This lesson introduces a fundamental stock valuation method, the "CAN SLIM" system, emphasizing the importance of Investors Business Daily (IBD) as a primary resource for identifying high-growth stocks, and blending these fundamentals with personal technical analysis for market timing.
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okay folks welcome back in June 2017 ICT mentorship
mentorship
stock trading Lesson Four valuation
okay folks uh mentioned this many times
in my free teachings I just one resource
I think as an investor
um you should have this you should have
this as part of your repertoire you need
to have it as a resource as a tool I
think it's valuable I don't have
high enough things to say about
Investors Business Daily I've used it as
a resource
since the late 90s
it's awesome awesome toll it gives you
in my opinion the best fundamental slant on
on
stocks than there then you can find
anywhere else I used to subscribe to the
Wall Street Journal as a young Trader
I felt uh stilted a little uh you know
stuffy yeah I guess the word I was I was
looking for and it just felt um you know
not friendly to me as a as a new Trader
Investors Business Daily has always been
presented in a a manner where it's easy
to understand it's very organized
um I like what they do I've always liked
what they've done with their resource
and they've always been on The Cutting
Edge as far as trying to crack the code
in terms of real supply and demand
factors behind stocks
so if there's a means of valuation from
a fundamental standpoint I believe that
there are fundamental reasons
to buy stocks
doesn't mean that those fundamentals are
sound or that they're going to equate to
future profitability for the company but
if we're going to number crunch
I think Investors Business Daily is the
number one resource in that regard
so everything I'm going to talk about
here is going to be highly dependent
upon you knowing
or getting familiar with Investors
Business Daily Newspaper uh they they
have it in digital form now you can do a
four week
free trial
um they do ask for a credit card but um
if you can cancel before they won't
charge you but the the point is
if you wait until like the second
week of September
wait and then ask for a four week
trial subscription okay so the second
week of September I'm going to remind
you all to subscribe to Investors
Business Daily with a free four-week
trial and no I'm not in business with
them no I'm not a
Salesman for them I I genuinely use
their service and I like it so part of
this mentorship was to learn what it is
I use to Come Away With My analysis
Concepts and this is one of them so
and I use it for currency stuff too and
I use it for commodity stuff as well but
when we get into uh post mentorship
stuff in September October whenever the
Divergence occurs in the stock market
that we're usually looking for for the
seasonal low we'll be tracking that week
by week and when it comes to fruition
I'll actually throw in a bonus teaching
because I just I promised you that I
would do a stock market analysis over
the shoulder so you guys can see how I
do it breaking down the industry groups
sectors leadership all that business and
using all the tools that I use for my
price action study but
I say that because I'm going to go over
and and kind of like in general terms of
what I use investors necessarily with
and like 80 of this teaching is
basically what you learn from Reading uh
William O'Neill's book how to make money
trading stocks to me um
um
I can't say it enough to Simply read
that book okay it's a really really good
book it's Timeless because the
information is
still pertinent today
but without using the Investors Business
Daily Newspaper it's kind of like well
you know it's just neat information it's
thanks for including it Michael but I'm
really not going to go that direction I
believe even if you don't trade stocks
you should be looking at this resource
uh you don't have to subscribe to it
either if you can get to a Newsstand
where you live at locally
um before I actually became a subscriber
to their service I used to go to the
newsstand in one of the local malls
where I lived at and I would go there on
the weekends I'd get the week weekend
edition which had like all the the bells
and whistles and the complete stock
breakdown and all the uh
the indicators they use for their
fundamental ratings
and I would literally pour over this
newspaper for hours on Saturday and I
loved it absolutely loved it and now
it's digital which it makes it very easy
to you know flip through and find what
you're looking for but truth be told I
still get the weekly printed Edition
because I like it I'm a dinosaur you
don't have to go that route but
to save money if you want to look at it
that way I guess you can
go there and buy the newspaper you know
once or twice a month
and then maybe uh you know that would be
one way for you to save some money uh
you don't need to see it all the time I
think once a month is is sufficient
enough especially if you're waiting for
something technically to align as we'll
discuss here in this teaching but I
can't say enough investors Mrs Daly
absolutely one of the best resources for
so we've learned about index stocks and
the Dow 30 NASDAQ 100 and S P 500 so you
have a universe of
630 stocks at your disposal
as a index base
this teaching is going to be talking
about valuation selections on growth stocks
stocks
and this is where the big
astronomical stock surges take place
okay it's going to be in this valuation format
and obviously I can't claim ownership of
this but I do subscribe to the theory
that William J O'Neal created and his
acronym he uses for it is can Slim and
we'll break down each one of these
components and I'll tell you how I segue
in from this information into
how I use my my price action analysis
Concepts but the first portion all the
way up to the letter M primarily this
portion of the acronym
that's where I get my fundamental basis from
from
so when I
View a stock on a fundamental level
whether being bullish or bearish I'm
using the
method of breaking down the stock
with these
letters here that we'll look at closer
and finally the last one here is the
technical basis which is my own
input into it I don't believe that
William J O'Neill's um
approach to timing the market was
sufficient enough
and by my own analysis Concepts and by
using my s p trading and such I I
adopted obviously the canceling method
from the fundamental standpoint
but I can time the market as we've seen
in the market in the mentorship and
prior to the mentorship I can time the
market pretty good uh in regards to
whether they're bullish or bearish and
we know
how to select certain times of the year
to do that so we have timing and we have
seasonals and we have fundamentals
together wow do we have a Dandy of a
so fundamentally speaking the first one
in the acronym can slime is C and when
Jane the old
basically was referring to current earnings
earnings
and you'll be looking for stocks with
earnings growth of at least 25 in the last
last
reported quarter and larger growth is
even better
but you're going to be also looking to
see earnings accelerate over the last
three quarters and for example
one-quarters earnings may be up 25
percent in the next quarter of fifty
percent in the most recent up 90 sale
ideally you want to see the increase building
building
not just a steady growth Pythagoras
and the a in the acronym stands for
annual earnings and you want to see
annual earnings growth of at least 25
each of the last three years
and you also find that the greatest
stocks over time have had the best
margins in the industry group and return
on equities at least 17 percent
and there's some of these things are
going to go right over your head and
without actually doing it with real
stock selections and going through the
process which you'll actually see me do
in the fall so just know that the folks
that are here at the end of this
mentorships content delivery
during those three months
you'll actually see me do this uh spend
I don't know how long it's going to take
me it's probably gonna be a long video
or a long live session but it'll get
it'll be done on a Saturday and you'll
see exactly how I do it but I'll break
down all the things that's shown here
and I'll show you how you can get this information
information
apart from Investors Business Daily for
some of it but other things you're going
to have to rely
solely on Investors Business Daily like
annual earnings and quarterly earnings
and stuff that's kind of like common
knowledge stuff you can pull that up on
a simple thing a bar chart or market
watch something like that you can pull
okay the end in the acronym
stands for the new Factor and the
biggest canceling winners or stocks that
are found to be selected by this method
it always had something new okay and it
could be a new product it could be a new
service new leadership New Management
new price high or new condition in the
industry and an important factor is to
look for newer companies
so Studies have shown the greatest stock
winners showed that 75 of them went
public within the last eight years
so this new economy this new growth
growth
that scene wide way of like for instance
like social media okay Facebook for
example the company came out with an IPO
and I remember telling some of my
friends that uh you want to wait for it
to trade down to around 20 a share and
then buy it and wait for it to go over
100 to share within about three and a
half years
went to exactly to script A lot of them
bought it initially and ended up paying
a little bit more and sat through a
little bit of a pullback on it but it
was a new company it was a new IPO but
it was a fresh idea it was everybody
wanted to be a part of it and just at
the time of this recording now you know
it hit a new mile marker with several
billion uh users a month or on Facebook
now I don't personally have a Facebook
anymore I did have one but the point is
you want to be looking for New Horizon
opportunities and
while there may not be new companies
coming on the same in terms of publicly
traded stocks there may be a company
that's coming out with a fresh idea or
new spin on something or revamping
something okay and I'll give you an
example like apple every time they do a
new iPhone update and I'm looking
forward to the iPhone 8 this fall
the uh that always obviously generates a
new more interest in that particular
