Our goal is simple: To help you make money when the stock market is up, and help you protect your gains as the market indexes start to weaken. It all starts with a basic game plan using the CAN SLIM Investing System.
For both beginning investors and market veterans, the CAN SLIM system forms the basis of the ratings, research and tools you’ll need to grow and protect your portfolio. It’s a strategy investors have been using for decades to minimize risk and maximize profits.
Each letter of CAN SLIM represents one of the seven key traits typically displayed by the best-performing stocks, giving you a step-by-step blue print for identifying the most promising stock picks.
C — Current Earnings
Look for companies with at least a 25% quarterly increase in earnings per share. Focus on companies that meet or beat that EPS gain in the most recent one or two quarters. Sales growth also should be at least 25% in the most recent quarter.
A — Annual Earnings
In addition to strong quarterly gains, look for powerful annual EPS growth. The best stocks should have at least a 25% rise over the past three years. Strong sales increases are also preferred.
N — New Products, New Trends, New Highs
From IBM (IBM) and Xerox (XRX) in the 1960s to Apple (AAPL), Alphabet (GOOGL) and Nvidia (NVDA) more recently, history’s top stocks have a breakthrough product or service driving explosive earnings growth. Such winners often tap into and lead a new industry trend. The N in CAN SLIM can also refer to new price high in the stock or new company management.
S — Supply And Demand
This element relates to stock charts, specifically the importance of volume. To confirm a stock is under strong demand, volume (i.e., the number of shares) should be at least 40% above average when a stock clears a proper buy point.
L — Leader Or Laggard
When looking for stock picks, focus on the true market leaders. Not necessarily the best-known companies, market leaders drive the trends within their industries and show exceptional relative strength. Pay attention to the No. 1 or No. 2 stock in the industry group in terms of company-related fundamentals and stock-related price performance. IBD Stock Checkup make it easy by instantly identifying a stock’s rank within its industry using unbiased, computer-generated stock ratings.
I — Institutional Sponsorship
Stocks increase in value when mutual funds and other institutional investors accumulate shares. Look for stocks with increasing professional ownership, especially from the best mutual funds. Use the Accumulation/Distribution Rating to see what top money managers are heavily buying or selling.
M — Market Direction
A stock can have all the other CAN SLIM traits, but if the general stock market indexes are weak, it’ll be an uphill battle for individual stocks to buck that trend. In fact, decades of market history show three out of four stocks will follow the underlying trend, either up or down. For best results, only aggressively buy stocks when the market is trending higher.