Naples, Florida IBD Meetup April 6, 2017 What Is CAM SLIM Investing What Can We Expect How To Get Started Lee Tanner Non-Professional Amateur Volunteer 1
This Presentation Is: For Educational Purposes Only Not recommending any stocks/securities to buy or sell All Investing has Substantial Risk of Big Losses CAN SLIM Is The Registered Trademark Of Investors Business Daily (IBD ) 2
Questions? 3
Everything is from the Basic CAN SLIM Educational Material 4
Learn From The Experts 5
Learn From The Experts 5 IBD Live Workshops 8 IBD Home Study Programs 6
This Presentation Is Recorded I ll Pause For Questions 7
What Is CAN SLIM Investing? 8
CAN SLIM Investing High Growth Stock Investing System High Earnings Growth 9
Key Advantages of CAN SLIM High Annual Return Potential Very High Actually Astonishing High Potential More On This Later Lower Risk Very Low Risk If I Follow The Rules Always Cut Losses Small, No Exceptions Ever Begin with Small Amounts of Capital - Peanuts Scale Up Only when Profitability Is Demonstrated If I Get Three Consecutive Losses I Stop & Study Some More Never buy or sell unless it is per a written rules 10
More Key Advantages Anybody Can Do This It can be done part time while still working, or retired There is abundant, excellent educational material It can be, should be, started with small capital, peanuts The tools are inexpensive, available to all, and easy to learn We can start simple and grow 11
Unique Combination Very High Earnings Potential Very Low Risk Can be learned and done by most people Lots of good educational materials Can be done part-time, actually better part time than full time. Bill O Neil and his professional portfolio managers do it part-time. Nicolas Darvas How I Made $2,000,000 in the Stock Market, 1960 12
Questions? 13
CAN SLIM Investing High Growth Stock Investing System High Earnings Growth Rule Based System 14
CAN SLIM Stocks C High Current (Quarterly) Earnings Growth A High Annual Earnings Growth N Something New Causing The High Growth S Favorable Supply/Demand L Leader I Institutional Sponsorship M Favorable Market 15
CAN SLIM Investing System Sell For Profits +20% to +25% Forms Base Breakout, Buy Forms Base -8% CAN SLIM Characteristics 16
~ 50 Pages 8 Chapters Describing CAN SLIM 17
Questions? 18
Basic CAN SLIM Investing System Sell For Profits +20% to +25% Most of Time Forms Base Breakout, Buy Forms Base CAN SLIM Characteristics Not Momentum Investing Often There Is No Momentum At The Breakout 19
Buying Base Breakouts Reduces Risk of An Immediate Loss The Stock Is Poised for Another 20% - 30% Advance Increases the Chance of A Quick Gain for a Higher Compound Annual Growth Rate (CAGR) Base on human nature so patterns repeat year in and year out, decade in and decade out 20
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Cup with Handle 2016 117 Years Later 22
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Double-Bottom Base 116 Years Later 24
Base Patterns Represent human psychology involved in buying and selling investments Assessments of price fairness Fear Excitement and eagerness to succeed Greed Human psychology changes very slowly Slower than glacial More like tectonic, if that fast 25
~ 50 Pages 1 Chapter Describing Bases + Hundreds of Examples 26
CAN SLIM System Usually Sell Here CAN SLIM Attraction Breakout, Buy Forms Base Reduce Risk CAN SLIM Characteristics Springboard To A Fast Advance 27
Bases Show Orderly Turnover In Institutional Owners Distribution on the left with orderly price declines as volume generally eases in normal profit taking. Price balances at the lows, ideally on quiet trade as profit taking subsides. Price increases with increasing volume and signs of accumulation on the right as accumulation increases. Patterns may include shakeouts and support. Institutional accumulation on the right constrains supply of available shares. New demand triggers pronounced price rise to stimulate new supply to meet the demand. This is the breakout. 28
What Happens In A Base? Normal Profit Taking, Orderly Distribution Prices reach balance, trade quiets Final quiet selling, handle New demand, accumulation 29