stock or that that company so if we have
a change in in management a lot of times
that will spur on a new interest in
buying so always look for things new and this
this
this portion of can slim is best used
for once you identify a stock that has
strong current earnings and annual
earnings you want to start looking in
like a simple Google search the company
list that you build a stock watch list
of that has strong earnings quarterly
and annually the next thing you want to
start looking through is the Google
search on those stocks see if there's
anything new coming up if there's any
any kind of uh new idea a new spin on
something something that's going to draw
investors attention to it because if
that's happening it's also going to be
happening on an Institutional level as
well and who has more money
Joe schmoe on you know the corner that's
Johnny shoes and puts money into an IRA
or the folks that run these mutual funds
or work for insurance companies
obviously the latter so anything new is
going to be beneficial to you in terms
of seeing potentially new purchasing
more appreciation in the share price
coupled with strong current earnings and
okay the letter S and the acronym
standing for supply and demand and no
supply and demand as it relates to
technicals all right so one of the most
basic economic principles is the law
supplying demand which is most sharply demonstrated
demonstrated
in the stock market
now I'm going to argue with that
but we'll just go along with what
they're saying here the stronger man for
a limited supply of available shares
will push a stock price up
on the flip side an oversupply of shares
and weak demand will cause the price to
Sag or decline
we'll be looking for a stock that
obviously is well valued it has to be
above 20 a share my personal opinion has
to be a share price of over 20 share and
it has to have a reasonable float that
means the outstanding number of shares
that could be purchased and we'll we'll
talk more about that when we actually do
case study and literally I pick out the
winners that's going to be for this fall
but you want to be looking at
the idea of
buying a stock that has a ton of float
or open shares that can be purchased
com compare that with another stock that
has uh lesser number of shares in float
that could be purchased
that has the same type of conditions
where it has strong earnings and annual
earnings and it has something new a new
product comes out maybe new management
and it has far less shares
which one has more opportunity to go
higher well if smart money starts buying
that one with a lesser float or lesser
outstanding shares
that one's going to go up a lot more
because it's going to be very easy for
them to reprice because of the supply
and demand Factor seen by investors
okay the L and the acronym can slim
stands for leader in laggard
all right so true leaders of those
companies showing the best earnings
growth strongest sales and Superior
price performance and
are in leading industry groups
consider buying high and selling higher
that sounds like foolishness but we've
learned that basically that's a little
that's a low resistance liquidity run
basically okay we're already seeing
price go higher and we are comfortable
with it because it's moved away from a
discount array and we know there's going
to be reaching for buy side liquidity
that's the general principle in the
stock market you're going to be looking
for these leadership issues not a
laggard a relative strength analysis is
going to help you with this but we can
be buying something that's already been
moving up and we're going to be selling
now the results of their studies over at
William J O'Neill's company Investors
Business Daily is the greatest Market
winners revealed something quite
interesting that the strong got stronger
and that's the basis of how I use
relative strength analysis because we're
ferreting out the ones that are
leadership so smart money is pouring
money into it
Chancellor is going to go up not go up a
little bit but go up a lot
so the task for you as the student
investor is to locate these strong
leading companies and to avoid the weak
okay the i in the acronym cancel m
stands for institutional sponsorship and
you hear me talk about that a lot
because it's important there's ways we
can track in Forex there's ways we can
track in Commodities but the way that
you can track it in stocks Is the
participation of the mutual funds
so mutual funds Pension funds and banks
are the big players that drive the
market in stocks and they account for as
much as 80 of all trading activity
for a stock to be a top form it has to
have institutional support to fuel its
price moves suggesting that you only buy
stocks that have
at least 10 mutual funds that own it is ideal
ideal
and have two to three quarters of
increasing institutional sponsorship now
there are ways you can go through and
dig out all this information but I've
found that it's much easier to go
through the ranking system that IBD uses
in their newspaper this is one of those
resources that save a lot of time you
can just go right there in their their
stock table and find all of these stocks
that fit this criteria and they also
have a stock scanner too for you guys
