【正文】 down to just a few. They involve one fundamental measure and two technical measures.Earnings, Earnings, EarningsThe only fundamental characteristic that matters to me is earnings growth. Some of us know that in real estate a property39。s value relative to other properties is largely a function of three things: location, location, and location. In the stock market, a stock39。s value relative to other issues also boils down to three things: earnings, earnings, and earnings. Over the truly longterm, say 10 years, a stock39。s price will tend to rise in tandem with its rate of earnings growth, all things being equal. Exogenous factors, such as the interest rate environment, will also play a major role, but these tend to impact investor appetite for stocks as a whole, and not on a relative basis.Is the importance of earnings growth in stock selection a fad that39。s destined to someday go the way of the hula hoop? No. As long as earnings are transferred from a pany39。s ine statement to the equity section of the pany39。s balance sheet, thereby increasing the equity of shareholders, this relationship isn39。t in danger of going the way of the dinosaur.So earnings growth is where we start. Historically, we know that the average pany in the Standard amp。 Poor39。s 500 Index has grown earnings at 7% a year. What I39。m looking for are panies that are growing profits at a minimum of 30% a year. This is the absolute minimum, however. What I39。m really on the lookout for are panies boasting at least 40% growth. In fact, the faster the growth, the better. My favorite buy targets are those panies that are growing earnings by 60%, 80%, even 100% or more per year. Back in the 39。80s, when I first started getting serious about investing, I favored panies with steady 20%25% growth, like Waste Management, WalMart, CocaCola, Merck, etc. The most aggressive growers simply scared me, what with their volatility. I quickly learned, though, that the really big profits in the market are made by focusing on stocks of panies with greaterthan40% earnings growth. Later in the course, Greg and I will show you how to deal with the higher rate of volatility associated with these names.So my initial screen quickly limits my search to those panies that are among the most aggressive growers. These are panies that are offering a product or service that39。s so popular that customers are beating a path to their doorstep. Microsoft grew its earnings at a 50%ayear pace in its early years as people gobbled up its stateoftheart software products. In the late 39。80s and early 39。90s, Home Depot experienced blistering growth by ing out with a chain of innovative home improvement stores offering discount prices. Cisco Systems became an earnings juggernaut by developing technology used to link groups of individual puters together. In each case, these panies carved out a whole new market for themselves by developing something new.There are various ways to measure earnings growth. The fiveyear annually pounded rate of growth, the threeyear annually pounded rate of growth, and the most recent two quarters of yearoveryear growth can be used. As one example of the latter, you39。re paring the third quarter of 39。99 with the third quarter of 39。98 and Q4 of 39。99 with Q4 of 39。98. Many panies experience some sort of seasonal bias to their business. Comparing yearoveryear quarterly earnings data, then, removes this bias versus merely paring 1999Q4 earnings with 1999Q3 earnings. And when I speak of earnings, I39。m referring to earnings per share not net ine, which is the socalled bottom line of an ine statement. Earnings per share equals net ine divided by total shares outstanding.How do I measure earnings? Specifically, I39。m interested in the next one to two fiscal years of earnings estimates provided by Wall Street analysts. Since the market is a discounting mechanism, or a forwardlooking animal, it doesn39。t care about yesterday, or even today. All that matters is the expectation of what tomorrow will bring. This is why I limit my earnings screen to the next two years of estimates. By just looking at past earnings performance one can miss out on a turnaround situation within a pany. I should point out, though, that Wall Street39。s accuracy in forecasting a pany39。s future earnings stream often leaves much to be desired. No one said this business of speculating was easy, however!There are two exceptions to my emphasis on future earnings: When a pany is not expected to bee profitable in the next two fiscal years, I specifically look at sequential revenue growth over the past one to three quarters. In this instance, the term sequential means from one quarter to the next. So I would be looking to see how much 1999Q3 revenues grew over those of 1999Q2, and then how much 1999Q4 revenues grew over those of 1999Q3. Indeed, since profitless panies are some of the biggest winners in the stock market, it would be foolhardy to overlook them entirely. The obvious example in 199939。s . market was the Internet group. You would have missed some fat moves had you ignored panies like Ariba, Commerce One, E Piphany, and Juniper Networks. Here39。s what I39。ve found: The biggest winners among profitless panies are growing revenues at 33% or more sequentially. When a pany is not expected to bee profitable in the next two fiscal years and sequential revenue growth over the past one to three quarters is unimpressive or even downright stagnant, I39。ll look at whether the stock is part of an industry group that39。s exhibiting outstanding tape action. The obvious recent example is the biotech group, especially the genomics segment. Many of these panies are development stage outfits. They39。re doing research on new genebased products and services that have yet to develop into revenuegenerating let alone profitmaking entities. Yet when an entire group runs up in such a bullish manner as did the genomics in December 1999February 2000, I sit up and pay attention. The odds of hooking a big winner in