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Account manager buys momentum stocks at reasonable prices

John O'Neill, 35


Account manager at a tool company

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The portfolio

Includes shares in Cipher Pharmaceuticals Inc., Macro Enterprises Inc., Rifco Inc., Bank of America Corp., Lloyds Banking Group, Manulife Financial Corp., Magna International Inc. and Badger Daylighting Ltd.

The investor

John O'Neill started out in mutual funds about 10 years ago. Then he switched to buying stocks through a discount brokerage in 2010. "I haven't looked back," he says.

How he invests

Mr. O'Neill calls himself a momentum investor. This approach requires scanning charts of stock prices to see which ones are in an uptrend. If a stock is moving up, it is more likely to continue rising than one without positive momentum, in his view.

Of special interest are small companies with strong earnings growth and "beaten-up blue chips trending back up." They have a greater capacity for sustained uptrends.

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Mr. O'Neill next checks to see if the price-to-earnings (P/E) ratio is reasonable. If it is low relative to peer firms, this is another signal the stock could have room to appreciate. He also looks at the forward P/E (which incorporates the earnings per share projected by analysts).

"I'll hold a stock anywhere from a few months to a few years. As long as the trend is intact I won't sell."

Recent move

Mr. O'Neill bought Badger Daylighting at $31 late last year. "It's an easy-to-understand business and fits my investment criteria perfectly: a great chart [showing upward momentum] and growing earnings."

Best move

"I bought Manulife Financial during 2012. The share price has rebounded by 65 per cent. I'm still holding and very bullish."

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Worst move

"I purchased Pengrowth Energy at $13 in 2011, and watched it fall to $6.50 before selling in late 2012. I was chasing yield. I did not understand the business or the headwinds it was facing."


"Find an easy-to-understand, growing business with a reasonable valuation and make sure the chart and key metrics are trending in the right direction."

"Avoid tech firms with no earnings and ridiculously high valuations."

"Trade as much as possible within a tax-free savings account – the gains are tax free."

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