fail to find any value in technical analysis. Third, the kind of stocks that are recommended can perform very poorly if the market goes through a prolonged drop in valuation (as last occurred from 1973-1975). You will be buying stocks that are trading at enormous multiples. You could experience more sustained losses than Mr. O'Neil suggests in such a changed market environment, if it were to recur. Fourth, few individuals have the discipline to adopt and follow a philosophy like this over a long enough time period to be successful. Fifth, if you are curious, it doesn't hurt to look. But remember that over most time periods 90 percent of professional investors do not match the market averages. And they have a lot of advantages you don't have. Be sure to also look at John Bogle's, Common Sense About Mutual Funds, to get the other side of the story. Having heard the caveats, let me say that Mr. O'Neil's advice is basically sound, well articulated, easy to follow, and balanced. It will make good reading for those who want to move toward developing the skills needed to be a self-directed investor in growth stocks being pushed along by earnings and investor momentum. Good luck with your investments! May they do well regardless of the philosophy you follow!
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