CAN SLIM


CAN SLIM refers to the acronym developed by the American stock research and education company Investor's Business Daily. IBD claims CANSLIM represents the seven characteristics that top-performing stocks often share before making their biggest price gains. It was developed in the 1950s by Investor's Business Daily founder William O'Neil. The method was named the top-performing investment strategy from 1998-2009 by the American Association of Individual Investors. In 2015, an exchange-traded fund was launched focusing on the companies listed on the IBD 50, a computer generated list published by Investors Business Daily that highlights stocks based on the CAN SLIM investment criteria.

Investing mechanism and process

CAN SLIM is a growth stock investing strategy formulated from a study of stock market winners dating back to 1953 in the book How to Make Money in Stocks: A Winning System In Good Times or Bad. This strategy involves implementation of both technical analysis and fundamental analysis.
The objective of the strategy is to discover leading stocks before they make major price advances. These pre-advance periods are "buy points" for stocks as they emerge from price consolidation areas, most often in the form of a "cup-with-handle" chart pattern, of at least 7 weeks on weekly price charts.
The strategy is one that strongly encourages cutting all losses at no more than 7% or 8% below the buy point, with no exceptions, to minimize losses and to preserve gains. It is stated in the book, that buying stocks of solid companies should generally lessen chances of having to cut losses, since a strong company will usually shoot up—in bull markets—rather than descend. Some investors have criticized the strategy when they didn't use the stop-loss criterion; O'Neil has replied that you have to use the whole strategy and not just the parts you like.
O'Neil has stated that the CANSLIM strategy is not momentum investing, but that the system identifies companies with strong fundamentals—big sales and earnings increases which is a result of unique new products or services—and encourages buying their stock when they emerge from price consolidation periods and before they advance dramatically in price.

Acronym

The seven parts of the acronym are as follows: