The short version
David Ryan joined William O'Neil's firm young, learned CAN SLIM from the source, and then won the US Investing Championship, a real-money trading contest, three years in a row in the mid-1980s. His method is O'Neil's: the leading stocks with the strongest earnings, bought as they break out of sound bases, with losses cut short.
Who he is
Ryan joined William O'Neil + Co. after college and stayed for many years, working his way up to portfolio manager. His three straight championship wins in the 1980s made him one of the best-known traders of the decade, and Jack Schwager interviewed him for Market Wizards (1989), in a chapter that compares picking stocks to a treasure hunt. He later left to manage money through his own firm. With Mark Minervini, Dan Zanger and Mark Ritchie II he wrote Momentum Masters, a roundtable on how each of them trades.
What makes his record useful to a reader is that his method was never secret. He traded the same rules O'Neil had published for anyone to read. The difference was how strictly he followed them.
How he trades
- Earnings and sales growth first. The companies he wants are growing fast, often with a new product or a change in their market behind it.
- Leaders only. Top relative strength, in a leading industry.
- Buy the breakout. He buys as a stock clears a sound base on heavy volume, and adds as it proves itself.
- Respect the market. Most stocks follow the market, so he presses hardest in strong markets and steps back in weak ones.
- Cut losses fast. Small losses keep the account intact for the big winners.
What he looks for before he buys
- Quarterly earnings growing fast, ideally faster in each recent quarter
- Sales growing too, so the earnings growth isn't only cost cutting
- Something new behind it: a product, a service, a new market or new management
- Relative strength in the top fifth of the market, in a leading industry
- A sound base of several weeks or more, with volume drying up near the lows
- A breakout above the base on volume well above average
- A market in a confirmed uptrend
None of these is unusual on its own. Ryan's point is that the biggest winners tend to have all of them at once, at the moment they start their run, and that waiting for the full set filters out most of the trades that go nowhere.
The habits behind the record
- Study the past winners. O'Neil's firm kept books of charts of the biggest winning stocks, marked at the point just before each one took off. Ryan studied them until he could recognise the same shapes and the same earnings profile in new stocks.
- Keep a record of every trade. He has described marking each buy and sell on a chart with a note on why he made it, then going back over them to find the mistakes he kept repeating.
- Trade smaller when it isn't working. After a run of losses he cuts his position size, and only builds it back once trades start to work again. A cold streak then costs little, and the account is still whole when the market turns.
- Concentrate in the best ideas. When a few stocks are clearly acting best, that is where the money goes, rather than spread thinly over many average ones.
- Add to winners, never to losers. A first buy that shows a profit earns a second one. A first buy that shows a loss gets sold.
Why the market comes first
Ryan, like O'Neil, treats the direction of the market as the first test. Three out of four stocks tend to move with the general market, so even a perfect setup struggles in a falling one. In a correction he holds more cash and buys little; when the market confirms a new uptrend, often with a follow-through day, he starts buying the leaders that held up best during the decline.
Using his method here
- CANSLIM screener: US stocks passing the measurable parts of CAN SLIM tonight.
- Relative strength stocks: the market's strongest stocks by RS rating, in uptrends.
- Follow-through day: whether the market has confirmed a new uptrend, by O'Neil's rule.
- High tight flags: the rare, explosive pattern O'Neil's firm prized above most others.
Questions people ask
Who is David Ryan?
An American stock trader who won the US Investing Championship three years running in the mid-1980s while working at William O'Neil + Co. Jack Schwager interviewed him for Market Wizards (1989). He later started his own investment firm and co-wrote Momentum Masters with Mark Minervini, Dan Zanger and Mark Ritchie II.
How does David Ryan pick stocks?
Using William O'Neil's CAN SLIM approach: fast-growing earnings and sales, a new product or new highs, top relative strength, and buying by institutions, in a rising market. He buys as a stock breaks out of a sound base and adds as it proves itself.
What did David Ryan learn from William O'Neil?
To study the biggest winning stocks of the past and look for the same traits today, to buy leaders rather than bargains, and to cut losses quickly, so a small loss never becomes a large one.
What is the US Investing Championship?
A trading contest, running since the early 1980s, in which entrants trade real money in their own accounts and are ranked on verified returns over a calendar year. David Ryan, Mark Minervini and Oliver Kell are among its best-known winners.
How does David Ryan size his positions?
He puts the most money into the few stocks acting best, adds to a position only once it shows a profit, and trades smaller after a run of losses, building back up only when his trades start working again.