The CAN SLIM method is a methodology in the field of investment. It focuses on the detailed analysis of various variables to detect the best values or actions.
In the investment map, the CAN SLIM method stands out as a combined model of practices whose objective is to obtain returns in the markets. It makes use of certain indicators that we will detail below in order to know the situation of the values studied and their possible evolution over time.
Investor and popular economics author William J. O’Neil was its creator. He elaborated this investment system encompassed in his work “How to make money in stocks”.
Relevance of the CAN SLIM method
Its main importance is based on an exhaustive analysis work by the professional investor. As a result of this observation work, the aim is to find the best and most attractive values in the market.
As it is a complex system of observation and study, it is usually more related to investor profiles that are remote or averse to risk.
Compared to many other methodologies of the investment activity, the CAN SLIM system or method is defined based on the following main features to be highlighted:
- Long-term vision.
- Detailed estimate. Of the existing variables in the markets.
- Not recommended in the short term. Given the characteristics explained below, this method is not commonly applied in short-term investment behaviors.
Taking into account the previous conditions, the system proposes a study development from the confirming initials of CAN SLIM:
- C (Current earnings). Observation of the current benefits generated by a studied action. Basically, the possible increases observed in the three months prior to the analysis are analyzed to know the current performance of the security.
- A (Annual earnings). Through the focus on annual profits, it is about knowing the historical trend of the value, specifically in the previous five years.
- N(New). Three parameters are analyzed, such as the novelties related to the company in reference to management teams, product range or possible new highs. It is a tool aimed at locating possible emerging investment opportunities.
- S (Supply and demand). Investors try to know the availability of shares in the market, since often the scarcity of available shares translates into greater investor attractiveness and greater potential for appreciation.
- L (Leadership in markets). This method advises locating and betting on the leading companies in each sector.
- I (Institutional investors). On the other hand, it is usually reliable that the securities or shares in which it is invested have among their investors, in turn, shareholders or institutional investors. This shows its reliability and permanent performance.
- M (Market wishes). From an investment point of view, it is often advisable under this method to follow the major stock market trends. Although it is a risk-averse behavior, since it largely avoids situations of loss.
Taking into account the previous guidelines, the system or method developed by O’Neil tried to establish a detailed investment guide.
In this sense, the perspective of CAN SLIM is the commitment to thoughtful investments and with forecast of continued profits over time, incurring in the least possible number of stock market and financial risk situations.