CANSLIM is a highly successful stock market strategy devised by William J. O’Neil and discussed in his book, How to Make Money in Stocks.
The approach is based on a combination of principles from fundamental analysis and technical analysis and aims to allow practitioners to buy mispriced stocks soon before significant rises in their stock market prices. CANSLIM is based on:
- Current Quarterly Earnings per share. This number is taken from the company’s most recent financial results. The higher the most recent quarterly EPS, the better. Ideally it should be the highest in the company’s history.
- Annual Earnings Increases: Significant growth is required from year to year. We’re talking about increases over 20% a year for a few years.
- New Products, New Management, New Highs: Buy at a time that enables you to take advantage of some positive news. New management might be getting positive media coverage or a new product like Apple’s iPhone might have been launched. New highs could be appearing in the stock’s price chart.
- Supply and Demand: The shares should be in demand with a larger pool of potential buyers than potential sellers.
- Leader or Laggard: Buy the leading stock in any sector (the one whose price is advancing faster) and avoid the laggards.
- Institutional Sponsorship: Are the big boys buying?
- Market Direction: Buy when the market is in an uptrend.