CANSLIM is System for Selecting Stocks. It is created by William J.O’Neil, the founder of Investor’s Business Daily.
Each letter represents a key factor to look out for when looking to purchase stocks in a company.
C – current Quarterly earnings of a firm
– last Quarterly earnings have > 20% growth
A – annual earnings growth
– annual EPS growth of 25 to 50%
N – new product, service, management or new high in price level
S – supply and demand
– smaller firms with smaller number of shares < 25 mil
– less shares means more movement
Also, look out for re- purchasing which signals management confidence
L – leader or laggard
– relative price strength ~ 70%
– ΔP stock/ ΔIndex over the same period of time
I – institutional sponsorship
– ideally between 3 and 10 sponsors . If over-owned, be cautious
M – market direction
– uptrend/ under pressure/ correction
– invest in time of definite uptrend
– see Indices for trend