The CANSLIM method for long term investing

No one style of investing fits all people, but I subscribe to the 45/45/10
Investing Method. 45% of your investing should in CASH FLOW strategies,
45% growth strategies, 10% (or less) in high risk, high reward strategies.

One of the first "systems" I learned in my twenties, was the CANSLIM

method of investing. A system developed by the founder of IBD, Investors
Business Daily. This system works very well in an up-trending market, OK
in a flat market, and poorly in a down trending market.

All stocks, are companies, and have financials. Some good, some bad, but
never equal. O'Neil found that just before a company did very well
financially, and in terms of stock growth, there were common
characteristics. Common elements, in their financial statistics, that often
can predict, stock growth. In addition, he noted some more subjective, but
measurable activates, that were good indicators of future stock growth. A
very strong indicator of gains.

Many of these indicators are pure financial bench marks; we can look for in
a company, such as: sales growth, and earnings over time. Some a little
more subjective, but still quantifiable. For example: product development,
being a leader or laggard in the sector (industry) and institutional buying.

Thus O'Neil developed the CAN SLIM method of picking stocks, which has
served me and many other investors very well. A checklist for the seven
common elements that indicate a stock is going to have solid gains in the
future. This strategy can reduce risk and increase returns when picking
stocks.

CANSLIM is an acronym that stands for:

C. Current Earnings.
A. Annual Earnings.
N. New Products.
S. Supply and Demand.
L. Leader or Laggard.
I. Institutional Investing.
M. Market Direction.
The system uses key numbers, and characteristics of the company to
evaluate a stock before you buy.
C= Current earnings per share should be up 25%. Accelerating in recent
quarters. Quarterly sales should also be up 25% or more.

A= Annual earnings should be up 25% or more in each of the last three

years. Annual return on equity should be at least 17% or more.

N= The company should have new products or services that drive

earnings. At this point, you might check the chart of the stock, and see if
there is new upward trending or positive pattern (breaking resistance for
example or new highs).

S= Supply and demand. Shares outstanding can be large or small. But as

the stock price increases, there should be increase in the trading volume
too.

L= Leader or laggard. The stock should be in the top 20 percent of the

industry or sector analysis. Therefore, you need a Relative Price Strength
Rating of 80 or higher.

I= Institutional buying (mutual funds, investment houses) should be

increasing. The big boys are buying more of the stock, and therefore,
demand is increasing, and supply decreasing.

M= The market need to be going up. Indexes: Dow, S&P 500, RUT and
NASDAQ are positive and moving up. Remember three out of four stocks
trend with the market.
This is a solid strategy for long term growth. Enjoy. Jim Francis
www.jimfrancis.