CAN SLIM is a stock market investment strategy created by William J. O’Neil, founder of Investor’s Business Daily. It focuses on a company’s earnings, new factors, supply and demand, leadership, institutional sponsorship, and market direction. The method combines fundamental and technical analysis and is popular in the US, but not a guarantee of success.
CAN SLIM is an acronym for a stock market investment strategy formulated by William J. O’Neil, the founder of the popular stock market newspaper Investor’s Business Daily. Each letter represents an item that a business must own before it is considered a wise investment. The letters CAN are: “C,” which stands for quarterly earnings per share that have increased substantially from the prior year; “A” for an annual increase in earnings over the past five years; and the “N” for new factors in the company, such as newly introduced products or management teams. SLIM stands for the following: “S” means an investment environment where there is a small supply of company shares, but a high demand for them; “L” means that the stocks under consideration are leaders in their particular industry; “I” indicates a stock that is institutionally sponsored by large investors that demonstrate above-average performance in the market; and the “M” stands for a stock that has a positive market direction for growth.
The CAN SLIM investing method is known as value investing, where the true value of a company in the market is analyzed, as well as how the company is perceived by competitors and industry analysts. This is a form of fundamental analysis, but the process also uses part of the technical analysis approach to investing that relies more on statistics and mathematical models to predict the direction of stocks. Fundamental or value investing strategies are also geared to the long term and more precisely to very large stocks, such as those represented by the Dow Jones Industrial Average on the NYSE. Technical analysts tend to focus investment strategies on more volatile segments of the market, such as technology stocks and companies with smaller capitalization levels.
Investment strategies like O’Neil’s were made for the US trading environment, particularly the New York Stock Exchange (NYSE), although the financial theories on which CAN SLIM is based can be transferred to almost any modern stock market environment. Stock market investing is a tricky business in general, and many investors regard acronyms as a form of mnemonic, or memory trigger, to guide decision making as they employ a variety of financial theories. The familiarity of the theory is one of the reasons why CAN SLIM’s principles remain popular, and O’Neill continues to write best-selling books based on his ideas and lecture across the US.
While O’Neil has made millions of dollars using his CAN SLIM methodology over the years, including growing his initial portfolio 20 times in 26 months using the approach, it’s no guarantee of success. He first published the elements of the concept in his book, The Model Book of the Biggest Winners in the Stock Market, in 1971. Other elements of the CAN SLIM strategy, however, date back to O’Neil’s earlier writings in the 1950s. , and The business environment of international finance has changed a lot since then.
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