CAN SLIM is a philosophy of screening, purchasing and selling common stock. Developed by William O'Neil, the co-founder of Investor's Business Dailyit is described in his highly recommended book "How to Make Money in Stocks". The name may suggest some boring government agency, but this acronym actually stands for a very successful investment strategy.

What makes CAN SLIM different is its attention to tangibles such as earningsas well as intangibles like a company's overall strength and ideas.

The best thing about this strategy is that there's evidence that it works: In this section we explore each of the seven components of the CAN SLIM system. For example, a company's EPS figures reported in this year's April-June quarter should have grown relative to the EPS figures for that same three-month period one year ago. If you're unfamiliar with EPS, see Types of EPS.

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Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. CAN SLIM By Investopedia Staff Share. Fundamental Analysis Stock-Picking Strategies: Qualitative Analysis Stock-Picking Strategies: Value Investing Stock-Picking Strategies: Growth Investing Stock-Picking Strategies: GARP Investing Stock-Picking Strategies: Income Investing Stock-Picking Strategies: CAN SLIM Stock-Picking Strategies: Dogs of the Dow Stock-Picking Strategies: Technical Analysis Stock-Picking Strategies: O'Neil found that in the period from tothree-quarters of the top-performing equity securities in the U.

The other one quarter of these securities showed price increases in two quarters after the earnings increases. This suggests that basically all of the high performance stocks showed outstanding quarter-on-quarter growth.

Earnings Must Be Examined Carefully The system strongly asserts that investors should know how to recognize low-quality earnings figures - that is, figures that are not accurate representations of company performance. Because companies may attempt to manipulate earnings, the CAN SLIM system maintains that investors must dig deep and look past the superficial numbers companies often put forth as earnings figures see How to Evaluate the Quality of EPS. O'Neil says that, once you confirm that a company's earnings are of fairly good quality, it's a good idea to check others in the same industry.

Solid earnings growth in the industry confirms the industry is thriving and the company is ready to break out.

The system indicates that a company should have shown good annual growth annual EPS in each of the last five years.

How Much Annual Earnings Growth? It's important that the CAN SLIM investor, like the value investoradopt the mindset that investing is the act of buying a piece of a business, becoming an owner of it. As O'Neil puts it, "who wants to own part of an establishment showing no growth"?

O'Neil points to Wal-Mart as an example of a company whose strong annual growth preceded a large run-up in share price. The graph below demonstrates how successful Wal-Mart was after its remarkable annual growth.

A Quick Re-Cap The first two parts of the CAN SLIM system are fairly logical steps employing quantitative analysis. By identifying a company that has demonstrated strong earnings both quarterly and annually, you have a good basis for a solid stock-pick.

However, the beauty of the system is that it applies five more criteria to stocks before they how to interpret stock market graph selected. McDonald's A perfect example of how newness spawns success can be seen in McDonald's past. And this is just one of many compelling examples of companies that, through doing or acquiring something new, achieved great things and rewarded their shareholders along the way.

New Stock Price Highs O'Neil discusses how it is human nature to steer away from stocks with new price highs - people often fear that a company at new highs will have to trade down from this level. But O'Neil uses compelling historical data to show that stocks that have just reached new highs often continue on an upward trend to even higher levels.

Nasdaq Composite Index - etygivusyx.web.fc2.com

For further reading on how supply and demand determine price, see our Economics Basics tutorial. The analysis of supply and demand in the CAN SLIM method maintains that, all other things being equal, it is easier for a smaller firm, with a smaller number of shares outstandingto show outstanding gains. The reasoning behind this is that a large cap company requires much more demand than a smaller cap company to demonstrate the same gains. O'Neil explores this further and explains how the lack of liquidity of large institutional investors restricts them to buying only large-cap, blue chip companies, leaving these large investors at a serious disadvantage that small individual investors can capitalize on.

Because of supply and demand, the large transactions that institutional investors make can inadvertently affect share price, especially if the stock's market capitalization is smaller. Because individual investors invest a relatively small amount, they can get in or out of a smaller company without pushing share price in an unfavorable direction.

In each industry, there are always those that lead, providing great gains to shareholders, and those that lag behind, providing returns that are mediocre at best.

The idea is to separate the contenders from the pretenders. CAN SLIM requires a stock to have a relative price strength of at least However, O'Neil states that stocks with relative price strength in the 80—90 range are more likely to be the mossberg 17 hmr aftermarket stocks gainers.

Sympathy and Laggards Do not let your emotions pick stocks. A company may seem to have the same product how to interpret stock market graph business model as others in its industry, but do not invest in that company simply because it appears cheap or evokes your sympathy.

Cheap stocks are cheap for a reason, usually because yahoo forex trading are market laggards.

How To Read Stock Charts

You may pay more now for a market leader, but it will be worth it in the end. Basically, this criterion is based on the idea that if a company foreign direct investment (fdi) and stock market development ghana evidence no institutional sponsorship, all of the thousands of institutional money managers have passed over the company.

CAN SLIM suggests that a stock worth investing in has at least three to 10 institutional owners.

However, be wary if a very large portion of the company's stock is owned by institutions. CAN SLIM acknowledges that a company can be institutionally over-owned and, when this happens, it is too late to buy into the company. If a stock has too much institutional ownership, any kind of bad news could spark a spiraling sell-off. O'Neil also explores all the factors that should be considered when determining whether a company's institutional ownership is of high quality. Even though institutions are labeled "smart money", some are a lot smarter than others.

When picking stocks, it is important to recognize what kind of a market you are in, whether it is a bear or a bull. Although O'Neil is not a market timerhe argues that if investors don't understand market direction, they may end up investing against the trend and thus compromise gains or even lose significantly.

Daily Prices and Volumes CAN SLIM maintains that the best way to keep track of market conditions is to watch the daily volumes and movements of the markets.

Conclusion Here's a recap of the seven CAN SLIM criteria: Most importantly, buy stocks when they start to hit new price highs. Forget cheap stocks; they are that way for a reason. CAN SLIM investors are not looking for older companies with a large capitalization. CAN SLIM is great because it provides solid guidelines, keeping subjectivity to a minimum.

Best of all, it incorporates tactics from virtually all major investment strategies. Think of it as a combination of value, growth, fundamental, and even a little technical analysis.

Remember, this is only a brief introduction to the CAN SLIM strategy; this overview covers only a fraction of the valuable information in O'Neil's book, "How to Make Money in Stocks".

Chart Analysis [ChartSchool]

We recommend you read the book to fully understand the underlying concepts of CAN SLIM. What do you do with your money when you're one of the world's wealthiest individuals? If you're Carlos Slim, you give a lot away. A look at his road to success. There are many ways to grow a portfolio, and the best approach for a given investor will depend upon various factors. Find out how the once-richest man in the world, Carlos Slim, invests his money to ensure that he doesn't lose his billionaire status.

Big-money sponsorship might make a company look good, but it's not always a reliable gauge of stock quality. Common sense or common folly? Discover some approaches to circumventing typical stumbling blocks on the road to profitable investing. For a record-holding stock trader, CANSLIM is the formula that identifies this magic mix. Here are some of the biggest market pundits' latest calls and how you can profit from them.

Get to know some of the best stock pickers, their strategies and how they got their starts. Investment clubs have been around for several decades and are simply groups of people who get together to invest.

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