How to Make Money in Stocks: A William O’Neil Review
Are you looking to dive into the world of stock trading and want to know how to make money in stocks? Look no further. William O’Neil, the founder of Investors Business Daily and the creator of the CAN SLIM investing system, has written a comprehensive guide that has helped countless investors achieve success in the stock market. In this detailed review, we will explore the key principles and strategies outlined in “How to Make Money in Stocks” and how you can apply them to your own investment journey.
Understanding the CAN SLIM System
The CAN SLIM system is a set of criteria that O’Neil developed to identify and invest in strong stocks. The acronym stands for:
| C | Current Quarterly Earnings per Share |
|---|---|
| A | Annual Earnings Increase |
| N | New Products, New Management, New Highs |
| S | Supply and Demand |
| L | Leadership |
| I | Institutional Sponsorship |
| M | Momentum |
Let’s delve into each criterion to understand its significance in the CAN SLIM system.
Current Quarterly Earnings per Share (C)
One of the most crucial aspects of the CAN SLIM system is focusing on companies with strong current earnings. O’Neil emphasizes the importance of analyzing a company’s quarterly earnings reports to identify those with consistent growth in earnings per share. This criterion helps investors avoid companies with volatile or declining earnings, which can be risky investments.
Annual Earnings Increase (A)
Building on the current quarterly earnings, O’Neil suggests looking for companies with a history of increasing annual earnings. This indicates that the company is not only performing well in the short term but also has a strong track record of sustainable growth. Companies with a consistent annual earnings increase are more likely to be successful in the long run.
New Products, New Management, New Highs (N)
This criterion focuses on identifying companies that are introducing new products or services, have new management in place, or are reaching new highs in their stock price. These factors suggest that the company is evolving and adapting to changing market conditions, which can lead to increased investor interest and potential stock price growth.
Supply and Demand (S)
The supply and demand criterion involves analyzing the trading volume of a stock. O’Neil suggests looking for stocks with strong demand, indicated by high trading volume. This indicates that a significant number of investors are interested in buying the stock, which can drive its price higher.
Leadership (L)
Leadership is another critical factor in the CAN SLIM system. O’Neil emphasizes the importance of analyzing the quality of a company’s leadership, including the CEO, management team, and board of directors. Strong leadership can drive a company’s success and contribute to its long-term growth potential.
Institutional Sponsorship (I)
Institutional sponsorship refers to the involvement of institutional investors, such as mutual funds, pension funds, and insurance companies, in a company’s stock. O’Neil believes that institutional investors tend to conduct thorough research and are more likely to invest in high-quality companies. Therefore, stocks with strong institutional sponsorship are often considered more reliable investments.
Momentum (M)
The final criterion in the CAN SLIM system is momentum. O’Neil suggests looking for stocks with strong upward momentum, indicated by a rising stock price and increasing trading volume. This momentum can lead to further price gains and make the stock a potentially profitable investment.
By following the CAN SLIM system and applying these criteria to your stock analysis, you can increase your chances of identifying and investing in strong stocks with high growth potential. However, it’s important to remember that investing in the stock market always involves risks, and it’s crucial
