"I once had a string of 10 stocks I cut losses on. But the very next one emerged just as the market came out of a correction (downtrend) and more than tripled in price. I've often thought: "What would've happened if I had gotten discouraged and quit because the previous 10 stocks I bought didn't work?"
William J. O'Neil, 24 Essential Lessons for Investment Success
Continuing with the CANSLIM series lets talk about what the A in CANSLIM stands for.
A = Annual Earnings Increase
Looking just at quarterly earnings can be misleading as companies who have only had a few good quarters will be selected. To screen out these companies CANSLIM factors in annual earnings. To be a CANSLIM growth stock a company must have an annual earnings increase of at least 25% . The company should have increasing earnings of at least three years of to be considered. This criteria weeds out companies who have short term success but may flutter out soon.
To learn more about CANSLIM check out one of the following resources.
- My Review of the CANSLIM MethodI got a nice quote by William J. O'Neil from this web service called Investors Quotes Daily. They send out a free daily quote from him. I highly recommend it. It's a great way to stay inspired.
Good Stocks are like a Pitchers Fastball
"I don't like to buy stocks with a Relative Price Strength ratings less than 80. In fact the really big moneymakers generally have RS ratings of 90 or higher just before they break out of their first or second base structure. The RS rating of a potential winning stock should be in the same league as its pitchers fastball. The average big-league fastball is clocked at 86 mph, and the pitchers throw "heat" in the 90s."
William J. O'Neil, How to Make Money in Stocks
and founder of the newspaper Investors Business Daily . He is a highly successful investor and entrepreneur. The web site Investors Quotes Daily will send you a free daily quote from him. It's a great way to learn from one of the best and stay encouraged in your pursuit of being a successful investor. Check it out.The method emphasizes earnings as they are a clear judge of a company’s performance. A company must have quarterly earnings at least 25% higher than the same quarter last year. You want to see quarterly earnings increases in the past few quarters as well, not just the most recent quarter. Then you want to look forward to future earnings You do this by looking at analyst’s projections for the next quarter. These should be up 25%. Then last you want to see an increase in the rate of quarterly earnings increases. For instance a 30% increase 3 quarters ago, a 40% increase to quarters ago and a 50% increase in the current quarter.
For a more in depth look at the CANSLIM method check out a review on it here.
