CANSLIM strategy simplified!

What does CANSLIM mean?

While many market participants think of technical and fundamental analysis as mutually exclusive & use either one or the other, CANSLIM employs both – the technicals indicate the entry and exit points for the stock while the fundamentals highlight the strength of the company and gives confidence to hold the stock.

“It is one of the great paradoxes of the stock market that what seems too high usually goes higher and what seems too low usually goes lower.”

– William O’Neil

After examining over 130 years of U.S. stock market history, O’Neil found that year after year, the top-performing stocks displayed several common traits. CANSLIM is a stock-screening model created by William O’Neil, an American stock broker and investor known for blending technical & fundamental analysis. Regarded as one of the most successful stock investors, in 1963 O’Neil became the youngest person then to get a seat at the NYSE.

The CANSLIM Criteria

A number of rules guide the stock-picking philosophy of this smallcase. This is a multicap strategy, which means that it selects stocks from all market caps, although it is tilted more towards mid and smallcap stocks. Fundamental factors like historical earnings growth, future expected earnings growth, and management efficiency are taken into account. Additionally, momentum aspects like 50-day moving average and price away from 52 week high are also factored in when shortlisting stocks for the basket.

The CANSLIM smallcase

Identifying stocks that meet all of the above criteria can be quite a challenging task that requires not only advanced tools & screens, but also domain expertise and regular monitoring. While many professional traders replicate this strategy on their own, the same can be quite difficult or time-consuming for retail investors – which is why we created the CANSLIM-esque smallcase. We even adapted it for the Indian markets since lack of data renders some of the original rules conceived by William O’Neil not meaningful in the Indian context. 

Aside from the CANSLIM criteria, the research process employed in creating & maintaining this smallcase includes some common features like our proprietary liquidity filters that are applied to remove illiquid stocks, a special check to remove stocks where a significant part of the promoter holdings are pledged, etc.

Note: The smallcase predominantly has a mix of mid and smallcap stocks. Pure-equity strategy like this one comes with the risk of significant drawdowns in the short-term and is suitable for long-term investors with a higher risk appetite.

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Who manages the CANSLIM-esque smallcase?

Windmill Capital builds investment products and curated stock/ETF portfolios to help users achieve their financial goals. We offer over 50 smallcases from high-volatility, pure-equity strategies to low-volatility, asset allocation models.