The Bull Hunters Guide

This continues our series of in-depth looks at the different strategies that are commonly employed by big name investors when they go to choose the stocks that they’re going to invest their hard earned money into. In fact, though it’s the case that everyone out there seems to have their own system for doing things, there are a fairly set number of strategies that seem to pop up over and over again. It’s these that we’ve been examining, as we feel they’re the most noteworthy.

CANSLIM

Having discussed all the basic and secondary strategies already, we’re going to move on to a stock picking strategy that represents something of a modern hybrid of picking techniques. It’s known as CANSLIM, and the whole idea is that it allows one to pay attention to a lot of different objective factors at the same time (seven to be exact) in an attempt to pick a stock without relying on subjective forecasts of future values that might not end up holding water.

Because it’s such a complex strategy, we’re going to cover it in two separate blog entries. Three of the aspects will be covered this time, and four next time, finishing it up.

What Does CANSLIM Stand For?

First off, the C in CANSLIM stands for “Current Earnings”. This is meant to indicate that you need to look at whether or not a stock’s earnings per share have risen on a consistent yearly basis. Generally speaking, if a stock’s earnings per share are continuing to increase over a period of a year, it’s said to be in good condition as far as this criteria is concerned.

The A stands for “Annual Earnings”. This indicates that one should look at whether or not a company has shown a good consistent growth over a period of years. Clearly, this implies that companies with a history of at least a few years tend to be in better standing in the CANSLIM method. However, there’s something of an exception…

The N stands for “New”. This means that CANSLIM strategists tend to look for companies that are offering something new. Because they also look for consistent growth over a long history, this means that they usually seek out old companies that are undergoing changes that alter the way that they do business. This could be anything from new management, to a new product line.

Next time, we’ll cover the other four aspects of CANSLIM.

See you next week for part 8 of Stock Picking Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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This entry was posted on Tuesday, July 1st, 2008 at 5:33 am and is filed under Bullhunter, Stock Market Tutorial, Stock Selection. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.