Sun. May 26th, 2024

Learning how to invest in stocks takes time, determination and study. It also takes finding and sticking to a proven set of rules for determining when to buy, sell or hold a stock, with several factors coming into play.




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You’ll also need to find the best online broker to fit your needs and style of investing. If you haven’t found a broker and set up a brokerage account yet, these tips for beginning investors can help you get started.

For decades, beginning investors, as well as seasoned veterans, have used the CAN SLIM Investing System to handle all aspects of investing in stocks. Here’s a look at what CAN SLIM is, how it started, and how it continues to help people of all walks of life and all skill levels.

Investing In Stocks: The IBD Story

In the late 1950s, future Investor’s Business Daily founder William J. O’Neil was a young stockbroker. Eager to master how to invest in stocks, he asked a simple question: What do the best stocks to buy and watch look like just before they make their biggest price moves?

To find the answer, he launched a groundbreaking study of every stock market cycle and top-performing growth stock, looking for common traits. He found seven.

This ongoing research, which now covers over 130 years of stock market history, continues to confirm how both today’s top stocks and those from past decades have displayed these seven telltale traits.

Those traits gave O’Neil a blueprint for finding the best stocks to buy and watch in the early stages of their big runs. He used that insight to develop the CAN SLIM Investing System, with each letter standing for one of those seven traits.

In the early 1960s, O’Neil used the CAN SLIM approach to grow his personal account from $5,000 to $200,000 in 18 months. With those profits, he became the youngest person at the time to buy a seat on the New York Stock Exchange and launched William O’Neil + Co., a securities research firm that today serves over 350 of the world’s best mutual funds and leading institutional investors.

Investing For Beginners Made Simple And Accessible

In 1984, O’Neil launched Investor’s Business Daily, then known as Investor’s Daily. Many Wall Street and media pundits thought he was crazy to launch a national newspaper, but from his decades in the market and from working with large institutional investors, O’Neil knew something was missing.

First issue, published April 9, 1984

He knew it was time to level the playing field and give “ordinary” people access to the type of stock research and stock ratings that, before IBD, were only available to professional investors and money managers.

The creation of Investor’s Business Daily instantly revolutionized how the stock market is covered and empowered individual investors with the rules, research and ratings they need to learn how to make money in stocks.

Editor’s note: In May 2021, Dow Jones parent News Corp. acquired IBD

CAN SLIM Investing System

Our goal is simple: To help you make money when the stock market is up, and help you protect your gains as the market indexes start to weaken. It all starts with a basic game plan using the CAN SLIM Investing System.

For both beginning investors and market veterans, the CAN SLIM system forms the basis of the ratings, research and tools you’ll need to grow and protect your portfolio. It’s a strategy investors have been using for decades to minimize risk and maximize profits.

Each letter of CAN SLIM represents one of the seven key traits typically displayed by the best-performing stocks, giving you a step-by-step blue print for identifying the most promising stock picks.

C — Current Earnings

Look for companies with at least a 25% quarterly increase in earnings per share. Focus on companies that meet or beat that EPS gain in the most recent one or two quarters. Sales growth also should be at least 25% in the most recent quarter.

A — Annual Earnings

In addition to strong quarterly gains, look for powerful annual EPS growth. The best stocks should have at least a 25% rise over the past three years. Strong sales increases are also preferred.

N — New Products, New Trends, New Highs

From IBM (IBM) and Xerox (XRX) in the 1960s to Apple (AAPL), Alphabet (GOOGL) and Nvidia (NVDA) more recently, history’s top stocks have a breakthrough product or service driving explosive earnings growth. Such winners often tap into and lead a new industry trend. The N in CAN SLIM can also refer to new price high in the stock or new company management.

S — Supply And Demand

This element relates to stock charts, specifically the importance of volume. To confirm a stock is under strong demand, volume (i.e., the number of shares) should be at least 40% above average when a stock clears a proper buy point.

L — Leader Or Laggard

When looking for stock picks, focus on the true market leaders. Not necessarily the best-known companies, market leaders drive the trends within their industries and show exceptional relative strength. Pay attention to the No. 1 or No. 2 stock in the industry group in terms of company-related fundamentals and stock-related price performance. IBD Stock Checkup make it easy by instantly identifying a stock’s rank within its industry using unbiased, computer-generated stock ratings.

I — Institutional Sponsorship

Stocks increase in value when mutual funds and other institutional investors accumulate shares. Look for stocks with increasing professional ownership, especially from the best mutual funds. Use the Accumulation/Distribution Rating to see what top money managers are heavily buying or selling.

M — Market Direction

A stock can have all the other CAN SLIM traits, but if the general stock market indexes are weak, it’ll be an uphill battle for individual stocks to buck that trend. In fact, decades of market history show three out of four stocks will follow the underlying trend, either up or down. For best results, only aggressively buy stocks when the market is trending higher. You can gauge strength and weakness in the indexes each day by checking The Big Picture and Market Pulse, which provide a recommended exposure level based on current conditions.

How To Invest In Stocks With A Simple 3-Step Routine

Whether you’re a beginning investor or have been at it for years, you can put all the pieces of the CAN SLIM system together using this basic three-step routine.

As you’ll see, it covers all the bases, providing a holistic view of the fundamental and technical aspects of both individual stocks and the general market.

1. Master Stock Market Timing With The Big Picture & Market Pulse

Where: Under the ‘Market Trend’ tab on Investors.com, go to The Big Picture.

The first step is to know what kind of market we’re in right now. Is it time to buy stocks, or is it time to play defense and protect your profits?

Find out by checking the Market Pulse inside The Big Picture to see which of three possible stages the stock market is in right now.

CONFIRMED UPTREND
• Best time to buy stocks

UPTREND UNDER PRESSURE
• Proceed with caution
• Be ready to take defensive action

MARKET IN CORRECTION
• Avoid making new buys
• Protect profits and cut losses short
• Build watchlist for next uptrend

Also see: Stock Market Today (updated throughout each trading session)

2. Find The Best Stocks To Buy And Watch With IBD Stock Lists

Where: On Investors.com, go to: Stock Lists | Stock Screener

The best performing stocks typically display seven common traits in the early stages of their big moves.

Using IBD stock ratings and unique stock lists like the IBD 50 and Sector Leaders, you can quickly identify which stocks are most strongly showing those same characteristics right now.

Which Top-Rated Stocks Are In Or Near A Buy Zone Right Now?
Simply scroll through IBD stock screens to find highlights of top-rated stocks in or near a potential buy range. It’s a simple, effective and fast way to build your watchlist.

3. Evaluate Your Stocks With Stock Ratings And Stock Charts

Under the ‘Research’ tab on Investors.com, go to: IBD Stock Checkup | IBD Charts

What’s the most effective way to maximize your profits and minimize risk? Always check both the company’s “fundamentals” (e.g., sales, earnings, products, industry trends) and “technicals” (e.g., price and volume action, support and resistance in the stock chart).

That combination of fundamental and technical analysis gives you a major advantage over investors who only look at one or the other.

Does Your Stock Pass Or Fail?

Stock Checkup gives you pass, neutral or fail ratings for the most important stock-picking criteria. Just enter the ticker for an instant diagnosis of your stock.

 

Time To Buy, Sell Or Hold?

Before deciding if or when to buy stocks, use stock charts to make sure they are in or near a proper buy zone. This technical analysis helps spot the right time to take your profits and minimize risk.

Learn More About How To Invest In Stocks

Use the links below to learn more about stock investing and how to invest in stocks using IBD and the CAN SLIM Investing System — and discover how to stay both profitable and protected.

 

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