An Introduction to Institutional Investing

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An Introduction to Institutional Investing

• William ONeils CAN SLIM Investment Modeling
  System

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Who is William ONeil?

• Founder and Editor of Investors Business Daily
• President of
• In 1963, at the age of 30, bought a seat on the
  NYSE. Youngest person to do this
• Created a study of the greatest stock market
  winners since 1953- Including Cisco, Wal-Mart,
  IBM, and Texas Instruments.
• www.investors.com/learn

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What is CAN SLIM?

• Simply, the seven common characteristics all
  great performing stocks have before they make
  their biggest gains.
• A great program to follow if you are a new
  investor
• Extremely rule-driven and disciplined

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Examples of CAN SLIM Rules

• ALWAYS sell at a 7-8 loss
• Never average down, always average up
• Never sell unless the fundamentals are weak or
  there is negative news about a company you are
  invested in.
• Buy at proper points (bases)
• Make sure the stock fits all the criteria of CAN
  SLIM.

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C-Current Quarterly Earnings Per Share

• Increasing at least 25 per quarter for at least
  three consecutive quarters.
• Quarterly sales should also be up 25 or more or
  accelerating over prior quarters

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What are EPS?

• EPS are the portions of a company's profit which
  are allocated to each outstanding share of common
  stock.
• EPS serves as an indicator of a company's
  profitability.

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A-Annual Earnings

• Should be up 25 or more in each of the last
  three years. Annual return on equity should be
  17 or more.

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What is Annual Return on Equity (AAR)?

• Your return that is stated after expenses have
  been tallied, which including administration and
  management fees, 12b-1 fees (promotional and
  sales fees), and others.

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N-New Product, New Service, or New Management

• Usually, new products, new services, new
  management or new industry conditions propel
  stocks to new heights. More than 95 of the
  successes in American industry met at least one
  of the above criteria.
• Take Apple for example, after the IPod was
  introduced, shares of their stock surged 83
  percent for the year 2001, compared with a gain
  of less than 1 percent in the SP 500, with the
  release.

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S- Supply and Demand

• The best way to measure a stock's supply and
  demand is by watching its daily trading volume.
  When a stock rallies up in price, you want to see
  volume rise at the same time, which may represent
  institutional buying that can really power a
  stock's move. When a stock pulls back in price,
  you want to see volume dry up indicating no
  significant selling pressure.

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L-Leading Stock in a Leading Industry

• Always look for stocks that are leaders in a top
  industry group.
• This means that their specific sector is
  performing well, often serving as a reflection of
  what the stock will do.

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I- Institutional Sponsorship

• A stock should show an increasing number of
  institutional sponsors in recent quarters
  (accelerating sponsorship).
• Sponsors would include mutual funds, pension
  funds and hedge funds.
• Since that large institutions control the
  majority of the ownership and trading, a stock
  that has strong support from them, are favored
  significantly

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M-Market

• Almost all the best stocks over the past five
  decades have made their upward moves when the
  overall market was strong
• Historically, 3 out of 4 stocks follow the trends
  of the general market
• Many of the biggest investing opportunities can
  be found right as the market begins a confirmed
  change in direction.

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Buying Points

• There are many rules in the CAN SLIM program, but
  essentially, you want to buy a stock when it is
  about to break out of a base
• These bases include a cup and handle, flat
  base and double- bottom among others

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Example of a Buy Point

• Here is an example of the cup and handle, the
  most basic and common form

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Additional Points to Invest Successfully with CAN
SLIM

• Avoid cheap stocks. Buy higher quality stocks
  selling 15 a share and higher.
• Do a post-analysis of all your buys and sells.
  Post on charts where you bought and sold each
  stock. Evaluate and develop rules to correct your
  major past mistakes.