Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

CAN SLIM

What it is:

CAN SLIM is an investing system that uses seven fundamental and technical traits to pick stocks.

How it works (Example):

The system, developed in the 1950s by Investor's Business Daily founder William J. O'Neil, relies on seven traits.
1. C = Current quarter earnings growth of at least 25% (some say 18%-20%)
2. A = Annual earnings growth of at least 25% for the past three years.
3. N = New product, service, management or price high.
4. S = Supply of the stock is less than the demand, often marked by heavy accumulation by institutional investors and/or smaller float size.
5. L = Leading stock in a leading industry group, often measured by a relative strength index rating of at least 70.
6. I = Institutional investors (usually at least three) account for about 75% of the stock's activity.
7. M = Market and stock are heading in the same direction.

Why it Matters:

CAN SLIM rests on the philosophy that high-performing stocks show high current and long-term profit growth, show market leadership, have institutional sponsorship, and follow the overall direction of the market. Under this system, cheap stocks are often put aside because they are "cheap for a reason." The idea is to have a way to wade through the thousands of stocks on the market, remove emotion from investing and combine the most favorable aspects of value, growth, fundamental and technical analysis. For the 10 years ended 03/31/17, the CAN SLIM method returned 15.4% annually compared with 5.2% annual returns for the S&P 500, according to the American Association of Individual Investors.