The idea in one minute
Instead of asking what a good stock should look like, O'Neil studied what the biggest winners actually looked like just before they took off, and wrote down what they had in common.
The answer was not "cheap". The great winners usually had rapidly growing profits, something new behind them, a price already near its highs, big investors buying, and a rising market. CAN SLIM is the acronym for those seven traits.
Where it comes from
William J. O'Neil (1933–2023) founded the research firm William O'Neil + Co. and the newspaper Investor's Business Daily. He described CAN SLIM in How to Make Money in Stocks (1988), one of the best-selling investment books ever written, updated in several later editions.
His approach shaped a whole school of growth investing. Mark Minervini, whose Trend Template is behind our JACK card, is one of its best-known students.
The seven letters
| Letter | What O'Neil looked for | |
|---|---|---|
| C | Current earnings | Quarterly earnings per share up at least 25% on the same quarter a year earlier, ideally speeding up, with sales growing strongly too |
| A | Annual earnings | Earnings up at least 25% a year over the last three years, and a return on equity of 17% or more |
| N | New | A new product, new management or new conditions in the industry, with the price breaking out to new highs |
| S | Supply and demand | Heavy trading on days the price rises; a share count that isn't being diluted |
| L | Leader or laggard | A leader in its industry, with price strength in the top 20% of all stocks |
| I | Institutional sponsorship | Growing ownership by good-quality funds |
| M | Market direction | A confirmed rising market, because most stocks follow the market's direction |
The first two letters are about the business, the next four about the stock and who is buying it, and the last about the market as a whole. Different practitioners use different numbers: thresholds of 18 to 25% for quarterly growth and 70 to 80 or more for relative strength are all common. Applied strictly, the original rules sometimes let almost nothing through.
The rule that makes it work
Cut every loss at 7 to 8%. O'Neil treated this as part of the method, not an optional extra. CAN SLIM buys strength, and strength sometimes fails. The rule keeps each mistake small so that the big winners can pay for them.
The M matters just as much: in a falling market, O'Neil's advice was to stand aside.
What the evidence shows
CAN SLIM has a strong record on paper and a weak one with real money. Both deserve to be said:
- On paper. The American Association of Individual Investors (AAII) has tracked a CAN SLIM screen since 1998. By its own figures it has gained about 19% a year against about 6% for the S&P 500 price index, but these are price returns, the method isn't fully published, and in some months no company passed the original rules at all.
- With real money. The exchange-traded fund built on IBD's growth list (FFTY) gained only about 18% in total from 2015 to 2025, while the S&P 500 gained around 240%. Two CAN SLIM mutual funds closed, and AAII's CAN SLIM portfolios lost about a quarter in 2022.
- The building blocks hold up. Earnings momentum and price momentum are both widely documented in the research.
The likely explanation for the gap: CAN SLIM depends on judgement (the N, the I, the entry point) and on discipline (the M and the sell rule) that a mechanical fund or screen doesn't apply.
Common mistakes
- Ignoring M. Buying growth leaders into a falling market is how CAN SLIM investors lose most.
- Holding losers. Without the 7–8% rule, one collapse can undo a year of gains.
- Screening only C and A. Fast-growing earnings alone describe many stocks that never go anywhere.
- Buying the laggard because it's cheaper. O'Neil wanted the leader, even at a higher price.
How ValuJack applies it
JOKER leads on earnings growth. JACK, from the same school, leads on the price trend. Keeping that split is what makes them two different cards.
C and A: strong growth over one and three years. Our data gives reliable yearly, not quarterly, figures, so JOKER requires profit growth of more than 25% over the last year and more than 25% a year over three years, with sales growing too.
A: a solid return on equity. A floor on return on equity, set lower than O'Neil's 17% so that enough companies qualify outside the US.
L: stronger than at least half the market. A relative-strength cut-off, deliberately looser than O'Neil's top 20%. The strictest price-trend rules are left to JACK.
S: no heavy dilution. Companies whose share count has jumped are flagged and checked.
N and I: found in the reports, not the numbers. What's new at the company and whether big investors are buying can't be screened. The Edge Check looks for both before a card is dealt.
M: the market's direction is checked. The Edge Check marks a JOKER company down when its home market is in a downtrend, so a growth leader isn't dealt into a falling market without a warning.
The sell rule is yours. A card can't manage your exit. The 7–8% rule is shown as information, because it is part of how CAN SLIM is meant to be used.
