For 09/17/2015 issue, please see the following article: http://www.gurufocus.com/news/361637/affid/127983
This screen is based on companies that meet O’Neil’s CAN SLIM growth with momentum strategy. This methodology was created by William O’Neil.
The following is an excerpt from Wikipedia (https://en.wikipedia.org/wiki/CAN_SLIM):
“CAN SLIM refers to the seven-pronged mnemonic publicized by the American newspaper Investor’s Business Daily, which claims to be a checklist of the characteristics performing stocks tend to share before their biggest gains. It was developed by Investor’s Business Daily editor William O’Neil who has reportedly made several hundreds of millions of dollars by consistently using its approach.
The seven parts of the mnemonic are as follows:
- C stands for Current earnings. Per share, current earnings should be up to 25%. Additionally, if earnings are accelerating in recent quarters, this is a positive prognostic sign.
- A stands for Annual earnings, which should be up 25% or more in each of the last three years. Annual returns on equity should be 17% or more.
- N stands for New product or service, which refers to the idea that a company should have a new basic idea that fuels the earnings growth seen in the first two parts of the mnemonic. This product is what allows the stock to emerge from a proper chart pattern of its past earnings to allow it to continue to grow and achieve a new high for pricing. A notable example of this is Apple Computer’s iPod.
- S stands for Supply and demand. An index of a stock’s demand can be seen by the trading volume of the stock, particularly during price increases.
- L stands for Leader or laggard? O’Neil suggests buying “the leading stock in a leading industry”. This somewhat qualitative measurement can be more objectively measured by the Relative Price Strength Rating (RPSR) of the stock, an index designed to measure the price of stock over the past 12 months in comparison to the rest of the market based on the S&P 500 or the TSE 300 over a set period of time.
- I stands for Institutional sponsorship, which refers to the ownership of the stock by mutual funds, particularly in recent quarters. A quantitative measure here is the Accumulation/Distribution Rating, which is a gauge of mutual fund activity in a particular stock.
- M stands for Market Direction, which is categorized into three – Market in Confirmed Uptrend, Market Uptrend Under Pressure, and Market in Correction. The S&P 500 and NASDAQ are studied to determine the market direction. During the time of investment, O’Neil prefers investing during times of definite uptrends of these indexes, as three out of four stocks tend to follow the general market pattern.”
Based on 2014 results, Adept Analyst’s O’Neil’s CAN SLIM portfolio had an average number of holdings was 6 and turnover was 57.1%.