Are you a doctor who is skittish about investing?If you're among the 80-millioninvestors in the United States who lost 50%to 80% of their savings since 2000, youprobably are skittish. With the recent market upturn,things are looking brighter, but gone is the investorconfidence of the 1990s. Most physicians are wonderinghow they can participate in the market's emergingrecovery without getting burned again.
Investor's Business Daily
To address these issues, William J. O'Neil, thefounder of (; www.investors.com), has just released a new book (McGraw-Hill; 2003). O'Neil's latestbook examines why the market unraveled, thepotential consequences, and what investors should doto succeed in future markets.
Investor Alphabet Soup
The Successful Investor
draws on a strategy forinvesting that O'Neil first conceived back in 1962. Bystudying performance records of great stocks, he wasable to create a checklist of common characteristicsthat stocks exhibit just before they make their biggestgains. O'Neil dubbed this strategy CAN SLIM, whichis an acronym for:
Current earnings per shareâ€”Current earningsshould be up at least 25% or more (the higher the better)and in many cases accelerating in recent quarters.Quarterly sales should also be up 25% or more or acceleratingover previous quarters.
Annual earnings increasesâ€”Annual earningsshould be up 25% or more in each of the past 3 years.Annual return on equity should be 17% or more.
New products, new service, or new managementâ€”One of these factors should be fueling a company'searnings growth. The stock should be able tomake a new high in price after a period of price consolidationand base building.
Supply and demandâ€”Shares outstanding can belarge or small, but trading volume should be big as thestock price increases.
Leading stock in a leading industryâ€”A stock'sRelative Price Strength Rating (an scale) should be80 or higher. In other words, a stock with an 80 relativestrength is outperforming 80% of all stocks in terms ofits relative price strength.
Institutional sponsorshipâ€”Invest in stocks showingincreasing ownership by mutual funds in recent quarters.
Market indexesâ€”The Dow, S&P 500, or Nasdaqshould be in a confirmed uptrend, since 75% of stocksfollow the market trend.
Over 40 years later, CAN SLIM continues to be analyzedand refined. According to an independent, realtimestudy by the American Association of IndividualInvestors (AAII), the CAN SLIM strategy produced a350.3% compounded 5-year return between 1998 and2003. "CAN SLIM has been one of the most consistentand strongest performing stock selection systems duringboth bull and bear markets," AAII wrote. Visitwww.investors.com/canslim for more information onthis investment strategy.
Sturdy Building Blocks
With CAN SLIM principles as its foundation, delves into today's market and thelessons learned since March 2000. The author providesthe following pointers: