CAN SLIM Stocks Analysis - Investors Support Network

Transcription

CAN SLIM
Stocks Analysis
CAN SLIM principles and information included in this presentation are described in
Investors Business Daily publications and on their website:
http://www.investors.com/default.htm
As well as in William J. O'Neil’s books such as:
How to Make Money in Stocks:
A Winning System in Good Times and Bad,
Fourth Edition Paperback – Jun 8 2009
by William O'Neil (Author)
24 Essential Lessons for Investment Success:
Learn the Most Important Investment Techniques
by William O'Neil (Author)
An additional source of information used in this presentation is the Stock Screens
based on CAN SLIM criteria developed and available at the American Association
of Individual Investors website: http://www.aaii.com/
PPI 2, S2, Fall 2015, Presented by Greg Shtock
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CAN SLIM
Stocks Analysis
CAN SLIM methodology was developed by William O'Neil, founder of Investor's
Business Daily and O'Neil & Co. Inc.
Mr. O'Neil began his career as a stockbroker in 1958 with Hayden, Stone & Company,
where his passion for stock picking led him to develop his own computerized study of
successful stocks based on historical precedent. He documented his findings as The
Model Book of Greatest Stock Market Winners, a pioneering study that became the
foundation of the method William O'Neil + Company uses today.
In 1963, he founded William O'Neil + Co. Incorporated where he continued his work
developing securities databases and providing independent research for institutional
investment managers. The O'Neil Database™ currently encompasses over 70,000
stocks and funds covering over 70 countries.
In 1984, he launched Investor's Daily (later renamed Investor's Business Daily®) to fill
an information gap for individual investors and the business community.
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CAN SLIM
Stocks Analysis
Mr. O'Neil’s approach to investing stems from an analysis covering 40 years
of market data which examined each year's stocks with the largest
percentage price increase to find the common characteristics of the "most
successful stocks." These common characteristics include both fundamental
factors, inherent in the nature of the firm and industry, and technical factors
from observing the price patterns of the stocks.
This investment approach is often classified as either "value-based" or
"growth-based" strategies that focus on fundamental company
characteristics. It also combines both fundamental and technical factors.
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CAN SLIM
Stocks Analysis
What is the CAN SLIM methodology?
Well… it’s not Canadian and it is not really “Slim.”
CAN SLIM is the acronym for William J. O'Neil's investment strategy based on the
seven common characteristics found in his study of the greatest stock market winners.
C = Current Earnings Growth
A = Annual Earnings Growth
N = New Products, New Services, New Management, New Price Highs
S = Supply & Demand
L = Leader or Laggard
I = Institutional Sponsorship
M = Market
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O'Neil's study of winning stocks highlights the strong quarterly
earnings increase per share of the securities prior to their
significant price run-ups.
 A minimum increase in quarterly earnings of 18% to 20% over the same
quarterly period one year ago is recommended.
 Many companies have seasonal earnings patterns. Therefore, comparing
current quarter results relative to the previous quarter results does not
represent the real growth.
 Another item to look for when screening for percentage changes is a
meaningless figure created by having a very small base number or change
from negative to positive earnings.
 The issue of how to handle extraordinary earnings comes into play. One-time
events can distort the actual trend in earnings and make company
performance look better or worse.
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 Buying shares back or issuing new shares can also distort the actual trend in
earnings. all non-recurring items should be excluded from the analysis. The stock
screener system based on CAN SLIM methodology examines growth in earnings from
continuing operations only.
 O'Neil also likes to see an increasing rate of growth.
 Growth rate from the quarter one year ago to the latest quarter must be higher than
the previous quarter's increase from its counterpart one year prior. Basically, the
current quarter's growth over the past 12-months must exceed the growth in
previous 12-month period.
 As a confirmation of the quarterly earnings screen O'Neil recommends that you
check the industry group and locate at least one other noteworthy stock. Strong
industry fundamentals should show up for a number of companies.
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A = Annual Earnings Growth
 The primary screen for annual earning increases that O'Neil uses is
growth in earnings per share in each of the last five years.
 In applying this screen we specify that earnings per share from
continuing operations must be higher for each year when
compared to the previous year.
 Earnings over the last 12 months should be greater than or equal to
earnings from the latest fiscal year.
 The winning companies in O'Neil's study had a median growth rate
of 21%. The O'Neil screen in Stock Investor specifies a minimum
annual growth rate of 25% in earnings per share from continuing
operations over the last five years.
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N = New Products, New Services, New Management, New Price Highs
 95% of the winning stocks had some sort of fundamental spark
to push the company ahead of the pack. This catalyst could be
