How to Make Money in Stocks
March 6, 2024
3 min read
📚 arvy's Book Club
arvy's Teaser: William O'Neil studied every stock market winner from 1880 to 2009 and found a pattern: the greatest stocks share specific characteristics before they make their biggest moves. His CAN SLIM system — a seven-point checklist combining fundamental and technical analysis — is one of the most systematic stock-selection methods ever created.
The Book in 60 Seconds
How to Make Money in Stocks (1988/2009) by William J. O'Neil introduces CAN SLIM — a stock-selection methodology based on 130 years of market data. Each letter: Current earnings, Annual growth, New products, Supply/demand, Leader status, Institutional sponsorship, Market direction. arvy is proud of its partnership with IBD (Investor's Business Daily), O'Neil's research platform.
William O'Neil · 1988/2009 · Investing, Stock Selection & Technical Analysis
Idea 1: CAN SLIM — A Systematic Checklist for Winners
O'Neil studied what actually worked across 130 years and built a system. The most important: strong current earnings growth (C), consistent annual earnings growth (A), and something new — a product, management, or industry shift (N). Companies with all three are disproportionately likely to outperform.
The Investor Lesson
CAN SLIM aligns with quality investing on fundamentals: strong earnings, innovative products, market leadership. The difference: O'Neil adds technical timing, while quality investing focuses on holding. Both start with the same filter: the best companies. (→ Quality Investing)
Idea 2: Leaders, Not Laggards — Buy the Best in the Sector
O'Neil's "L" principle: buy the leading company in the leading industry, not the cheapest. Market leaders outperform because they have the best products, most market share, and strongest momentum.
What seems too high in price and risky to the majority usually goes higher, and what seems low and cheap usually goes lower.
The Investor Lesson
Core of quality investing: buy the best, not the cheapest. Nvidia over Intel. Apple over Nokia. ASML over commodity chipmakers. The leader with expanding margins is the compounder. The cheap laggard is usually cheap for a reason. (→ 100-Baggers)
Idea 3: Market Direction Matters — Swim With the Current
O'Neil's "M" principle: 3 out of 4 stocks follow the general market direction. Even the best stock struggles in a bear market. Understanding overall market trend provides critical context.
The Investor Lesson
For long-term investors, market direction matters less — quality companies recover from every downturn. But knowing "3 out of 4 stocks fall in a bear market" helps you not panic when yours does. It's the market, not your stock. Keep the savings plan running. (→ Savings Plan)
arvy's Take
What holds up: CAN SLIM is one of the most data-driven stock-selection systems ever. The emphasis on earnings quality, leadership, and institutional sponsorship aligns with quality investing. O'Neil's research scope is unmatched. What's missing: CAN SLIM is a growth/momentum system for active traders. The sell rules (cut at 7-8%) conflict with quality investing's "hold through drawdowns" philosophy. What we'd add: Use CAN SLIM to find quality companies. Then apply Fisher's holding philosophy: if fundamentals are strong, don't sell on a 7-8% stop-loss. The best compounders drop 30%+ regularly on the way to 100x.
3 Sentences to Remember
1. Study what works: strong earnings, market leadership, and innovation are the shared DNA of every great stock.
2. Buy leaders, not laggards. The best company in the best industry is the compounder.
3. 3 out of 4 stocks follow the market. In bear markets, that's normal. Keep the savings plan running.
Buy the book English (Amazon) · No German version
Also in Book Club: Best Trading Books → · Weinstein →
Buy the leaders. Hold the compounders.
Quality companies with strong earnings, market leadership, and innovation. Systematically selected. From CHF 1/month.
This article was written by Thierry Borgeat, Co-Founder of arvy, and reviewed by Patrick Rissi, CFA, and Florian Jauch, CFA.
Disclaimer: This article is for general informational purposes only and does not constitute personal investment advice. Amazon links are affiliate links. arvy is a FINMA-supervised asset manager.
