Introduction to CANSLIM

1
Introduction to CANSLIM

• California Investment Association
• University of California, Berkeley
• Haas School of Business
• September 11th, 2007

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What did you guys come up with?

• Guess - GES
• GameStop GME
• Southern Peru Copper - PCU
• Altria - MO
• Kraft - KFT
• Amerisafe - AMSF
• Toyota - TM

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What is CANSLIM?

• An acronym/tool for finding winners and reducing
  risk
• Created by one of the greatest investors of all
  time William ONeil
• Based on a 40-year study of the most successful
  stocks of all time
• Ill go over the first 4 letters
• C-A-N-S

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C Current Earnings

• Current Earnings Per Share should be up 25 or
  more
• Look for acceleration in the earnings
• Sales up 25 too

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Source MSN Money
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After clicking Financial Results This page will
come up.
Source MSN Money
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A Annual Sales

• Should be up 20-25 or more in each of the last
  3-5 years
• Annual ROE should be 17 or more

Source MSN Money
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N New

• Does the company have a new, innovative product
  or service thats fueling growth?
• Is the stock emerging for a proper chart pattern?
  At new highs?

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New Ideas New America

• Today in IBD
• Scroll Down
• Click New America Section

Source Investors.com
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New Highs

• Usually its buy low, sell high
• Buy High, Sell Higher
• ONeils study of the three best mutual funds for
  the previous two years
• Dreyfus Fund was the best studied the 100 best
  stocks in its portfolio
• Every single new stock was purchased at the
  highest price the stock had sold for the past
  year.

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Example CROX
Most investors would think, Its too high here.
But no, CROX went on to 70 gains in 3 months!
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What was fueling Crocs growth?
Source Crocs.com
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Example - RIMM
Its topping! Sell now!!
Those who sold RIMM missed out on 125 gains in
10 months! (split)
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Research in Motions Catalyst
Source Blackberry.com
RIM capitalized on its first popular blackberry
model and expanded its product line.
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The Lesson?

• Dont be afraid to buy when a stock is making new
  all-time, 52-week highs
• Warning This type of investing ONLY WORKS IN A
  BULL MARKET!
• Also, try and identify whats driving a companys
  growth

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S - Supply

• A stocks volume demand for shares
• A strong stock breakout sees volume twice the
  typical amount
• Look for companies that dont have many analysts,
  arent followed by the media
• Low institutional ownership
• Small shares outstanding

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Looking for ownership

• MSN Money
• Ownership tab
• Institutional Ownership ()
• Not as critical if other traits present
• Key smaller companies lt10B with less media
  coverage

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Looking for volume
Volume of 8M vs. 1M on big price move
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Next Week

• Continue our CANSLIM discussion
• Ill talk about L-I-M
• Begin gathering ideas for stock presentations to
  be made on 9/25