Understanding Stocks

WANT TO MAKE MONEY SLOWLY? TRY THESE INVESTMENT STRATEGIES 75
CANSLIM: A Disciplined Method
of Picking Stocks
William O’Neil, founder and publisher of Investor’s Business
Daily, designed a rule-based investing system called CANSLIM.
What is most helpful about CANSLIM is that it combines both
technical and fundamental analysis, although it leans more
toward the technical. Each letter of CANSLIM stands for a characteristic
of a winning stock:
C: Current quarterly earnings per share
A: Annual earnings increase
N: New products, new management, new highs
S: Supply and demand
L: Leader or laggard
I: Institutional sponsorship
M: Market direction
Ideally, a winning stock should have all of these attributes,
according to what O’Neil wrote in his best-selling book How to
Make Money in Stocks.
C: Buy stocks with large increases in current earnings, preferably
25 percent or more. The higher the earnings per share,
the better. Buy stocks in companies with accelerating earnings,
especially when compared to previous quarters or
years.
A: Concentrate on stocks that have increased earnings per share
every year for the last 3 years. In addition, look for stocks
with recent quarterly earnings improvement. Stocks with
strong earnings improvement will have a higher probability
of success.
N: Look for companies that have introduced new products or
changed management. In addition, using technical analysis,