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CANSLIM is not a way to lose weight but it is a simple way to remember 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 marketplace, 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 with an edge.
Average trade duration
Medium Term – months to years
Effort to maintain the strategy
Medium – you will need to keeps up to date on the company fundamentals, competition, business climate and the quarterly financial results and balance sheet changes.
Risk Rating
Medium
