CAN SLIM
Definition
CAN SLIM is a growth-stock selection system created by William J. O’Neil (founder of Investor’s Business Daily, from his 1953 book How to Make Money in Stocks). Each letter is a characteristic typically present in high-performing stocks before their price surges. The core idea: buy solid companies before large institutional investors fully pile in.
Core Ideas
| Factor | Signal | |
|---|---|---|
| C | Current quarterly earnings | EPS up sharply YoY (>25%, ideally 50–100%+); ROE ≥ 17% for sustainability |
| A | Annual earnings | EPS growth >25% over the last 3–5 years |
| N | New | New products, management, or events pushing the stock to new highs |
| S | Supply & demand | Scarce supply + strong demand; buybacks reduce float |
| L | Leader vs laggard | Prefer leaders; use relative strength / RSI |
| I | Institutional sponsorship | A few quality institutions — get in before the crowd |
| M | Market direction | Buy in bull markets; ~75% of stocks follow the major indices |
Discipline
The system pairs the buy criteria with a strict stop-loss at 7–8% below the buy point — following the selection half without the stop-loss can be devastating. The “buy point” typically follows ≥7 weeks of price consolidation. Performance is highly dependent on M (market direction): even great stocks struggle in a downtrend.
Relationships
- Davis Double Play — complementary valuation lens (PE × EPS expansion)
- Portfolio Risk Management — the 7–8% stop-loss is disciplined risk control
- Trading & Finance
References
- A Guide to the CAN SLIM Stock-Picking System (SmartAsset)
- CANSLIM Explained (Investopedia)