O’Neil’s CANSLIM Strategy

This scanner provides a list of Indian stocks based on William J. O’Neil’s investment rules and strategy. O’Neil was one of the first investors to use computers in his research and decision-making process. He also founded Investor’s Business Daily, one of the world’s most-read financial journals.

O’Neil’s strategy, known as CANSLIM, is based on technical and fundamental analysis and consists of seven traits that help determine which stocks are most likely to grow in value. According to this strategy, investors can predict growth based on a company’s quarterly and annual earnings, positive changes within the company, the supply of company shares in the market, the company’s leadership role in the industry, investment in the company from large financial institutions, and the company’s ability to follow market trends. O’Neil’s strategy yielded returns of more than 5000% over 25 years.

Let’s delve into the CANSLIM strategy and explore its investing philosophy:

C- Current Quarter Growth

This refers to the increase in a company’s earnings per share (EPS) in the latest quarter compared to the same quarter in the previous year, typically at least 25% year-over-year. This metric helps identify companies with strong, recent performance and potential for continued growth.

A- Annual Earnings Growth

This refers to a company’s consistent increase in its annual earnings per share (EPS), ideally 25% or more over the last 3-5 years. This metric helps investors identify companies with strong, sustainable growth potential, indicating solid financial health and profitability trends.

N- New product, services, and management

This signifies a company’s innovation or recent improvements. This could include new products, services, or changes in leadership that drive growth. Investors use this criterion to identify companies poised for significant expansion, potentially leading to higher stock prices.

S- Supply of Stock

This refers to the availability of a company’s shares, particularly the number of shares outstanding and trading volume. This helps filter out stocks with strong demand but limited supply, which has the power to drive price increases as more buyers compete for fewer available shares.

L- Leading Stocks

This filter will help us find top-performing companies within their industry, often with strong price and earnings momentum. This criterion helps identify stocks that are likely to continue outperforming the market, aiming to capitalize on the strongest trends for higher returns.

I- Institutional Ownership

This refers to the percentage of a company’s shares held by large institutions like mutual funds and pension funds. High institutional ownership indicates confidence in the company’s potential, suggesting stability and growth prospects. It signals strong professional endorsement, often leading to increased stock prices as institutions buy more shares.

M- Market Direction

Helping us define the overall trend of the stock market, this metric focuses on identifying the current direction of the market through factors like indexes and market averages. Understanding market direction helps investors make informed decisions on when to buy, sell, or hold stocks, enhancing their chances of profitable investing.

In this scanner, we have made some modifications to the strategy, so that it can be seamlessly applied to Indian stocks.