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canslim

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.

Advantages

The CANSLIM method is a well thought out strategy combining fundamental success factors with market timing.

Disadvantages

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

Medium

Risk Rating

Medium

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