CANSLIM Stock Screening Strategy, CANSLIM Investing

Tuesday, April 15, 2008

CANSLIM Stock Screening Strategy

CANSLIM is a stock screening strategy developed by William O’Neil. CANSLIM is a highly successful strategy for trading/investing stocks as it gives proper guidelines, integrates major investment tactics and keeps minimum subjectivity. CANSLIM is an acronym of various factors a trader/investor should look when screening the stock.

C : Current Earnings – CANSLIM traders look for stocks which have large increase in current earnings per share (more than 18%)
A : Annual Earnings – Annual earnings per share should show reasonable growth (at least 25% above than last 3-5 years)
N : New - CANSLIM traders target stocks of companies with new product(s), new management, new changes, new market entry, or new price heights.
S : Shares Outstanding or Supply/Demand - CANSLIM traders look for companies with less shares outstanding (below 25million; below 5million is better). So they often avoid larger and older companies with large capitalization. The idea is that if good news comes up stocks of companies with lesser number of shares outstanding will go up faster.
L : Leader or Loser – Every industry should have a leader and followers. It is always good to invest in leaders.
I : Institutional Sponsor – The number of institutional sponsors should be 3 to 10. Better to look for companies with institutional sponsors with above average performance.
M : Market Trends – Traders should use various trend prediction and confirmation tools to find market trends. Buy when stocks are going up and major markets are bullish.