that like to do those types of things
you can put in the criteria you're
looking for and all the ratings and such
it'll spit out all the stocks that they
follow that meet that criteria on a
fundamental basis and one of the
institutional sponsorship tabs they have
in my opinion is awesome and if you use
it correctly at the times of the year
when we look to be a buyer or leading
into it you can find some real dnds in
terms of strong leadership upside companies
and lastly in our acronym can slim it's
the market Direction
and studies show that three out of four
stocks follow the market trends so
you're going to want to be trading in
sync with the market as I've always
taught and you should only be buying
stocks in a confirmed uptrend and you
look to protect your capital and Corrections
Corrections
so Market Direction
I don't subscribe to anyone else's
theory about that I think
the only thing that matters for stocks
in terms of things that's been around
forever is Dow Theory Dow theory is all
you'll ever need in terms of technical
analysis for stocks to me that coupled
with how I look at institutional
sponsorship and institutional order flow
and premium and discount arrays
simple simple simple stuff applied with
Dow Theory as a confirmation
looking at quarterly shifts and seasonal
Tendencies that's how we time the market
no one breaks down timing the stock
market down like I do and that sounds
rather arrogant right now but it's the
truth you've gone through most of the
mentorship here already by the time of
this recording you're listening to it
you can see there's rather unique things
that I do about price and it's highly
specific it's a it's about specific
times of the day specific times of the
week days of
um the week that are superior than
others there's periods of the the year
or calendar months that are better than
others and there's certain quarters of
the year
that are better than others in terms of
abortions for bearishness so I have
spent a lot of time classifying how I
can in general terms view the market
in a cyclical nature where it repeats
itself very generically and no one else
has done that they they get close to it
with a little bit of this and a little
bit of that but I came up through just
about everything that was around prior
to year 2000 and I was in everything you
know I did Elliott leave I did all those
things that supposedly work and I Come
Away with
most of it's nonsense and some of it
works sometimes and that's why they keep
selling books and stuff but
we the way I interpret price if we can
look at things seasonally for instance
if we know there's a seasonal influence
for stocks to Rally a specific time of
the year doesn't it make sense to start
studying the market right before that
maybe a month before that seasonal
impact and start looking for companies
that are already showing evidences that
they're having strong earnings annual
earnings are increasing they have a new
product New Management something new
about them something drawing attention
and they have a a reasonable open float
for shares that are existing that can be
purchased and that way we can start
tracking whether or not mutual funds are
pouring into it and if it's a leadership
stock and it's Industry Group and sector
man you got everything going for you
the only thing you need to know is
when's the stock market going to move as
a whole
I've already taught you that so by
coupling that you actually put IBD
Investors Business Daily's statistics
it takes us back to the major Market
timing points
every one of the months here gives us
our bias for bullishness or bearishness
you as a Trader for looking in the
buying and selling stocks
you want to be buying
in the first portion of the Year
February to May and in selling stocks or
looking to sell short stocks from May
going into the latter half of September
and then in October
going into the last day of the trading
year you want to be looking to be a
buyer of stocks so you have this basic
rule of buying stocks February to May
selling stocks May to mid-september and
then from mid-september to the end of
the year you look to be buying stocks
that's all there is to this folks it's
very simple
everyone creates all these things these
wave one and wave two and correction B
and correction C all that stuff is
nonsense it's ridiculous you just simply
look at where is the seasonal Tendencies
for these large deep pocket investors
but we call you know smart money
when the smart money is looking to
operate whether a buyer seller that's
all we're trying to do we understand
seasonal influences are repeating they
happen every year and if we know when
the stock market is predisposed to go higher
higher
we can go in and fundamentally filter
out stocks that are already showing leadership
leadership
stocks that are failing to make lower
lows and the times when we're looking to
be a buyer of stocks
by default you are going to see
leadership issues
and if you have Investors Business Daily
as a resource you can use that column
they have in in part of their smart
readings the
institutional sponsorship rating and
you'll actually see me do it this fall
actually go through the whole process
we'll be sorting through like 7 500
stocks it's crazy I know but you'll see
