Average returns using CANSLIM method

[hlpsg]

Hi
I've never invested using the CANSLIM method, but have heard so many good things. Just out of curiousity, will like to hear the average annual returns you've made using CANSLIM to trade as your main method, and the number of years you've been using it.

Thanks,
HL

 

[Rhody Trader]

I have been in and out of using the system live and on paper for years. Last year it was the core of my equity trading and I made 200%+. What I do is not pure CANSLIM, but is definitely inspired by that and very close.

 

[Brokepc]

They have a website http://www.canslim.net might be a good place to start.

Chris

 

[ajaskey]

Hi
I've never invested using the CANSLIM method, but have heard so many good things. Just out of curiousity, will like to hear the average annual returns you've made using CANSLIM to trade as your main method, and the number of years you've been using it.

Thanks,
HL

Hello HL,

These posts were made on the This and That thread. I am copying them here as this topic looks to have enough interest to be within it's own thread.

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Hello ajaskey,

Thanks for starting this forum - I'll follow with interest. A question which you may re-direct to another thread(?)

As a keen trend follower, I'm of the opinion (yet willing to learn!) that 95% of all information is in the price itself. I suppose the "N" and "M" are the factors I look for, with a little glimpse at "I". Would you have a feel, or any factual information, that would indicate how much of the total expected return from CANSLIM investing is attributable to these factors alone (and maybe just "M").

FWIW when I've looked for correlations between PEG ratios and subsequent returns in my trading, no significant correlations could be found.

Any info appreciated.

UTB

UTB,

Welcome. This is the thread for this sort of discussion.

The idea of CANSLIM is to find the best fundamental stocks, buy them when they begin a big move, and hold them as long as they continue to go up. As Jesse Livermore says (paraphrased), "I make the most money when I sit and do nothing".

O'Neil's book "How To Make Money in Stocks" details what his company's reseach has found which part of the move is directly related to "M" and the specific industry "M". I believe it is 15-20%, but I will post the actual value when I find it in the book or at the IBD site. The technical formation alone (with fundies) will get you the initial move gain. Many people trade only this move. Gary B. Smith from Realmoney.com and FoxTV as an example.

WIth CANSLIM, the idea is to use the initial move to give a buffer that allows us to hold thru slow times but never lose more than a preset amount (unless it gaps down big some morning). I believe an active trader can do as well or better than CANSLIM if he/she is very good. But CANSLIM requires a lot less work and is more suited for someone who wants to be in the market for big gains, but doesn't want to actively trade everyday.

Andy

 

[ajaskey]

Andy,

I think yu're suggesting that the "M" part alone is responsible for 15-20% in which case I'd agree. But what would you suggest is the total pot, a realistic total annual return achievable from full CANSLIM investing?

UTB

UTB,

A realistic return would be an average of 20% per year (some can do much better). Some years "M" is nasty and cash is held. When the bull run starts the returns can be 50%... 100%... 200%.... realistically. It isn't hard to find the best stocks at the end of a bear market and double or triple the invested cash. If one averages 20% per year for 20 years, it will make for a very easy retirement....

I don't think CANSLIM would work for someone who wants to trade for a living. There are years when the best thing to so is stay in cash and go fishing or golfing. Someone who needs steady income could not do this. But after several successful years, one could possibly retire and l live off the previous years earnings and wait for the next good run.

I find CANSLIM great for buying and paying off things. I bought two cars in the last few years and am now working on paying off our basement we had finished. It helps to have a goal and not just invest for excitement. The goals don't need to be large, e.g. "I want to get rich". They can be as simple as "I'd like to go on a vacation next year". I don't have as much trouble selling a stock when I can see my goal slipping away with the stock price...

Andy

 

[ajaskey]

Andy,

I'd tend to agree and I'm working towards this. However, in my experience a simpler strategy of focussing on stocks with the greatest momentum can deliver better returns (25 - 30% PA) than this.

I'm toying with the idea of exploring the fundamental side of things, yet can't see any justification for the effort. But as always, I'd be happy to be proved wrong.

UTB,

There are many methods/strategies that can outperform CANSLIM by someone who knows what they are doing. Most are time consuming and the CANSLIM method works well for someone who can't monitor the market all day. If you don't hold your stocks for months at a time, then there isn't much point in wasting your time on CANSLIM. If you have found how to make 25-30% each year and are comfortable with the time spent, then you probably won't gain anything looking at the fundies.