What Happens In A Base? Stock has Gone from Weak Hands to Strong Hands 30
Basic CAN SLIM Investing System Very Specific Stock Not Just Any Stock 1. 30% prior advance 2. Top CAN SLIM Characteristics 3. Completed a proper, standard base 4. Has a good breakout 5. Market is favorable, bull market. Sell For Profits +20% to +25% System Breakout, Buy Forms Base CAN SLIM Characteristics 8 to 12 Weeks Not Swing Trading 31
Post Analysis Questions Am I Buying Stocks With CAN SLIM Properties that I ve Prescreened for my WL? Am I Buying Just When They Breakout of A Full Base Right At The Pivot Point? How long am I holding stocks; weeks or days? Do I Hold Many Until They Go Up 20%? Then Do I Sell Them At +20% While They Are Still Going Up? 32
System Don t Remove This Belt 33
CAN SLIM System Breakout, Buy Forms Base CAN SLIM Characteristics Springboard To A Fast Advance 34
CAN SLIM Fast Advance 20% gain in 4 months: 75% CAGR* 25% gain in 3 months: 145% CAGR Three 20% gains in one year: 73% Three 20% gains and three 7% losses in one year G-L-G-L-G-L : 24% Three 25% gains and three 7% losses in one year; G-L-G-L-G-L: 73% *CAGR = Compound Annual Growth Rate 35
Basic CAN SLIM Investing Sell For Profits +20% to +25% While The Stock Is Still Advancing Forms Base Breakout, Buy Forms Base CAN SLIM Characteristics 36
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Profit-And-Loss-Plan How to Make Money In Stocks, By William J. O Neil, 4 th Edition Page 258 38
Objective Of Every CAN SLIM Trade Sell For Profits +20% to +25% Buy Breakout Proper Base Top CAN SLIM Characteristics 8 to 12 Weeks 39
Objective Of Every CAN SLIM Trade Greedy Don t Want To Sell Here, I Need Rules Sell For Profits +20% to +25% Scared Want To Sell Here, I Need Rules Buy Breakout Proper Base Top CAN SLIM Characteristics 8 to 12 Weeks 40
Questions? 41
Simple Sell Rules To Get Started 42
Standard CAN SLIM Trade ¼ of My Best Picks Fail this Way Buy Breakout Sell Rule #1 Cut Losses Small Stay In Business Proper Base Top CAN SLIM Characteristics -8% from buy price Sell Here, Always, No Exceptions 43
CAN SLIM Sell Rules 1. Sell any stock that goes down 8% from the buy price always, no exceptions ever. 44
Objective Of Every CAN SLIM Trade Sell For Profits +20% Sell Rule #2 Routine Profit Taking Buy Breakout Proper Base Top CAN SLIM Characteristics 45
CAN SLIM Sell Rules 1. Sell any stock that goes down 8% from the buy price. 2. Sell all shares to take profits when the stock advanced 20% above the standard base pivot point. A key part of the revised profit-to-loss plan. 46
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Standard CAN SLIM Trade It starts up but then fails If it declines too much it is probably broke sell it Buy Breakout Proper Base Top CAN SLIM Characteristics -8% Sell Rule #3 Decline From The Peak 48
Standard CAN SLIM Trade Sell Rule #3 Decline From The Peak Key Philosophy Not Protecting Unrealized Gains Just Freeing Up Capital Buy Breakout Proper Base Top CAN SLIM Characteristics -8% 49
CAN SLIM Sell Rules 1. Sell any stock that goes down 8% from the buy price. 2. Sell all shares to take profits when the stock advanced 20% above the standard base pivot point. 3. After a stock is up 7% from the buy price begin raising the sell point from -8% first up to -5% then keep it 11% below the recent intra-day peak. These Sell Rules Are Objective Specific Values, We Can Use Broker Stops 50
To Start 11% is a bit tight, but okay The CAN SLIM System Philosophy Not Protecting Unrealized Gains - Stock Goes Up 15% from 100 to 115 - Come Down 12% Ends Up at 101 51
CAN SLIM Sell Rules 1. Sell any stock that goes down 8% from the buy price. 2. Sell all shares to take profits when the stock advanced 20% above the standard base pivot point. 3. After a stock is up 7% from the buy price begin raising the sell point from -8% first up to -5% then keep it 11% below the recent intra-day peak. These Sell Rules Are Objective Specific Values, We Can Use Broker Stops 52
Standard CAN SLIM Trade Three Strikes Rule Stay In Business Buy Breakout Proper Base Top CAN SLIM Characteristics -8% from buy price If this happens three straight times STOP and figure out what is wrong 53
