CANSLIM is an approach formulated by William J. O’Neil in his classic investing book “How to make money in stocks”. It combines fundamentals and technical analysis into a cohesive strategy.
Below we will summarize the key elements of the strategy:
C – Current Earnings. Has the company made a strong recent earnings announcement which is considerably more than the earnings one year previously?
A – Annual Earnings. Does the company show good earnings growth for the past 5 years?
N – New Products or Management. Has the company innovated its product base or injected new management to seek higher performance?
S – Supply and Demand. Does the stock have increasing demand in the market place, is volume increasing with price?
L – Leaders. Is the company a leader in its marketplace?
I – Institutional Ownership. Does the stock have some institutional ownership, but not too much ownership?
M – Market Direction. Understanding the overall market direction is important to be able to time your purchase of the stock effectively.
The CANSLIM method is a well thought out strategy combining fundamental success factors with market timing.
A lot of people follow this method so it can be difficult to implement successfully.
Average trade duration
Medium Term – months to years
Effort to maintain the strategy