Growth at a reasonable price. CAN SLIM has no price check at all; several of its own followers suggest adding one. JOKER companies must not be priced far above our fair value estimate. That means fewer cards, but each is a growth leader at a price its earnings can support.
The same final steps for every card
Whatever the strategy, a company only becomes a card after three more steps. Our own model estimates a fair value from the company's reported earnings, and only companies priced below it (or, for the two momentum and growth cards, not far above it) can be dealt. The Edge Check, described below, then reads the latest reports, filings and news for what the numbers can't show. Finally the company must be tradable at major European online brokers. The full process is on the methodology page, and every card ever dealt stays on the card history.
The Edge Check: what the screen can't see
Every original strategy leaves something to judgement that no screen can measure. The Edge Check is ValuJack's answer: before a card is dealt, an AI research agent reads the company's latest reports, official filings and news, and asks the one question that matters most for this strategy.
The JOKER question: What is new, and does it carry the growth?
Two of O'Neil's seven letters, N (something new) and I (big investors buying), can't be screened, and a third, M, is about the whole market. The Edge Check looks for all three.
Counts in favour
- A clear new product, market or driver, with its revenue visible in the reports
- Growth that is mostly organic
- Ownership by institutional investors rising
- The company's industry outperforming the market
Counts against
- Growth mostly bought through acquisitions
- Nothing identifiably new behind it
- A share issue or convertible loan planned
- Post-listing share lock-ups ending soon
- The price stretched far above its trend
- The home market in a downtrend
Checked for every card
- Insider trades: are the company's own managers buying or selling shares with their own money? Awards, option exercises and routine trades are ignored.
- Short sellers: are professional investors betting against the company, and is that bet growing?
- Report wording: has anything changed since last year in the risks, targets, dividend policy, accounting rules or the auditor's report?
- Customers, suppliers and peers: what have they said about demand since the company's own latest report?
- Management's record: have they met their own targets, and have the finance chief or the auditor left unexpectedly?
- The latest report: a clear beat or miss, and has guidance been raised or cut?
What stops a card outright
A profit warning, a takeover bid, a trading suspension, profits not backed by cash, doubt about the company's future or a qualified audit opinion, restated accounts, a large new share issue, a regulator investigating the accounts, or an unanswered fraud allegation from short sellers.
Argue the opposite
Before any verdict, the agent writes down the three strongest reasons this card could fail within the strategy's time frame, and looks for evidence on each. A reason that is confirmed counts against the company, or stops it.
How it changes the cards
Every trading day the best-ranked companies in each tier are checked. A stop removes a company; the other signals move companies up or down the order, and the best-placed company that passes is dealt. A company due to report within the next week usually waits until after its report. Open a card's details to see its Edge Check: the question, a short answer, up to three signals marked ✓ or △, what would break the case, and the date it was checked.
Every point needs a source and a date: the company's own reports, official registers of insider trades and short positions, and exchange news. Forums, social media and analysts' price targets never count, and a source that can't be reached counts as no signal, not as good news. The Edge Check never changes the fair value or the star rating, and never says buy or sell. It is research done by an AI agent under fixed rules, live since 28 October 2026; it can miss things or be wrong.
Questions people ask
What does CAN SLIM stand for?
Current earnings, Annual earnings, New product or high, Supply and demand, Leader or laggard, Institutional sponsorship, and Market direction.
Does CAN SLIM still work?
Back-tests and AAII's screen look strong, but funds that apply it mechanically have done poorly. It depends heavily on the market direction rule and on cutting losses quickly.
What is the CAN SLIM sell rule?
O'Neil sold any stock that fell 7 to 8% below the purchase price, without exception, to keep each mistake small.
What is the difference between CAN SLIM and the Minervini Trend Template?
Both come from the same school. CAN SLIM puts earnings growth first; Minervini's template is a stricter checklist for the price trend. At ValuJack, JOKER leads on earnings and JACK on the trend.
Sources
- O'Neil, W. J. (1988 and later editions). How to Make Money in Stocks. McGraw-Hill.
- AAII: A tribute to William O'Neil, revisiting the CAN SLIM strategy
- Lutey, M. & Rayome, D. (2022). Live out-of-sample testing of CAN SLIM. Journal of Accounting and Finance.
- StockAnalysis: Innovator IBD 50 ETF (FFTY)
- Stock Rover: The CAN SLIM investment system
- Great Work Life: Rethinking CAN SLIM
- Desjardins / Disnat: CANSLIM
- Jegadeesh, N. & Titman, S. (1993). Returns to buying winners and selling losers. Journal of Finance 48.
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