CAN SLIM Sell Rules 1. Sell any stock that goes down 8% from the buy price. 2. Sell all shares to take profits when the stock advanced 20% above the standard base pivot point. 3. After a stock is up 7% from the buy price begin raising the sell point from -8% first to -5% then keep it 11% below the recent intra-day peak. 4. If you have three (3) straight failures to trigger sell rule #1, STOP buying and do post analysis. Don t buy again until you see and fix the problem. 54
Four Simple Sell Rules To Start Very Objective Rules 55
Questions? 56
Special Big Gain Stocks 57
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Profit-And-Loss-Plan How to Make Money In Stocks, By William J. O Neil, 4 th Edition Page 258 59
The Certain-teed Exception Rule The Eight-Week Hold Rule Two 8-Week Holds 60
Life-Changing Very Special Stocks 1,696 CAGR 61
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380% CAGR 63
HANS (MNST) Modeled for Petaluma IBD Meetup by Michael Nestler 64
Weekly 7/14/2006 Sell All 11 Add-On Buys Sold and Bought Again Start Buying On the IBD 100, Very High Earnings Growth 65
HANS (MNST) Results $20,000 in margin account. Cash used for initial position no margin loan Margin loan used only for add-on buys Stock Gained 1,587% in 23 months Portfolio grew from $20K to nearly $1 million. Portfolio gained 4,877% in 23 months the power of using margin. 700% CAGR Life style changing 66
Holding Onto and Adding To Big Winners Is Key Part Of CAN SLIM System Jesse Livermore said something like, It is the sitting that makes us the money. Big Gains Made by Holding Onto Winners 67
HANS (MNST) Summary Less than one trade per month on average Steady Hand, Easy Work Not Swing Trading 68
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2004 70
HANS Was Great Then But, What About Now? Weibo (WB) - Maybe 71
One Year Exactly +193% 4/6/2016 72
Questions? 73
What Can We Expect? 74
What Can We Expect? How much might we make? How much will it cost to learn this? How long will it take to learn this? When might I start making a little money? When might I make big money? When can I quit the day job/retire? 75
How Much Can We Make? 76
American Association Of Individual Investors (AAII) 77
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AAII 21.3% CAGR Since 1/1/1998 80
AAII.com >> Computerized Investing 81
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Computerized CAN SLIM Index Based on picking stock with CAN SLIM properties Dropping them when they lose those properties No Market Timing No Base Breakout Rules No Revised Profit-to-Loss Plan No Protective Sell Rules 86
I Can Most Likely Better the AAII Screen Results 87
IBD 50 Index Performance 88
IBD 12/12/2016 What Is The Significance Of This? I Can Surely Do Better 89
Why Might I Do Better Have the IBD 50 Don t Buy Extended Stocks Don t Buy Declining Stocks Only buy stock breaking out of good bases Have sell rules Have portfolio management rules Even more selective on CAN SLIM properties than the IBD 50 90
IBD 12/12/2016 With Sell Rules & PM Rules Avoid Big Drawdowns 91
IBD 12/12/2016 44% CAGR 3/6/2009 92
Bill O Neil s Expedience 93
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Bill O Neil s Start Joined Hayden, Stone and Co. in 1958 Began developing the system soon after Refined in in 1960-1961 Turned about $6,000 into over $200,000 in 1962-1963 95
Study Model Stocks 96
Model Stocks Front of How to Make Money in Stocks HANS (MNST) posted 5/21/2016 Weibo posted 10/2/2016 AMN Health Care posted 8/17/16 Sketchers (SKX) posted 12/11/2015 Ambarella (AMBA) posted 8/18/2015 GMCR posted 6/2/2015 Littleton, CO Example Stock (Unknown Until After It Is Picked) posted 5/18/15 Lululemon Athletica (LULU) posted 12/20/2013 97
Model Portfolios 98
IBD Market Simulations (Model Portfolios) March 2003 November 2003: Gained 390% (>700% CAGR) 2004 Masters Course Used +25% profit goal March 2003 April 2005: Gained 1104% (227% CAGR) May 2005 Masters Course Used +20% profit goal August 2004 April 2006: Gained 454% (165% CAGR) April 2006 Masters Course Used +20% profit goal March 2007 June 2008: Gained 462% (510% CAGR) June 2008 Masters Course Used +20% profit goal August 2006 November 2007: Gained 445% (257% CAGR) Advanced Strategies 2012 (And Home Study) Used +20% Profit Goal 99
