Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market: How to Achieve Superperformance in Stocks in Any Market

by Mark Minervini

LOOK FOR EARNINGS SUPPORTED BY REVENUE In addition to strong, accelerating earnings per share growth, you want to see sales exhibit the same characteristics: strong quarterly growth and acceleration. It’s not uncommon for new market leaders to show triple-digit sales growth in the most recent two, three, or more quarters. In fact, some great stock market successes deliver large quarterly sales increases consistently for several years. For example, from March 2009 through December 2010, Netflix reported eight consecutive quarters of sales increases that accelerated from 21 percent to 34 percent; during that period, quarterly earnings averaged 45 percent. Netflix’s stock price advanced more than 500 percent. Home Depot made a 698 percent move from June 1982 to June 1983. Its sales grew 104 percent, 158 percent, 191 percent, and 220 percent, respectively, over the four quarters leading up to this major stock-price jump. In 2010, accelerating sales bolstered earnings and propelled shares of F5 Networks more than 500 percent. This is what really accounts for superior stock performance: strong earnings growth backed by brisk sales, not accounting gimmickry. If you demand that your stock selections not only show strong earnings but also show strong sales, you will increase your chances of latching on to a superperformer.