Trade Like an O'Neil Disciple: How We Made 18,000% in the Stock Market

2.2. 1996—"Y2K" STOCKS PUT ME OVER THE TOP

I made only minor headway with my personal account (PA) during the first quarter of 1996 as the market was what we might call "sideways" or mostly trendless. Over the years, I have found such trendless, choppy, and sideways markets to be the most challenging because it is easy to get nickeled and dimed as the market whips you in and out, forcing you to take many small losses that begin to add up over time. While getting nickeled and dimed, one must avoid being drawn and quartered.

In mid-March of 1996, I noticed a few high-quality stocks breaking out such as Iomega Corp. (IOM), shown in Figure 2.1. IOM had a natural monopoly on portable storage in the form of portable hard drives. They were the first company to effectively market the portability of their hard drives and so enjoyed this first-mover advantage in a space that had little competition at the time. At the time of the breakout, IOM had a 700 percent increase in earnings to 16 cents per share in its most recent quarter and a 287 percent increase in sales. In the prior quarter of September 1995, they had shown only 3 cents of profit per share so 16 cents represented a huge acceleration into profitability. Additionally, sales accelerated over the prior 6 quarters from −2 percent, 2 percent, 16 percent, 60 percent, 138 percent, to 287 percent.

IOM's base served as a beautiful launch pad for the stock. I put the usual 25 percent of my trading account into IOM on March 18 as it gapped ...