| Topic - The ABCs of CANSLIM Investing | Education Center |
A close cousin of momentum investing is an approach called CANSLIM. CANSLIM is a philosophy of screening, purchasing, and selling common stock described and developed by William J. O'Neil in his book "How To Make Money In Stocks." Using a computer database, O'Neil selected over 500 stocks that had the greatest increase in share price for the calendar years 1953 through 1993. He then analyzed these stocks in detail and determined seven common characteristics they all shared. These characteristics are represent by the acronym CANSLIM.
Each letter of CANSLIM represents one of the points that investors should consider when looking at a stock.
C = Current quarterly earnings per share (should show a major percentage increase compared to the prior year's same quarter)
A = Annual earnings (the company should be experiencing meaningful growth over the past five years)
N = New products, new management, new high prices
S = Supply and demand (small capitalization stocks with high trading volume)
L = Leader in the industry, not a laggard
I = Institutional sponsorship (a little goes a long way)
M = Market direction (should be headed up).