Legendary US investor & author William J. O'Neil did a comprehensive study of the greatest winning stocks spanning the past 125 years. He then put together a set of common characteristics to these past market leaders and coined the term CAN SLIM. Each letter stands for one of the seven chief characteristics of these greatest winning stocks
C: Current Quarterly Earnings
Look for stocks with big earnings in their latest reported period. The bigger, the better.
A: Annual Earnings Growth
You want to see annual earnings growth of at least 25% for each of the last 3 years.
N: New Product, Service, Management or Price High
The biggest CAN SLIM winners had something NEW! New products,new services,new leadership, new price high or a new condition in the industry.
S: Supply and Demand
One of the most basic economic principles is the law of supply and demand which is most sharply demonstrated in the stock market.
L: Leader or Laggard
True leaders are those companies showing the best earnings growth, strongest sales, superior price performance and are in LEADING industry groups.
I: Institutional Sponsorship
Mutual funds, banks, and other professional investors are the big players that drive the market.
M: Market Direction
Study shows 3 out of 4 stocks follow the market's trend, so you always want to trade in sync with the market.