RE: [CANSLIM] Why I like CANSLIM

From: rkhenry@naxs.com (Robert Henry)
Subject: RE: [CANSLIM] Why I like CANSLIM
Date: Sun, 6 Apr 1997 22:08:59 -0400

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I haven't actually tried out CANSLIM yet. About the time I decided to =
look into it the "M" part went soft. Still, assuming it works like Mr. =
O'Neil (and others) say it does, I'm excited. I feel a little like the =
kid who gets a new sled for Christmas and Christmas morning the sky is =
clear blue and the temperature is 70 degrees (yeah, been there) or the =
kid who just got a new kite but it's raining outside. I can't wait to =
try out CANSLIM. And I don't intend to paper-trade either (but start =
with a very small position.). I've tried it and paper-trading is just =
nothing like the real thing. When you're actually trading you never =
quite know what prices you're going to get when you place that order. =
Then of course the emotional stress of actually having real money on the =
table alters your perception. Any "fool" can make "paper" money by =
paper-trading, especially if you're permitted to delude yourself into =
making all sorts of assumptions that have nothing to do with the real =
world. You can't learn to fly with your feet on the ground, you can't =
learn to swim without getting wet, and I don't think you can learn to =
trade stocks with Monopoly money. Then of course there's another =
consideration: you can't spend "paper" profits.=20

One thing I like about CANSLIM is that it permits "stock picking" to =
enter into the equation. So many strategies I've seen seem to assert =
that you can make money trading anything as long as you follow charts or =
numbers or moon phases or some other such thing. Most of the indicators =
seem to be dedicated to following the performance of the Dow Industrials =
or some other index. If you're going to do that you might as well just =
buy an index fund. I've seen that even in a raging bull market you can =
easily buy stocks that go down while everything else is going up. (Even =
stocks that don't seem to have anything wrong with them except that the =
market doesn't like them.)

Other strategies do focus on stock picking, worrying over such elements =
as PE, sales, debt, book value, and rarely, earnings growth. These =
strategies seem to assert that all you have to do is pick a good company =
with good prospects, buy in and wait. Even if the market doesn't like =
the company right now, maybe because it or its industry isn't =
fashionable, just wait and eventually the market will come to it's =
senses and realize the value of what you've been holding. Sometimes it =
can take quite a time, but eventually your foresightedness will be =
rewarded. Actually, I've used this strategy and it does work, =
eventually, if you have the patience (and if the company doesn't =
self-destruct in the meantime).
=20
CANSLIM tries to deal with all of these elements. It's a complete =
strategy that helps you decide WHICH stocks to buy and tells WHEN to buy =
them to achieve optimum return. If you bought no other book than Mr. =
O'Neil's "How to Make Money in Stocks" you could still proceed--assuming =
it actually works. I'm hoping to find that out as soon as the market =
gets through screwing around. It seems to me that if you follow his =
rules carefully, no cheating, that there shouldn't be too much risk of =
getting hurt and even then not getting hurt badly. It makes sense, it =
seems reasonable, and it seems to be a complete strategy that was =
arrived at scientifically by looking at the performance of actual =
stocks. Science Rules! And because it is scientific, with the rules =
clearly spelled out, it means that any idiot can apply it successfully, =
not just people who were blessed with ESP or years of experience "on the =
street."

Or have I completely misinterpreted things?
- --
Bob Henry

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