CAN SLIM(12)

Leader or Laggard

Winning Characteristics


Look closely at the top 20% of industry groups (Investor's Business Daily tracks 197).

Our study of the greatest stock market winners show the best stocks generally come from the top 22% of industry groups.

Also, you want to avoid the bottom 20% of groups.

Historical analysis also shows stocks within the top half of all industry groups greatly outperform those in the bottom.


The best-performing stocks are generally No. 1 in their industry based on key fundamentals, including return on equity, annual earnings growth, pretax and after-tax profit margins and its relative price strength.

Look for confirmation of strength from at least one other company in the same industry group.


Look for leading stocks:

Our study of the greatest stock market winners found that all-star stocks had, on average, outperformed 87% of the market before they began their most dramatic price advances.

In a manner of speaking, if you want to find next year's winning stocks, look at the better-performing stocks today.


Once a general-market decline is definitely over, the first stocks to bounce back to new price highs are almost always your authentic leaders.

CAN SLIM(10)

Supply and Demand(2)

Winning Characteristics

Watch the demand for shares by looking at the Volume % Change for each of your stocks.

It will show you immediately how much a stock traded vs. its average daily volume over the last 50 trading days.


For example, a stock that trades 100,000 shares on average will have a 50% Volume % Change if it trades 150,000 shares on the day.


Stocks closing at their highs for the day or gapping up in price can indicate strong demand.

Companies buying back their stock in the open market and companies showing stock ownership by management can be positive indications.

When a stock breaks out of a price consolidation area, trading volume should be at least 50% above its average daily volume, indicating strong demand.

In many cases, a strong stock breakout will see volume up 100% or more for the day, indicating solid buying and the possibility for further price increases.


Investing Tip:

A stock moving up in price on lower than normal volume could be a sign of weakness. Look for strong demand supporting price increases.

CAN SLIM(8)

New Products, New Services, New Management, New Price Highs(2)

Winning Characteristics


A stock that makes big gains often results from new products or services.

But be wary of unproven products, especially if the company management doesn't have a solid track record.

Superior management is essential to a company's success.

That's why often a shakeup at the top pushes a stock's price higher.

Quality stocks making new price highs just as they emerge from sound chart bases on higher volume are often likely to continue climbing, while stocks making new lows are probably headed even lower.

Therefore, focus on the new price highs list for the best potential opportunities.

You can think of a stock's price as a measure of its quality and, consequently, its potential.

Typically, stocks higher in price reflect higher quality.

Always be on the lookout for new products, new services, new management, or major improvements in industry condition.