O'Neil's proof: 45 years of winner studies — the system before the opinions
Chapter 1 of 16 · 11 min
William J. O'Neil founded his research firm in 1963 and the newspaper Investor's Business Daily in 1984, and his starting point was radical: instead of formulating theories about how the stock exchange ought to work, he built a database of every stock that had risen sharply since 1953 and searched for what they had in common BEFORE the breakout. The answer became CAN SLIM — seven traits that recurred in winners such as Sybase, Cisco and Price Club, regardless of decade. This chapter provides the map of the system and shows where each letter lands in AKM1 and AK1TS.
O'Neil was 30 years old when he bought a seat on the NYSE, the youngest of his time, after building his fortune on exactly the type of stocks he would later describe in How to Make Money in Stocks (first edition 1988, fourth edition 2009). His method was empirical, unlike most stock market books: he and his team went back to 1953 and catalogued the biggest winners cycle by cycle — what had the income statement, the product, the share count, the price chart and the funds' behavior looked like before the great price run began? The same seven patterns recurred again and again, and together they form the acronym CAN SLIM: Current quarterly earnings, Annual earnings increases, New products/management/highs, Supply and demand, Leader or laggard, Institutional sponsorship, Market direction.
The important thing to understand is that CAN SLIM is not an opinion but an observation. When Sybase broke out in 1990, when Cisco got its run going in the decade of the 1990s and when Price Club had refined the warehouse-club format in the early 1980s, they shared three things with hundreds of other winners: sharply accelerating quarterly earnings, something new that transformed its industry, and a price chart that built a base before the breakout came on heavy volume.
O'Neil's point is that the market is not randomly composed — the biggest gains have a common fingerprint, and the fingerprint shows up in the data before the price sets off on its course. The question therefore never becomes 'do you believe in the company?' but 'does the stock meet the measurements?'.
For the AK1A Research Lab this book is something as rare as a bridge. Fundamentalists read C, A, N, S and I as a checklist in the language of the AKM1 variables: quarterly earnings link to V01 revenue growth, the annual file to V09 ROE, the new to V13 Patent & IP and V16 Product launches, the share buybacks to V20. The technician reads L and M as timing: relative strength is the AK1TS Price dimension in pure form, and market direction is a cycle and Time perspective.
O'Neil's own system refuses to pick a side — he maintains that fundamental data decide what you buy and the chart decides when you buy. That is precisely the ecosystem's thesis, and the reason this course is tagged CRITICAL.