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

3.7. VERISIGN: THE "SPICE IN THE SOUP"

We see in the Oracle example the idea that stocks that try to break out before the general market has finished correcting and turned back to the upside are often your strongest buy candidates once the market actually does begin a new uptrend. Given that I was long a quality big-cap name in Oracle, I wanted to balance my portfolio with a hotter, newer name that I felt had huge potential given its exposure to the rapidly-growing Internet.

One thing that Chris Kacher and I had picked up on in 1999 is that earnings were becoming less a driver of stock price movement in an entire raft of recent new issues with business related to the Internet, and many stocks with little to no earnings had been showing strength throughout the year. We discovered that the key metric in most of the sounder cases was not earnings growth, but sales growth. In a sense, this seemed logical since the Internet was a rapidly emerging phenomenon, and the market accurately sensed that this would likely change the entire paradigm of how business was done, how society's vast libraries and sources of data and information would become easily accessible and hence readily integrated into the day-to-day activities of the average citizen, and how individuals would then conduct their personal lives and business with respect to online banking, shopping, networking, and more. In a sense, the market was trying to find a metric with which to measure those companies with the best potential ...