More IBD Simulation Info Margin accounts using 50% margin. Held about 6 or 7 stocks Scaled in 50%, 30%-35%, 20%-15%. -8% cut loss sell points applied to each buy point. Sometimes made buy backs +10% Didn t use the rule not to take profits in first eight weeks in any of the simulation. (Petaluma IBD Meetup Example SR#14, HTMMIS page 271) All used the Certain-teen exception 8-week hold rule. Follow-up buy points: 10-week bounce 3WT or more Base Breakouts 100
One Of Lee s Model Portfolios 101
Stocks in the Model Portfolio 102
Started With: $50,000 in Margin Account $100,000 in Retirement Account Ended with $542,731 Total Total Gain 262% CAGR 458% Picking from IBD 100/50 Lists Completing Full Bases Just Following The Rules 103
Summary of Return Guestimate AAII 21% IBD 50 Approximation 44% Model Stocks Individually 100% - 600%, more Average of Model Portfolios 380% CAGR (Can we do ⅟10 of that 38%) 104
What Can We Expect? How much might we make? 25% Annually? 105
This Is Why I Use CAN SLIM +100% in 3 Months ~4,000% CAGR 106
But, 107
Sell Rule #1 Is Immutable The Same Stock One Year Later $10,000 evaporated to $2,500 108
What Can We Expect? How much might we make? How much will it cost to learn this? How long will it take to learn this? When might I start making a little money? When might I make big money? When can I quit the day job/retire? 109
What Can We Expect? How much might we make? 25% Annually? How much will it cost to learn this? 110
How Much Will It Cost? Computer High Speed Internet Subscription to IBD Books Place to work Discount Brokerage Account Eventually Subscription to Market Smith 111
Learn From The Experts 112
Learn From The Experts 5 IBD Live Workshops 8 IBD Home Study Programs 113
What Can We Expect? How much might we make? How much will it cost to learn this? How long will it take to learn this? 25% Annually - Eventually? Several $ Thousand 114
How Long Will It Take To Learn? How Difficult Is It? 115
116 Pages Three Page Table of Contents The Details Are Important But We Can All Learn Them We All Follow Rules When We Drive, Mostly We Can Also When We Invest 116
These Five Books 117
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Files 120
Common CAN SLIM Pitfalls Arrogance and Big Ego Not Adopting the Whole System (Don t Understand It) Not Spending Enough Time Learning The System Mixing CAN SLIM with Other Systems Knowing Better Prior Knowledge Gets In The Way Don t have or don t follow rules Impatience Buying stocks before ready Inability to patiently follow the rules Selling good stock too soon Pessimism 121
Why Must We Have & Use Written, Specific Rules CAN SLIM investing is intricate The details are important Correct actions are often counter to our natural emotional instincts Our psychology will derail us if we don t follow specific rules 122
Pessimism: CAN SLIM Will Not Work Any More Times and markets have changed greatly yes, but: CAN SLIM is based on the psychology of investing that has not changed at all And on the needs of big money investors which has not changed Everybody knows about CAN SLIM so it can t keep working Not so: Everybody knows but nobody does Big investors can t buy base breakouts just as we do and can t buy and sell in one mouse click. We have a big advantage of being nymble. 123
Pessimism: The Market Is Bad Nasdaq Composite Monthly 26 Years 124
More CAN SLIM Snags Not staying focused on one system Can t stand being wrong big ego problem 125
What Can We Expect? 126
Bill O Neil s Start Joined Hayden, Stone and Co. in 1958 Began developing the system in 1959 Refined in in 1960-1961 Turned about $5,000 into over $200,000 in 1962-1963 5 Years to Develop the CAN SLIM System and Make Big Money 127
