CANSLIM | Can I CANSLIM? 1st Post - May Be The Last!!

5th Jul '17 by poughtibridge

11 comments 6041 reads

I've been a Stockopedia subscribersince 2014 - I love the concept and the execution. The way those charts load up in seconds.... hats off to the programmers! One thing I am not is a professional. I've had good results since I started in 2008, but this has co-incided with a long bull run - I don't kid myself that I'm some stock wizard...

One thing that really fascinates me is the guru screens. I've read many a book on investing over the years - how great to be able to screen the entire stock market in seconds for all the stocks that match a guru's strategy. And then to tweak the strategy for your own investing preferences.

One strategy that has caught my eye over the years is the William O'Neil CANSLIM-esque strategy ^[1] It fits in with my investing temperament. Note: I think it is very important to be self aware and understand your investing temperament. By this, I mean if you are naturally a fiddler, a tweaker, don't follow a buy and hold type strategy! In my experience, it will result at best, in mental anguish and at worst losses.

I've read the CANSLIM book, cover to cover, several times and as Stockopedia acknowledge, it is a difficult book to distill into an automated screen. Also, the book is very US focused and some of the rules do not work on the UK stock market. That is why they call it the CANSLIM-esque screen. Having said that, it has been consistently one of the top ranked screens, so the poses a few questions (to me at least)

1) If we combine the buying / selling theories in the book, do we get an even better result than the impressive automated Guru Screen results (currently 25.8% annualised)

2) The Stockopedia performance tracker rebalances the portfolio quarterly. What would happen if you rebalanced the portfolio weekly?

So I'll attempt to uncover this with two portfolios:-

1) A fantasy weekly rebalanced portfolio

2) A real portfolio that I actually invest in based on the guru screen and my attempt at interpreting the buying / selling theories in the book

All compared with the CANSLIM-esque Guru screen (rebalanced quarterly) and the FSTE...

So why might this blog post by my last? I've tried to write several blogs before and never got past the first post. This may be different - I hope it will give…

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peterg

5th Jul '17

The Stockopedia performance tracker rebalances the portfolio quarterly. What would happen if you rebalanced the portfolio weekly?

You would almost certainly perform less well. Costs - commission and spreads - would rise significantly, and I'd be very surprised if the underlying timeliness of the Stocko indicators, or factors if you will, is such that a short term trading system such as weekly would gain anything to balance the additional costs.

It would be interesting to see how it performs, but I wouldn't do it with real money, and it will need some careful work to fully account for the effect of spreads and commissions on the returns.

Good luck!

Peter

poughtibridge

Good point - so on the fantasy portfolio, I'll be sure to add dealing costs. Spreads - good point and definitely needs to be accounted for. Thanks for the feedback.

dmjram

6th Jul '17

For the UK market there is also stamp duty at 0.5% to factor in as a cost for non AiM purchases.

Ben Hobson

Hey - I really hope this isn't your last post !

Yeah, the Bill O'Neil strategy is tricky to model - but we're big fans. Apart from anything else, (as you'll know) it has a rule to sell any stock that falls 7-8% below the buy price - with no exceptions. So it's never really been the sort of approach that suits rebalancing in the true sense. But even so, it has worked very, very well with the quarterly refresh (but it does have difficult periods - like the first half of 2016).

One thing to say is that there haven't been that many shares passing the rules over the past year or so. So you might be struggling with diversification (although O'Neil himself isn't too concerned about diversification). But a handful of those that have been passing the rules have been in the portfolio the whole time. So the options have been limited but the churn has been quite low - and they've performed well. We've been up to 9-10 passing the rules since April.

Good luck!!

Ben

buyhard

Are you going to provide a link to the fantasy portfolio? It would make very interesting viewing.

Good point. Pesky stamp duty - I'll include this. Thanks

Hi Buyhard,

Definitely and I'll also share the portfolio with the dealing according to CANSLIM rules. And share my reasons for taking actions. I'll be interested to see if people agree my interpretation of the charts...

jimmygee

I too have read his book multiple times - this is going to be a fascinating experiment.

Thanks for taking the time to try it. I'll be particularly interested in your interpretations of when to buy.

aflash

Another fan here.
The strength of the book introducing CANSLIM is the quality of the charts and the explanations.
The text is maybe improved by Minervini who acknowledges O'Neil's work and introduces the VCP concept which is close to the properly formed base pattern. Both of them buy on pullbacks from Higher His.

Thanks Jimmy - I'd interested in your thoughts on how I'm interpreting they buy signal too... It can be quite subjective!

Thanks - I'll check out Minervini - I had not come across him before. Next on the amazon shopping list!

Can I CANSLIM? 1st Post - May be the last!!

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Poughtibridge

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