There are thousands of different investment strategies and methods. They all have their own strengths and weaknesses. Even Warren Buffett said that before he became a value investor he tried all sorts of methods.
CANSLIM is a popular method developed and promoted by William O'Neil, the editor of Investor's Business Daily. It is described in a book he wrote called How to Make Money in Stocks. The letters in CANSLIM stand for:
C: current quarterly earnings per share. They should be higher than the same quarter one year ago
A: annual earnings growth. Earnings per share should be increasing for the past five years.
N: new: choose companies with new products or management, or an important change in the industry
S: supply and demand. Favor stocks with a reasonably small number of shares
L: leader or laggard. Look for market leaders, rather than laggards, even if they seem to be cheap.
I: institutional investors. Choose stocks with at least a few institutional investors
M: market direction. Study market trends, look for bottoms and tops
It is a mixture of fundamental analysis and technical analysis. But beware. Writers on CANSLIM describe M as the most important. In other words, that technical analysis in the form of market direction should be your main focus.
For example, Michael Doran of Sierra Capital Planning wrote "The most crucial aspect to the CANSLIM method of investing is the M, or in other words, the market direction. The acronym consists of seven keys to finding leading stocks, but none compare to the impact of market direction."
And William O'Neil writes in his book that the market "should be studied closely every day." (p.45) Also, "Recognizing that the market has hit a top or bottomed out is 50% of the whole complicated ball game." (p. 46) Amongst the world of technical analysts, CANSLIM has a strong following.
But once we step back a little, it is clear from the comments of analysts over the recent years just how difficult (both Warren Buffett and John Price would say impossible) it is to pick market tops and bottoms.
The basic difference between Conscious Investor and CANSLIM is that Conscious Investor is based on the methods of Warren Buffett, by far the world's greatest investor. Just like Warren Buffett, it is all about finding great companies selling at reasonable prices. The sort of companies that will make you money year after year independent of bull and bear markets, and of market tops and bottoms. And without having to study the market every day.
As Buffett says, the role of an investor is to invest, not to worry about what the market is doing. The market is there just to offer you the stock you want at the price you are willing to pay. Conscious Investor provides the step-by-step tools to allow you to put this into place.
