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Definition: Can Slim
‘Can slim’ is a seven letter mneumonic and investing philosophy popularised and originally published by the American magazine, Investor’s Business Daily. In a nutshell, Can Slim encapsulates the characteristics and attributes that stocks exhibit before posting some of their major gains. It is basically a stock picking methodology.
The foundation of the Can Slim method is that best performing stocks generally exhibit 7 common traits, before they advance to make huge price gains. It is a growth investment strategy derived from historical stock performances. This strategy comprises both fundamental and technical analysis components. The focus of the Can-Slim investment strategy is to discover leading stocks prior to their major stock advances.
Can Slim’s method/system of stock selection was created by William O’Neil, the founder of the Investor’s Business daily. In its essence, this system is a acronym C-A-N-S-L-I-M. Each letter in this acronym refers to a key factor attribute of the company under analysis.
C- Current Earnings (usually quarterly earnings), on a per share basis, an accelerating trend is viewed positively.
A- Annual Earnings
N- New Product, Service, Management or price high, for instance, Apple Computer’s i-pod
S- Supply and Demand ( significance of high relative strength )
L- Leader or laggard, ‘leading stock in a leading industry’ was pioneered by the CanSlim strategy
I- Institutional Sponsorship, refers to ownership of stock by mutual funds
M- Market direction, bullish or bearish by reviewing market averages on a daily basis.
As seen above, the Can Slim method involves both qualitative and quantitative criteria, where the quantitative measures involve identifying price patterns on an individual price chart of a stock. Purchasing, screening and selling common stock is aided by the tool that is Can Slim.
The Can-Slim strategy is distinct from momentum investing. It encourages capping losses at 7-8% and has historically been successful in recording gains of over 25% from 1998 to 2010. Hence it has been observed that year on year, the Can Slim investing system has outperformed benchmark indices such as the S&P 500.