CANSLIM Technique: How to Find Winning Stocks
•By Shafiqah Sulaiman
Artikel ini juga tersedia dalam Bahasa Melayu
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You always hear people say, find stocks with good FA. Find profitable companies.
But not many share how to actually do this research, right?
So in this article, I want to show you one technique that can be used to find profitable companies. Want to know?
Read this article until the end.
The technique for finding profitable companies is by using the CANSLIM technique.
CANSLIM was founded by William J. O'Neil, combining both Fundamental and Technical analysis.
If you want to read the book about CANSLIM, you can buy the book 'HOW TO MAKE MONEY IN STOCKS'. You can find it on Amazon.
CANSLIM is an acronym where each letter has a meaning that you need to understand.
Earning Per Share (EPS) is the company's earnings per share for the most recent quarter.
What you need to pay attention to is that the most recent quarterly EPS should consistently increase compared to the same quarter in the previous year.
EPS should increase by at least 20% every quarter.
Annual Earning refers to the yearly earnings of a company. For Annual Earning, it should show an increase over the most recent 5 years.
Good growth is 20% for the most recent 3 years or 5 years.
For example, this year is RM1.2 million. Last year was RM1 million. That is what is meant by 20% growth.
In simple terms, you need to find what is interesting about the company that can act as a catalyst.
For example, the company has a new product or perhaps an impressive new business management approach, and so on.
But remember, the new product must have a wow factor. Not just any new product.
Besides products, a catalyst can also come from New Management. This is because great companies have great and experienced leaders.
Additionally, from a technical perspective, for N, we can look at whether a particular stock has a NEW HIGH. This means a breakout.
That is one study that can be done from a technical standpoint.
Supply and Demand refers to the buying and selling activity in a company. For supply and demand, you can look at:
Here we need to know whether the company is a Leader or a Laggard.
The important thing is to pick the leader because the leader will move first. And usually, the gains are significant.
The easiest way to identify a leader or laggard is to compare the market capitalisation of companies within their respective sectors.
Do not make the mistake of comparing companies across different sectors. For example, comparing Greatech in the Technology sector with Lionind in the Industrial Products sector. This is WRONG because they are from different sectors.
Good companies are usually bought by institutional investors.
Examples of institutions include KWSP (EPF), KWAP, LTAT, Tabung Haji, and Unit Trust Funds.
This is because their fund managers will buy companies with strong financials. The company is profitable and has products that are well received by the market.
To check institutional ownership, you can use the Bursa Marketplace or the Mplus platform. If you do not have an Mplus CDS account yet, go to Mplus CDS Account. Register your CDS with me now.
To analyse Market Direction, you need to use technical analysis by looking at these 3 things:
For example, by looking at the Trend, Support and Resistance levels, and other indicators.
But the simplest approach is that the FBMKLCI Index and the company's sector should be trading above the 200-day moving average.
The CANSLIM technique is a proven method for finding quality stocks. By evaluating 7 key criteria — Current Earnings, Annual Earnings, New Products, Supply and Demand, Leader or Laggard, Institutional Sponsorship, and Market Direction — you can make wiser investment decisions.
CANSLIM is a stock selection technique introduced by William O'Neil. It combines 7 criteria: Current Earnings, Annual Earnings, New Products, Supply & Demand, Leader or Laggard, Institutional Sponsorship, and Market Direction.
Yes, the CANSLIM technique can be applied on Bursa Malaysia. You can use platforms such as Malaysiastock.biz and KLSE Screener to obtain the required fundamental data.
It depends on your experience. For beginners, it may take several hours to study one stock. With practice, this process can be shortened to 30 minutes to 1 hour.
CANSLIM combines fundamental analysis with technical analysis (Market Direction). It does not merely look at the company's financials, but also takes into account market momentum and institutional ownership.
Now you know the CANSLIM technique. Do not wait any longer — start your investment journey today.
Open a CDS Account: Open an Mplus CDS account and start investing using the CANSLIM technique on Bursa Malaysia.
Download Free Ebook: Get the free stock basics ebook from Mahersaham for a solid investment foundation.