it doesn't take much work at all really
really easy and I won't use the stock
scanner that's available like I have all
that stuff as bells and whistles but I
want to show you how I do it literally
going through all the stock tables it's
fun I I'm looking forward I love doing
it in the fall it's one of those things
I like doing as a as a Pastime because I
used to do it years ago with uh you know
High interest in being participating in
it and and great deal but now because
I'm basically on one trick pony with
Forex I've moved away from it so I get
to the wonderful privilege to be able to
do it in front of all of you whereas I
generally don't do it in front of
anybody I just go through the analysis
make my my watch list and then finally
Whittle it down to what I believe is
going to be a strong leadership stock
and I watch it go into uh you know the
end of the year going into the first
at the time of
that fall analysis when we do that together
together
I'm actually going to go through the
Darlings of the Dow I'm going to do that
one with you it's all the same that same
Saturday I'm going to do The Darlings of
the Dao the dogs of the Dow which is
another stock selection concept which is
you can do a Google Search and figure
out what that is and I'm also going to
do the index stocks
for the s p
the Dow and the NASDAQ so you'll know
all the strongest index stocks
and I'm going to go through all of the
Investors Business Daily fundamentally
ranked stocks and then I'll
find the ones that have the best
technicals as I look at timing the
market looking for index smt against
now that's one of the things I've
learned over the years looking at some
of their stocks they have a relative
strength rating in their
IBD smart tabs and
that to me I thought they were looking
at how I look at Price you know failing
to make lower lows and then that's the
buy that's not that's not what they're doing
doing
um but
you're going to see sometimes IBD will
give you strong fundamental ratings on
certain stocks
but they won't have the technicals to
support it
so we're forcing ourselves to do is
finding yes there is a fundamental basis
for this stock to do well because it's
making money but the stock may not have
enough attention drawn to it so
therefore you won't see these investors
pouring in on an Institutional level
because there's nothing that's drawn
attention to it no new thing happened
remember the n in canceling so there's
so many stocks out there to be following
it's like you know first listen to my
uncle the first time he talked to me
about you know he wants to be a
stockbroker he don't know how to the
stock market works and he's going to
start trading and yada yada
when he found out how many stocks are
really out there and the whole Business
of Being a stockbroker was just
basically selling something like a used
car salesman there was no valuation
there was no analysis they were just
told this is what we're pitching well
well
that's not what people want they want
they want to know what stocks are most
likely going to go up and without large
institutions pouring money into them
they're not going to go up not to any
measure and investors on an
Institutional basis are not going to put
large funds into something that aren't
making money so you have to have
quarterly earnings increasing you have
to have the annual numbers increasing
something new something fresh something
exciting about that company
it's got to be a leadership in its
sector in its Industry Group it's got to be
be
um a short supply in terms of a number
of shares outstanding compared to like
for instance index stocks you know when
I taught you how to do index stocks
there's a reason for that because some
of you are older and not privileged to
be as young as some of you are now
learning this stuff so when you trade
stocks the index stocks are far less
volatile the liquidity is awesome and
it's not going to see these crazy whip
saw movements they won't go up five
dollars and then crash twenty dollars
the next
growth stocks like I'm teaching you here
they can have very very explosive growth
on the upside
but they can also come down pretty quick
too so in a way Investors Business Daily
is a great front running tool where they
it's like a pump and dump thing but
you're not in there investing and
holding for 20 years that's not what we do
do
we look for runs to new highs and one
appreciates to a measure that's
reasonable which will actually go over
when I do the stock selections I'll
actually tell you what my targets are on
each one individually and William J Neal
talks about risking up to eight percent
for each stock well that's nonsense you
don't need to do that either so you'll
learn all the money management rules
that will actually by me actually doing
it over my shoulder but the stock
selection process
for valuation on high growth stocks is
basically the Investors Business Daily's
canceling method but me blending in my
technical analysis of institution order
flow Market structure and now as you've
learned premium and discount array
modeling that and using the Divergence
between the three averages when that
occurs you have blue ribbon results so
one of the things to look forward to
when we get done this complete
