I have spent a good amount of time over the past years studying the stock market, in particular the teachings of William J. O'Neil. Something I quickly learned is that the term "CAN SLIM" is intellectual property of William O'Neil + Co, and IBD's staffers will go to great lengths to protect O'neil's intellectual property.Astute readers may have noticed that I refer to the technical formation coined as an "O'Neil Cup With Handle".
"CAN SLIM," is another acronym, which is vigorously defended as O'Neil's intellectual property.I feel that I have used these terms in good faith and fair use, Though I have never received any notice from O'Neil + Co concerning this blog, I can't help but think Mr. O'Neil must at least find my blog a little bit interesting. If it weren't for O'Neil, I would never have achieved the gains I have made in the stock market.I present the following with all due respect to Mr. O'Neil and his years of hard work.
For those who aren't familiar, CAN SLIM stands for the following:
C - Current EPS growth above 25% for two most recent quarters
A - Annual EPS growth above 15% for the last five years.
N - New: price highs, new management, new company (just past IPO)
S - Supply, companies with a low number of shares outstanding have the potential to move farthest, fastest.
L - Leading stocks in leading groups tend to move highest the fastest.
I - Institutional support. Understand which institutions own your stock. Do they have strong performance? Fidelity has owned great amounts of stock. of my profitable positions.
M - Market direction. Don't buy during corrections or bears. Buy top rated stocks shortly after a general market's "follow through," more of O"Neils intellectual property.
Without learning O'Neil's stock selection formula, I am certain that I would not have been able to produce the 1000%+ gain I have enjoyed over the past years. To quote Gil Morales, I believe William O'Neil is the greatest investor who ever lived.I believe I have something to add to CAN SLIM, which will help smaller investors pick EXCELLENT stocks, instead of just good one.
In my stock analysis I now add "FUZZY RED" to O'Neil's "CAN SLIM" acronym to help distill the true power names from second rate hodads, FUZZY - I have borrowed this term from the academic community. FUZZY Logic defined means A form of reasoning, derived from fuzzy set theory, whereby a truth value. need not be exactly zero (false) or one (true), but rather can be zero, one, or any value in between.Some of history's best stocks suffered a minor flaw that have kept some traders away, thereby missing a possibly big price move.
As I have written before, I prefer to buy marginally flawed glamour setups. For example, FSYS's most recent base was somewhat short and choppy. By using fuzzy logic I was able to "forgive" the stocks marginally flawed basebuilding by focusing on it's stunning fundamentals.
R - R.O.E. Any stock worth buying should have a minimal R.O.E. of 18% if not much higher.
E - Estimates. Future E.P.S. estimates are best when Wall St. is constantly revising estimates to the upside.
D - Debt. The less debt the better. Every single stock in which I have earned 20%+ returns had debt of zero, or close to zero.
To turn up the volume of power stocks, try the FUZZY RED CANSLIM screen. All stocks with the potential to move higher should meet the criteria of this screen at some point in their lives. One such stock is Fuel Systems Solutions (FSYS): Monster E.P.S. growth, almost no debt, and an 11% R.O.E. The number of shares out standing remains very tight, and Fidelity is the biggest institutional holder. Did this stock exhibit all the FUZZY RED CANSLIM data points? Clearly it did not, even though it has become one of 2008's biggest market winners.
$1290.46997 (08/24/08)