What Can We Expect? How much might we make? 25% CAGR is Fair How much will it cost to learn this? Several Thousand Dollars, maybe $5 to $10 thousand. How long will it take to learn this? 3-7 Years When might I start making a little money? 1 2 Years When might I make good money? 5 7 Years When can I quit the day job/retire? Not Too Soon 128
Easy to Get Started 129
The CAN SLIM Business 1 Study & Write Rules 2 Make a Watch List 3 Buy Just Right 6 Review 5 Sell Just Right 4 Manage a Portfolio 130
The CAN SLIM Business 1 Study & Write Rules 2 Make a Watch List 3 Buy Just Right 6 Review 5 Sell Just Right 4 Manage a Portfolio 131
Start Learning CAN SLIM 1 Study & Write Rules 2 Make a Watch List No Money Needed No Money Needed 6 Compare our WL with stock that broke out that we should have been watching Review No Money Needed Personal Breakout List of Qualified Stocks 132
Getting Started Plan Study and read a certain amount of time each week. Keep a notebook of studies Write and/rewrite some rules every week Stock Picking Rules/Guidelines Making The WL Stock Buying Rules Portfolio Management Rules Add-on Buy Point rules Sell Rules Post Analysis (Data to save for example) Keep references for your rules Make a watch list (ready list, buy list) every week and save them. Keep a personal breakout list current with notes. Compare personal breakout list to watch list each week. 133
Pick Watch List Stocks Only from the IBD 50 at first That have nearly completed full and proper bases NVDA NTES ESNT MCHP CRUS 134
Personal Breakout List Stocks that breakout that have the type of CAN SLIM properties you look for to qualify stock for your watch list, and Have completed full and proper bases These are stocks that were on your WL or should have been, or were close to going on your WL. 135
IBD 50 4/3/2017 136
Personal Breakout List of Qualified Stocks That Broke Out Recently 137
Finding Personal Breakout List Stocks WL Stocks That Breakout During your WL preparation process Market Pulse: Leaders Up or Down In Volume The Big Picture Stocks On The Move Weekly Stocks On The Move IBD Meetup Discussions 138
Start Learning CAN SLIM 1 Study & Write Rules 2 Make a Watch List No Money Needed No Money Needed 6 Compare our WL with stock that broke out that we were or should have been watching Review No Money Needed Personal Breakout List of Qualified Stocks That Broke Out Recently 139
The CAN SLIM Business 1 Study & Write Rules 2 Make a Watch List 3 Buy Just Right 6 Review 5 Sell Just Right 4 Manage a Portfolio 140
Getting Started 141
Starter CAN SLIM Approach 1. Each week pick only 4 or 5 watch list stocks with top CAN SLIM properties and that are completing full and proper bases. Starting by looking on the IBD 50, IPO Leaders, Sector Leaders and Big Cap 20. 2. Don t invest money using the CAN SLIM system until you are making watch lists every week for a few months and see some of those stocks breakout and advance at least some. 3. Then, allocate small amounts of money initially for CAN SLIM investing, peanuts, but use real money. 4. Buy within 1% of the ideal buy price, better yet within 0.5%. Making only one buy; no scaling in yet. Trigger the buy based on price only, don t worry about the desired +50% Volume. 5. Hold the stock until it triggers a written sell rule in your personal sell rule set. 6. Use the short sell rule set similar to that on the next slide. 7. After some successes gradually increase the amount of money for CAN SLIM investing, begin scaling into initial positions, and expand your sell rule set. 142
Beginning Sell Rule Set This Rule Is Immutable 1. Sell -8% from buy price, intra-day. (Cut Loss Sell Rule) 2. Take gains +20% above pivot point, immediately. (Profit goal sell rule) 3. When profitable by 7% move the -8% sell point up to -5% from the buy price. After that keep a trailing sell point 11% below the highest intra-day high. (Decline from the peak sell rule) 4. If you have three straight -8% failures, stop buying and study these failed trades to see what is wrong before resuming. (Three-Strikes Rule)
Be Patient While Learning It Takes Time It Involves Some Un-Learning 144
This Concludes Naples, Florida IBD Meetup April 6, 2017 Lee Tanner Amateur Volunteer ~ Happy and Profitable Investing to You All ~ 145