The CAN SLIM Investing Strategy

The CAN SLIM investing approach is one of the modern growth stock investing strategies introduced by Bill O'Neil. It's an acronym for seven data points and qualities to seek out in a stock.

The CAN SLIM approach has no hard and fast rules but uses more rules of thumb. Also, this type of growth stock investing is more risky than value investing but can be the most rewarding. Note, that the qualities to look for in a company's stock are the data points and the qualities in the company itself. The qualities in the company itself are more important in this investing strategy. Because, more often than not, growth stock investors look for companies that have potential to become major stories and grab the attention of the investing public. This is different from value investors who look more at the principles of stock investing to find generally valuable opportunities to invest in. It would be like the difference between Krispy Kreme doughnuts becoming a rave for long enough to make a fortune investing it and one of the peripheral companies that supplied Apple computers with its silicon chips for computer processor development. The idea behind this type of growth investing is that the company will eventually be a part of a major index, or become a major story company.

The following defines the CAN SLIM investing approach:

Current quarterly earnings per share for the company should have higher than average growth.

Annual earnings for the company should also be growing higher than average.

New products, new management, and new highs should be visible when investing in this stock.

Supply and demand should be favorable to make money investing. In other words, high liquidity with few shares listed.

Leading company, the stock should be a leader in its peer group, not to mention it should be exhibiting strong price support.

Institutional sponsorship, the company should have a few institutional investors, like mutual fund investors to aid the demand.

Market direction must be favorable in order that all the preceding favorable qualities become fruitful for the investor.

A major point to take away is that this investing approach deals entirely with bullish stocks during economically stable times. The economy should be in an uptrend as well as the major stock index to indicate that it is time to invest in growing companies. If the market direction, the last part of CAN SLIM, is not expected to be favorable, not only will the growth stock be a failing investment for the time being, it will also be a risky one. Strong bull cycles warrant growth investing. This usually occurs after emerging from a recession or during prosperous times in a strong economy. A normal economic cycle is said to last no more than seven years without a recession. Yet there are longer time horizons for major cycles which could exhibit fifteen or twenty years of general bullish strength.

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