CANSLIM

CANSLIM is a strategy for investing that was pioneered by William J. O’Neil, who later went on to found Investor’s Business Daily. The strategy is a mixture of fundamental analysis and technical analysis. Each of the letters in the acronym describes a different metric used to pick a stock:



• C – Current Earnings: current earnings growth for the stock must be at least in the 20%-25% range
• A – Annual Earnings: average annual earnings growth for the stock over the past five years should be substantial, around 25%.
• N – New Things: the company should be involved in developing new services or products; this can sometimes even refer to new highs for the stock price.
• S – Shares Outstanding: the company should have less than 30 million shares outstanding so that it has the potential for good growth.
• L – Leading Stocks: the company should be a leader in its industry.
• I – Institutional Ownership: the stock should have at least a couple of institutional shareholders (e.g. pension funds, endowments, etc.).
• M – Market Conditions: the market should be moving upward or ready to move upward.
Most of the principals involved in CANSLIM investing make sense to experts. Of course, figuring out whether or not a company meets these seven criteria is a whole other story.