how to make money in stocks and how to get rich_11

Beverly Hills investor barged into the office of a broker friend of mine

and in a loud voice shouted Xerox was drasticaly overpriced because it

was selling for 50 times earnings. He sold 2000 shares short at $88.

After he sold short this "obviously overpriced stock," it immediately

started advancing and ultimately reached a pricequal to $130 before

adjusting for stock splits. So much for amateur opinions about P/E

Some institutional research firms in recent years published services

and analyses based on the principle of relative P/E ratios for companies,

compared to individual company earnings growth rates. Our

detailed research over many cycles hashown these types of studies to

be misleading and of little practical value.

The conclusion we have reached from years of in-depth research into

wining corporations is thathe percentage increase and aceleration

in earnings per share is more importanthan the level of stock's

P/E ratio. At any rate, it may be easier to spot emerging new trends

than to accurately assess correct valuation levels.