Can Slim Strategy
A method of picking stocks promoted by William J O'Neil, who started Investor's Business Daily, a competitor of The Wall Street Journal.
CAN SLIM is an acronym for the elements O'Neil looks at before deciding to buy.
C - Current earnings. Stocks that satisfy the CAN SLIM formula have unusually large increases in current earnings, usually 25 percent or more.
A - Annual earnings. The annual earnings per share should show a growth rate exceeding 25 percent over the past five years.
N - New Highs. O'Neil suggests buying stocks that are making new highs after breaking out of a period of consolidation.
S - Shares outstanding. Stocks meeting the CAN SLIM formula have less than 30 million shares outstanding, with preferential treatment given to those with less than 5 million outstanding. Pay special attention to those that show big increases in recent daily trading volume.
L - Leading stocks, meaning stocks should be selected from the leading companies in the strongest industries. Attention should be paid to the relative strength of both the stock and the group in which it is in.
I - Institutional ownership. At least one large institution should be owners or buyers of the stock.
M - Market conditions. In the CAN SLIM formula, knowing the overall directional trend of the market is as important as the stocks you select. O'Neil recommends watching the 200-day moving average of the Dow Jones industrial average as well as changes in the daily volume.