CANSlIM Investing Method Stock Picks
Perrigo Pharmaceuticals is this weeks stock pick below that comes from the Investors Business Daily. William Oneil is the founder of CANSlIM, and the founder publisher of Investors Business Daily. The IBD is the one of best financial print newspapers available, and now its all online too.
What is CANSLIM?
CANSLIM is the Investors Business Daily acronym for the seven common characteristics all great performing stocks have before they make their biggest gains. You can significantly reduce your risk and increase returns by using the CAN SLIM Investment Research Tool as a fact-based performance checklist to evaluate a stock before you buy.
C = Current Quarterly Earnings Per Share
Look for earnings increases of at least 18% to 20% above the same quarter one-year prior.
A = Annual Earnings Per Share
Look for meaningful, consistent earnings growth over the last five years, with increases each year over the prior year.
N = New Products, New Management, New Highs
The best stocks had new products, services, or new management driving their stock prices. Stocks making new highs tend to go higher.
S = Supply and Demand
Look for a small or reasonable number of shares outstanding that create buying pressure, and watch for above-average volume increases as stock's price increases.
L = Leaders
The best stocks were already leading stocks in leading industries, so avoid laggards and focus on strength and leadership.
I = Institutional Sponsorship
Institutional investors are a major influence on stock prices, so buy stocks with at least some institutional ownership, particularly mutual funds with good performance records.
M = Market
The general market should be positive, since three out of four stocks follow its trend.
This Weeks Stock Pick from Investors Business Daily
Will Drugmaker Perrigo Break Through Resistance and Move Higher?
Perrigo (NASDAQ:PRGO), which reported earnings earlier this week, makes generic prescription drugs, as well as a number of over-the-counter products such as cold medicine, skin care goods and nutritional items. The company's products are sold by retailers like Wal-Mart and CVS to sell under those stores' brand names.
On Tuesday, Perrigo posted fiscal first quarter earnings of 87 cents a share, topping analyst estimates. Still, growth has cooled somewhat in recent quarters, going from 56% growth 4 quarters ago to 23% growth in its most recent filing.
Sales rose 21% last quarter but were lower than the Street expected. Sales growth came in between 21% and 22% during the past two quarters.
Analysts expect earnings to increase 22% in the current 2011 fiscal year. On Tuesday, Perrigo said it expects fiscal 2011 earnings to come in higher than that.
Its Accumulation/Distribution Rating is a D+. That rating tracks buying and selling of the stock among institutional investors. The D+ Rating indicates moderate selling among big players, so that's something to keep in mind.
Mutual funds and hedge funds own about 33% of the shares not owned by management. But the number of funds owning the stock slipped a little last quarter, dropping from 197 to 193. Ideally you'd like to see just the opposite.
Perrigo Chart Analysis - Click For Large View
The stock broke out of a base on September 24 as it hit a new high (Point 1).
Since its breakout, Perrigo has had trouble gaining traction, running into resistance around $68 a share.
It's been trading sideways for 6 weeks, long enough to form a flat base (Point 2).
The potential buy point is calculated by adding 10 cents to the peak in the base, which was 67.94 (Point 3). That gives you a buy point of 68.04. The stock briefly moved above that point earlier this week, but quickly pulled back to its 10-week moving average line.
Watch to see if the stock can bounce up from the 10-week line and break though that area of resistance around $68. If the move comes on heavy volume it means institutional investors are buying shares, and that could create a buying opportunity.
Perrigo Stock Checkup
At 87, Perrigo's Composite Rating is the second highest within its 17-member Medical — Generic Drugs industry group.
Its EPS Rating of 96 also ranks first, while its SMR Rating of A comes in at #5.
Its Relative Strength Rating of 79 is 6th among its peers.
The stock's Acc/Dist Rating of D+ comes in at #15
How to Find CANSLIM Stocks
Use Investor's Business Daily and Investors.com in tandem to identify, validate, and track potential winners with quick reviews of key IBD fact-based market assessments.
Step 1: Identify Stocks with CAN SLIM Traits
Scan the List: Investor's Business Daily 100 is IBD's weekly ranking of leading companies. Companies are measured in terms of profit ans sales growth, stock performance, and other factors. Your Weekly Review ( exclusively in the print edition ) identifies industry leaders showing strong earnings growth and price performance.
Discover Promising Companies: The New America features groundbreaking companies that often fly under Wall Street's radar, yet are among the fastest growing enterprises.
Find Stocks with Winning Traits: Check Screen Of The Day ( exclusively on Investors.com ) for a daily look at some of the market's stongest stocks. Each day, this computer-generated list is compiled by Investors.com's editors to help you identify the best stocks.
See where the Market's Headed: Understand today's investment climate with the The Big Picture. This column reviews significant action in the major indexes and examines the condition of leading stocks.
Step 2: Validate & Research CANSLIM Stocks
Check the Stocks Relative Health: IBD Stock Checkup: IBD's "stock doctor" diagnoses the overall health of a stock with fact-based examinations of its techinical and fundamental performance.
Get the Story behind the Stock: IBD Archives let you assess the business history of prospective investments. Research IBD articles dating back to January 1998 by company name, ticker symbols or IBD's industry groups. Simply save or print articles that are of interest.
Watch Key Price and Volume Action: Daily and weekly IBD Charts are color coded to help you identify buying and selling trends. These charts include CAN SLIM-vital data such as moving average lines and Relative Strength lines. These tools are invaluable in gauging the right time to buy or sell.
Buy and Sell Like A Pro: Daily Graphs Online is an interactive, financial information service offering premium stock charts for equities traded on the NYSE, AMEX, and NASDAQ. The service provides technical, fundamental and unique proprietary data for over 10,000 companies that are tracked in the William O'Neil + Co. Database.
Click here for more information and resources on the CANSLIM investing method and the Investors Business Daily
Disclosure: Buying Long Perrigo