(Bloomberg) -- William J. O’Neil, an early and successful practitioner of computer-aided stock analysis who shared his strategy in a best-selling book and Investor’s Business Daily, which he founded in 1984, has died. He was 90.
His death was announced Monday on the website of William O’Neil & Co., the Los Angeles-based investment-management firm he opened in 1963. No details were provided.
O’Neil was an innovator in compiling, analyzing and publishing data on stock movements. He concluded that hot stocks of the past shared seven characteristics that, when correctly applied today, could identify the biggest winners of tomorrow.
“Everything O’Neil does with the computer is his own invention,” Martin Mayer wrote in his 1969 book, New Breed on Wall Street. He quoted O’Neil as saying, “I believe in the next three to five years the computer will be the big thing in the securities market. You go through fads in this business, and the computer is the next one.”
Even after using his trading profits to buy a seat on the New York Stock Exchange in 1964, O’Neil and his charts and graphs remained in California, far from the central nervous system of the finance industry.
Staying Focused
“I never pay any attention to the parade of experts voicing their personal opinions on the market,” he wrote in How to Make Money in Stocks: A Winning System in Good Times or Bad, first published in 1988. “It just creates entirely too much confusion and can cost you a great deal of money.”
His view of stock-picking as a winnable game contrasted with that of efficient-market proponents such as Burton Malkiel, a former professor of economics at Princeton University, who maintained that “a blindfolded chimpanzee throwing darts at the stock listings” can do as well as a professional portfolio manager.
O’Neil called his investment strategy CAN SLIM, an acronym for its seven components and the signals he looked for: current quarterly earnings per share up 25% or more; annual earnings per share up 25% or more for three consecutive years; new products, management or market highs; shares outstanding of fewer than 25 million; leader or laggard status in its field; institutional shareholders; and market direction.
Accurate Forecasts
On two occasions when his analysis pointed to imminent bull markets, O’Neil paid for full-page advertisements in the Wall Street Journal to trumpet his forecast. The first was in March 1978, the start of a six-month rally in in equities. The second, in February 1982, preceded one of the most famous bull markets in history, lasting five years.
With the money he made as an investor, O’Neil founded Investor’s Daily, now Investor’s Business Daily, which began as a Monday-to-Friday newspaper loaded with charts and data that feed the CAN SLIM method.
William O’Neil & Co. sells research to about 350 major institutional clients, according to its website. Its broker-dealer business was renamed O’Neil Securities Inc. in 2010. O’Neil Global Advisors, an SEC Registered Investment Advisor, was launched in 2019.
With his wife, Fay, O’Neil established the O’Neil Center for Global Markets and Freedom in 2008 at his alma mater, Southern Methodist University in Dallas. He also funded a chair in business journalism at SMU’s Meadows School of the Arts and a professorship in markets and freedom at its Cox School of Business.
The donations reflected, in part, his determination not to become part of the East Coast establishment.
Southern Strategy
“You need a Harvard or Stanford somewhere in the South,” O’Neil said, according to a 2010 Dallas Morning News article. “If SMU keeps upgrading and improving itself, it could emerge as that.”
William J. O’Neil was born on March 25, 1933, in Oklahoma and was raised in Texas, graduating from high school in Dallas. He earned a bachelor’s degree in business administration from SMU in 1955.
He began his career as a stockbroker in 1958 in the Los Angeles office of Hayden Stone & Co. There, he developed his computerized study of what made stocks successful and, according to a biography on his website, “quickly became the top-performing broker.”
O’Neil said following his own rules in early 1962 led him to sell all his stocks, “with no idea the market was headed for a real crash that spring.”
Independent Thinker
When he continued to bet on falling prices for some stocks, including building-materials manufacturer Certain-Teed Products Corp., “I got into trouble with Hayden Stone’s home office on Wall Street,” he wrote. “The firm had just recommended Certain-Teed as a buy, and here I was going around telling everyone it was a short sale.”
He founded William O’Neil & Co. in 1963 after recording a 20-fold increase in his own account. Jack Schwager, in 1989’s Market Wizards, said O’Neil parlayed a $5,000 investment into $200,000 through three consecutive bets: on discount chain E.J. Korvette Inc. to fall, on Chrysler Inc. to rise, and on Syntex Corp., maker of a compound used in birth-control tablets, to increase.
When he was 30, O’Neil bought a seat on the NYSE.
Early on, William O’Neil & Co. managed money for clients with at least $75,000. For investors who couldn’t meet that minimum, O’Neil started a fund in 1966 that within two years had about $10 million in assets, according to an article in the New York Times.
Top Fund
The O’Neil Fund soared 116% in 1967 to make it that year’s most successful mutual fund, as measured by FundScope, a monthly magazine. The Times, reporting on O’Neil’s stellar year, called him “a shy 35-year-old Texan” who “pores over computer data on 2,050 stocks listed on the New York Stock Exchange and the Amex — that’s the entire list — to see which 100 or so are likely to provide the best opportunity for increasing his fund’s asset value.”
O’Neil struggled to maintain the fund’s stellar performance, and by the time he sold it in 1975, its assets had shrunk to $6 million from a peak of $49 million, according to the Los Angeles Times.
In 1992, O’Neil opened another fund, called New USA, which swiftly attracted $170 million from investors, the Los Angeles Times reported. It gained 67% through 1996, outperforming the average growth fund but not the S&P 500. In 1997, O’Neil sold the fund’s assets to Boston-based MFS Investment Management.
