Which stocks get the tick mark with the CANSLIM methodology?

by 5paisa Research Team Last Updated: Dec 13, 2022 - 09:52 am 44.1k Views
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There are numerous ways in which a stock’s valuation can be assessed, and that can be used as a deciding factor whether one intends to bet on them. However, no single parameter can be a right determinant of the price at which to enter as an investor.

More often than not seasoned investors look at multiple metrics to pick stocks. One popular cocktail of such measures is to mix fundamental metrics with technical factors.

While purists on both side of the gallery would like to stick to their basket of metrics to hand pick stocks to invest in, one alternative trick is to mix both sides under what’s known as the CANSLIM methodology.

This methodology seeks to identify growth stocks with strong fundamentals with technical factors supporting a price momentum. It was developed by former stock broker William O’Neill, who was behind financial research and media firm Investor’s Business Daily.

So, what exactly is this methodology?

CANSLIM is an acronym for a bunch of factors that can be used to assess a stock. These are: (C) current quarterly earnings, (A) annual earnings growth, (N) new product/services or management, (S) low supply and high demand of that stock, (L) leader or laggard in peer group, (I) institutional ownership and (M) market direction.

We put these multiple filters with growth in earnings per share, revenue growth, change in the holding of offshore portfolio investors, relative strength index and average monthly volume on the exchange to get a list of 53 stocks that can be considered for investment.

This basket mostly has small- and mid-cap companies, but a few large-cap firms as well.

Large-cap picks

In the large cap segment with valuation of more than Rs 20,000 crore, we get names like Reliance Industries, GAIL, Hindalco, Titan, SAIL, Ramco Cements, Bata, Bharat Electronics, GMR Infrastructure, Godrej Properties and Cummins.

Mid-caps and small-caps

For those who would like to pick the gems of tomorrow from the small- and mid-cap space, there are many names to consider. These include VIP Industries, Kewal Kiran Clothing, Confidence Petroleum, Brigade Enterprises, Titagarh Wagons, Praj Industries and Manali Petrochemical.

The list also has Taj Hotels operator Indian Hotels. The Tata Group company could be a contrarian pick considering that hospitality companies have suffered the brunt of the impact of the Covid-19 pandemic. 

The other stocks that could be part of a wider basket include BL Kashyap & Sons, Globus Spirits, Bharat Dynamics, Thirumalai Chemicals, Gujarat Narmada, Sarla Performance, Everest Kanto, Sutlej Textiles, Central Depository, JMC Projects and Gravita India.

The list also counts stocks such as Century Plyboards, Orient Paper, Garden Reach, IIFL Securities, Greenply, Shipping Corporation, Pioneer Embroideries, PNC Infratech, Gokul Agro, Olectra Greentech, Aro Granite, Elgi Equipments, TTK Prestige, D-Link, KEI Industries, Gokaldas Exports, Sterlite Technologies, IIFL Wealth Management, Asahi India Glass, Dwarikesh Sugar, Puravankara, Hindustan Oil Exploration and Gati.

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