a new product or service, a new management team after a
period of lackluster performance or even a structural change in
a company's industry such as a new technology.
 A second consideration that O'Neil emphasizes is that investors should pursue stocks
showing strong upward price movements.
 O'Neil says that stocks that appear too high-priced and/or risky most often go even
higher while stocks that appear low priced often go even lower. A stock making a new
high after undergoing a period of price correction and consolidation is especially
interesting.
 Investor's Business Daily highlights stocks within 10% of their 52-week high and this is
the criterion established for stocks screen. Used independently the screen allows about
one-third of the companies to pass the filter.
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S = Supply and Demand: Small Capitalization Plus Volume Demand
 Companies with a smaller number of shares outstanding should
increase more quickly than those with a large number of
outstanding shares.
 O'Neil found that 95% of the winning stocks had fewer than 25
million shares outstanding, while the median for the group was
4.6 million.
 O'Neil suggests that investors consider looking at the actual "float" of the stock. The float
is the number of shares in the hands of the public—determined by subtracting the
number of shares held by management from the number of shares outstanding. Thus we
establish a screen requiring stock with fewer than 20 million shares available through the
float.
 Share buyback, which reduces the public float of company's stock, is positive because it
reduces the supply of the company's stock while boosting per share earnings.
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L = Leader or Laggard
 Scan for rapidly growing companies that are market leaders in
rapidly expanding industries. O'Neil advocates buying among
the best two or three stocks in a group.
 O'Neil suggests using relative strength to identify market leaders. Relative strength
compares the performance of a stock relative to the market as a whole.
 Investor's Business Daily presents the percentage ranking of stocks and O'Neil
recommends only looking for stocks with a percentage rank of 70% or better.
 When monitoring your portfolio, O'Neil recommends that you sell off your worstperforming stocks and keep your best-performing stocks a little longer. You should try to
avoid letting your ego dictate your actions. It is best to recognize a mistake early, before
it becomes a major problem.
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I = Institutional Sponsorship
 O'Neil warns against selecting low-priced stocks
with small capitalization and no institutional
ownership, because these stocks have poor
liquidity and often carry a lower-grade rating.
 A stock needs a few institutional sponsors for it to show above-market
performance. Three to 10 institutional owners are suggested as a reasonable
minimum number.
 IBD as well as the Stock Investor Pro, which is an American Association of
Individual Investors Stocks Screening tool, reports the percentage of shares
held by institutions and the number of institutions. They established a screen
for stocks to have at least five institutional owners.
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M = Market Direction
 The trend of the overall market has a tremendous
impact on the performance of your portfolio.
 O'Neil finds it difficult to fight the trend so it is
important to determine if you are in a bull or bear
market.
 When the market peaks and begins a major reversal,
O'Neil recommends that you try to put 25% of your
portfolio into cash.
 If the last four or five stocks you purchased after a
careful analysis are not showing a profit, it may
signal a negative shift in the general market.
 Market top also includes heavy volume without
significant price progress and the divergence of key
averages. At market tops, you often find stocks that
were past market leaders faltering while poorquality stocks are showing up on the most active
lists.
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How to find CAN SLIM stocks, tools and stocks screens.
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This chart is for illustration purposes only.
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IBD SMART NYSE + NASDAQ Tables With 10 Vital Ratings.
1. IBD Composite Rating has 5 Smart- Select Ratings, 1 -99, with 99 the best. Ratings
of 98 or more are boldfaced.
2. Earnings Per Share (EPS) rating compares your stock's last 2 quarters and 3 years
EPS growth to all stocks. Ratings of 90 mean earns outperformed 90% of all stocks
3. Relative Strength (RS) Stock's relative price change in last 12 months vs. all stocks.
Best rate 80 or more
4. Sales+Profit Margins+ROE Rating combines recent sales, profit margins and return
on equity into an A to E rating. ROE over 17% is preferred
5. Accumulation/Distribution Our price and vol. formula shows if your stock is under
accumulation (buying) or distribution (selling) last 3 months. A buying; E selling
6. Vol % Change is volume traded yesterday vs. average daily volume last 50 days. Vol
% chg. + 50% & up bolded
7. 52-Week High is boldfaced if closing price within 10% of new high.
8. Boldfaced stocks are up 1 or more or new high. Underlined stocks are down 1 or
more or at a new low.
9. Stocks have EPS & RS Ratings of 80 or more and were IPOs in the last 15 years
10. * after stock symbol means stock story at Investors.co
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http://www.innovatorfunds.com/fundETF.php
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CAN SLIM Stocks Analysis - Investors Support Network

Transcription

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