Can Slim

Posted in Finance, Accounting and Economics Terms, Total Reads: 386
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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.

 

Hence, this concludes the definition of Can Slim along with its overview.

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