Andy

 

[the blades]

UTB,

There are many methods/strategies that can outperform CANSLIM by someone who knows what they are doing.

Andy

which rules me out......

However, I have found that simply rotating stocks with a strong trend and rising momentum(M), avoiding resistance points (N), and hedging against the index, can give excellent returns. It's a mechanical strategy that takes only a few minutes with the right software.

Mind you - it's not working today!

UTB

 

[dbphoenix]

I have found that simply rotating stocks with a strong trend and rising momentum(M), avoiding resistance points (N), and hedging against the index, can give excellent returns. It's a mechanical strategy that takes only a few minutes with the right software.

UTB

Which would seem to support the notion that you do know what you're doing and have no particular reason to switch to CANSLIM . . .

 

[the blades]

Which would seem to support the notion that you do know what you're doing and have no particular reason to switch to CANSLIM . . .

But I'd of thought that each component would add a further reward? :?:

Sticking with M - would rising volume together with price enhance returns (he says, knowing you'll have done this one to death......)?

All advice appreciated.

UTB

 

[dbphoenix]

CANSLIM is a package deal, and no one claims that CANSLIM results are superior to any and every other alternative. If, for example, one is particularly good at charts, he can probably beat CANSLIM handily, as many bubble traders did in '99/'00. CANSLIM, however, is only one step above Investing for Dummies, requiring minimum skill and talent, unless one tries to make it into something that it is not.

Therefore, taking one or more elements of CANSLIM and modifying one's approach with it/them may yield superior results to what one would have done otherwise, but that speaks less to the value of the element or to CANSLIM or the individual strategy than it does to the synergies found in various combinations. To say that whatever one is doing is superior to CANSLIM says nothing about CANSLIM per se but speaks to the means one employs to reach his individual goals.

 

[ajaskey]

But I'd of thought that each component would add a further reward? :?:

Sticking with M - would rising volume together with price enhance returns (he says, knowing you'll have done this one to death......)?

All advice appreciated.

UTB

Maybe.... maybe not. As Jim Cramer says, "there is always a bull market somewhere." It may be possible to use "M" to determine which large sectors to look to for stocks. When "M" is bad, maybe energy or gold stocks are good. I have not found that correlation yet, but I do know that there are always stocks and industries with great gains in any "M" condition. My guess is it changes from cycle to cycle and the best thing to do is watch the relative strength to find which are moving right now. For example, after 9/11, most stocks dropped significantly. But defense and security stocks skyrocketed...

If you have already figured out sector rotation, I am guessing that anything you learn from "M" will only confirm what you have already figured out...

Andy

 

[ajaskey]

which rules me out......

Mind you - it's not working today!

UTB

UTB,

From Jesse Livermore: "The market will tell the speculator when he is wrong, because he is losing money." and "There are times when one should speculate, and just as surely there are times when one should not speculate."

One thing your can take from CANSLIM is that your system may not work all the time. If you can isolate when it does not work, then you can save yourself a lot of time, money, and worry by doing something else. CANSLIM works for long periods of time and then doesn't work for long periods of time. Your cycle may be much shorter, but it may serve you well to stay out for a day or two when you start to lose more than you win.

Andy

 

[the blades]

To say that whatever one is doing is superior to CANSLIM says nothing about CANSLIM per se but speaks to the means one employs to reach his individual goals.

I hope I haven't given that impression. I'm merely seeking to find out how to improve.

Suffice to say anyone with the "skill" to use CANSLIM would have the ability to follow / improve my strategy. But it is rewarding for the effort required.

UTB

 

[Serenity]

Maybe.... maybe not. As Jim Cramer says, "there is always a bull market somewhere." It may be possible to use "M" to determine which large sectors to look to for stocks. When "M" is bad, maybe energy or gold stocks are good. I have not found that correlation yet, but I do know that there are always stocks and industries with great gains in any "M" condition. My guess is it changes from cycle to cycle and the best thing to do is watch the relative strength to find which are moving right now. For example, after 9/11, most stocks dropped significantly. But defense and security stocks skyrocketed...

If you have already figured out sector rotation, I am guessing that anything you learn from "M" will only confirm what you have already figured out...

Andy

Man.Jim Cramer is a d#%k head...his show makes a joke out of investing or trading..... why even listen to a jarrhead like that.