As the stock market continues to grow in popularity, more and more people are looking for ways to maximize their profits through investments. One of the most well-known experts in this field is William O’Neil, founder of Investor’s Business Daily and author of the book “How to Make Money in Stocks.”
O’Neil’s strategy for maximizing profits is rooted in a set of principles he calls CAN SLIM. This stands for Current earnings, Annual earnings, New products, Supply and demand, Leader or laggard in the industry, Institutional sponsorship, and Market direction.
The first principle, current earnings, refers to the company’s earnings per share (EPS) in the most recent quarter. According to O’Neil, a 25% or higher increase in EPS is a good sign of a healthy and growing company. This information can be easily found on financial websites like Yahoo Finance or Google Finance.
The second principle, annual earnings, takes a look at the company’s earnings over the past three to five years. O’Neil recommends investing in companies with a history of consistent and strong earnings growth over this time period.
The third principle, new products, is all about innovation. O’Neil looks for companies that are introducing new products or services into their industry, as this often translates into increased revenue and profits.
The fourth principle, supply and demand, examines the overall demand for the company’s products or services. O’Neil suggests looking at the company’s sales volume and market share to get an idea of how much demand there is for what they’re offering.
The fifth principle, leader or laggard in the industry, looks at how the company stacks up against its competitors. O’Neil recommends investing in companies that are leaders in their industry, as these are often the companies that will continue to grow and expand.
The sixth principle, institutional sponsorship, is all about who is investing in the company. O’Neil suggests looking for companies that are being invested in by institutional investors, as this indicates that the company is viewed as a strong investment opportunity.
The final principle, market direction, looks at the broader stock market trends. O’Neil recommends investing in companies during a bull market, or when the overall stock market is on an upward trend.
While these seven principles may seem overwhelming, O’Neil has developed a system to help investors identify which stocks meet these criteria. The Investor’s Business Daily (IBD) 50 is a list of top-performing stocks that meet many of the CAN SLIM criteria.
Investors can also use IBD’s stock screening tools to find other stocks that meet the criteria. These tools allow investors to filter through thousands of stocks to find ones that are strong investments based on O’Neil’s principles.
It’s important to note that while O’Neil’s strategy has been successful for many investors, it’s not a foolproof method. The stock market is unpredictable, and even the most well-researched investments can fail. It’s important for investors to do their own research and never invest more than they can afford to lose.
In addition to his CAN SLIM principles, O’Neil also emphasizes the importance of discipline and patience in investing. He recommends holding onto winning stocks for as long as they continue to meet the criteria, and cutting losses quickly on losing investments.
Overall, William O’Neil’s CAN SLIM principles and Investor’s Business Daily tools can be a valuable resource for investors looking to maximize profits in the stock market. While there are no guarantees in investing, following these principles and doing thorough research can increase the likelihood of success.