Finding the Next Multi-bagger: A Plan of Attack using CANSLIM strategy
10-50-100 baggers are hard to come by. The success stories of these stocks inspire investors all over the world, and they keep them coming back to find the market’s rare gems time and time again.
These exponential growth stocks can return $100 for every $1 invested, transforming a $1,000 investment into a $100,000 investment, a $10,000 investment into a $1 million investment, or a $100,000 investment into a $10 million investment.
For example, The stock price of Tesoro Enterprises, Inc. (OTCMKTS: TSNP) increased from $0.0004 per share on September 30,2020 to $4.83 on February 01,2021 per share (growth of 21,510%). OTC stocks are risky but they frequently provide opportunity to make 10-50-100 baggers.
A better illustration for CANSLIM stock would be Inventronics, a business we have been monitoring (TSX.V: IVX), Inventronics has performed incredibly well, expanding by over 20x in only a short two-year period, despite how poorly the stock market has performed over the past two years.
Inventronics Ltd. creates and manufactures protective enclosures for utility infrastructure. Its products are used in telecommunication networks, cable television networks, electric power distribution networks, traffic control systems, and oil and gas installations to house and protect passive and/or active electrical and electronic components in both outdoor and indoor applications. The company was established on February 10, 1970, and is based in Brandon, Canada.
What is CANSLIM investing?
As per Investing.com CANSLIM is a system for selecting growth stocks by using a combination of fundamental and technical analysis techniques. It was created by Investor’s Business Daily founder William J. O’Neil.
CANSLIM strategy was taken from William O’Neil, the creator of Investor’s Business Daily, in his book How to Make Money in Stocks.
The CANSLIM strategy’s goal is to identify promising stocks before they experience significant price increases. These pre-advance phases, which typically take the form of a “cup-with-handle” chart pattern for a minimum of seven weeks on weekly price charts, are “buy points” for stocks as they emerge from price consolidation zones (or “bases”)
With no exclusions, the method strongly recommends cutting all losses at a price that is no more than 7% or 8% below the buy point in order to reduce losses and protect gains. The book claims that investing in shares of strong companies should generally reduce the likelihood of having to cut losses because strong companies—those with good current quarterly earnings-per-share growth, annual growth rate, and other strong fundamentals—tend to soar rather than decline during bull markets.
O’Neil recommends that you must employ the entire method and not just the parts you like.
The acronym is sometimes written as CAN SLIM.
Who is William O’Neil?
Born in America on March 25, 1933, William O’Neil is a writer, businessman, and stockbroker best known for founding Investor’s Business Daily, a publication that competes with The Wall Street Journal. O’Neil published a number of books, The Successful Investor, and 24 Essential Lessons for Investment Success & How to Make Money in Stocks which explains CANSLIM Strategy.
What does CANSLIM Stands for?
Each letter in the acronym CAN SLIM, often known as “CANSLIM,” stands for a crucial quality to look for in a business.
The acronyms of CAN SLIM are
- C – current quarterly earnings,
- A – annual earnings,
- N – new product, service, or management,
- S – supply and demand,
- L – leaders or laggards,
- I – institutional ownership,
- M – market direction.
C – current quarterly earnings
When compared to the same quarter a year ago, current quarterly earnings per share (EPS) ought to increase by at least 25%. Additionally, recent quarters’ faster EPS growth is an extremely promising indicator.
A – annual earnings
Over the previous five years, annual earnings should have increased. Additionally, throughout the previous three years, annual EPS growth should have been at least 25% or higher.
N – new product, service, or management
A competent management team that has just been engaged, new goods, or services should all be driving the stock price and favorably benefiting the company’s future.
S – supply and demand
With comparison to other companies, the company should have a small float (fewer shares outstanding) and a high trading volume during price increases.
L – leaders or laggards
A relative price strength of 80 or above is necessary for the company. Relative price strength is a technical indicator and shows the performance of a stock relative to the market.
I – institutional ownership
Growing numbers of institutional investors should be purchasing the company’s stock. Banks, insurance firms, mutual funds, pension plans, and governmental entities are a few examples of institutional investors.
M – market direction
Purchases of stocks should only be made when the market is moving upward. According to O’Neil, if the market is falling, a stock may meet the first six criteria of CAN SLIM and still fall.
Does the can slim method work?
Since 2003, the CANSLIM technique has consistently outperformed the S&P 500, but at a cost: extreme volatility and significant drawdowns. Given that CANSLIM favors small-cap stocks, the outperformance may as well be attributable to the long-term small-cap bias: Small-cap stocks have outperformed large-cap stocks over several decades, most likely because they have a longer runway. Refer to the backtest done by quantifiedstrategies.com
When To Use The CANSLIM Investing strategy
A bull market is the ideal time to begin using the CANSLIM strategy. Great returns are possible if you invest during a bull market when prices are rising.
Does CANSLIM work in bear markets?
The CANSLIM strategy is only applied when the market is in a bullish period.