Ask Mike:
Is CANSLIM a core component of your methodology?

Question:

Dear Mike:

I am certainly intrigued by your service, but I like to have a clear idea of what drives an advisor's methodology rather than leaping for the sizzle.

I have a thorough understanding of William O'Neil's methods which I think are outstanding. Of course, I am interested in a savvy pioneer who can improve any approach so effectively that the risk/reward is substantially improved.

Is it fair to say that CANSLIM or some variation of it is the core of your methods, upon which you have impressively improved to deliver even better returns with less risk ?

Thanks,

g.w. - Austin

Mike's Response:

Hi George,

There is no question that O'Neil's CANSLIM approach to picking the right stock at the right time is excellent.

Early in my investment career, I discovered the CANSLIM analysis methodology. I was then, and continue to be now, a strong advocate of that methodology.

Certainly, you cannot go wrong by closely following the CANSLIM methodology.

But, to answer your question specifically, many of my rules are similar to some of the CANSLIM rules.

I take a differing approach to how much weight I put on some of the fundamental analysis. My primary premise is that the price of a share of stock is driven solely by supply-and-demand. The more in demand there is for shares of a company's stock, the higher the price will go.

Of course, fundamentals play a very large role in driving demand. But, very simply put, the biggest fundamental driver is 'Growth'. The more a company can show growth and/or growth potential, the more that company's shares of stock will be in demand. So, I put a lot more emphasis in growth fundamentals in my analysis.

I put a lot more weight on technicals than does the CANSLIM methodology. And, I don't agree at all with the CANSLIM stop loss strategy. Don't get me wrong... I firmly believe in the use of stop loss settings but I don't believe that one percentage fits all stocks.

If you have a few minutes, read my '10 Must Follow Rules for Consistent Profits in the Stock Market' on my website. This will give you a clearer understanding of my approach.

Finally... There is no magic formula. There is no secret strategy. To make consistent profits in the stock market takes a disciplined, steady, consistent, non-emotional approach. Certainly, I believe that it is critical to combine both fundamentals and technicals in the process, but the real key is having a set of rules that you follow in good times and bad times. Consistently making profits by investing in the stock market should be looked at as a marathon... not a sprint.

I hope you decide to become a subscriber. My methodology is not for everyone, but it is certainly one common sense approach that works.

Thanks for writing.

Mike