mentorship is we'll sit down in the fall
when it's actually time to be buying
stocks and I'll go through the whole
process with you and I'll tell you why
I'm doing it why it's important why you
shouldn't be doing this and that and
then you actually see me do the pricing
for the options that we'll do
the fifth lesson on this week's content
is how to use stock options and picking
up it's one thing to talk about it but
actually to go through and pick them and
then you can start tracking how they appreciate
appreciate
some of them aren't going to do as well
as the others but you'll see how amazing
you can get really crazy returns I mean
if you double triple you quadruple your money
money
okay with a call option that costs you
very little money
who cares if the stock price only goes
up eight dollars or ten dollars who cares
cares
if you're seeing that much of a return
that's what you're looking for you're
looking for velocity you're not looking
for this Stock's going up twenty dollars
or a hundred dollars a share because
chances are we're not going to hold
those stocks that long again I don't
believe in the Buy and Hold mentality I
believe in the buy hold it for something
for a premium let everybody else like it
fall in love with it want to buy it from
us and we'll sell it to them you know
there's going to be a lot of stocks that
if you look back over the time there's
many of them that went crazy went higher
like Amazon is one of them in particular
I told everybody that uh last year we'd
see uh 700 a share
um and I said ultimately
it'll go up to a thousand dollars a
share it had a nice Wicked reversal went
down like 200 a share and then from that
point on it rallied all the way up and
in this year we've hit a thousand
dollars a share um
um
there's going to be instances where you
see you potentially would have had a
really long-term hold but
but
who's making money here
the traders that buy and hold and keep
their money tied up and they have to
wait and see if these stale markets push
these stocks up higher
or the individuals that take the money
they invest in it they swing trade these
stocks take the money out and profit and
then reinvest those new profits into
another move
obviously the second person that's doing
that is making far more than the investor
investor
so you need velocity and you need to see
something that's consistently done every
single year the same way and this is
what I've mapped out for you I've given
you the seasonal tendency the the buy
and sell programs that's seen across the
entire 12-month calendar for the stock
market we know what we're looking for in
terms of the Divergence between the
three averages we know what months
specifically are outlined for
bullishness and and bearishness and if
you only want to be a buyer of stocks
which is nothing wrong with that you
want to be focusing on buying in
February to May
and from the last half of September in
the beginning of October all the way to
the last portion of the year
that's it so that's why you have to be
as for a stock Trader that's all you do
there's no getting in your day trading
stocks that's nonsense it's foolishness
you want to be in there capturing swing
trades and stocks that's it you don't be
doing anything other than that to do
anything less than that you're gambling and
and
think about who makes these markets move
the stock price has to move by
institutional sponsorship
the moves are going to be long and drawn out
out
so these mutual funds and you know large
Pension funds and insurance companies
have poor money into these companies
they're not going to just buy one time
they're going to keep flooding that
stock and keep buying and buying and
buying it and keep on investing more money
money
every one of their investors
funds are going to be poured into this
and just like in Forex
the smart money the big money can't take
on their position on the first time at
that price they got to keep building it
in and if the stock is going to be a
mover and go higher they will have to
buy at higher prices and that's going to
just Propel the price of that share even more
more
so hopefully you found this insightful
the real lesson will be using this
information as I describe it here over
live market conditions this fall where
we actually wait for the September to
November time period where we wait for
the Divergence in the three major Market
averages when they diverge foolishly
and the market is traded down into a discount
discount
then we can apply all these Concepts
I'll actually have an Investors Business
Daily uh at the time whatever that week
would be the most present and accurate
current edition of IBD will be used so
you can see how it's done and you'll see
it's a little bit of work but it's fun
it's really really fun and
it's nothing better to sit back and
watch all these companies that you've
hand-picked and it just totally destroys
all of these fund managers out there
that oh yeah I mean 18 I mean 25 percent
of the Year man you're gonna see how
some of these stocks just blow that out
of the water and we'll have a sampling
of index and growth stocks to choose from
from
until next lesson I wish you good luck
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