Investing from the lessons of Dhoni!

We all know how efficient was Dhoni when he is appealing for review. We even go a step ahead and say DRS is the Dhoni Review System rather than a Decision Review System. 

In an interview, the reporter addressed Dhoni and asked about DRS “ How can you be correct for most of the times?”  Then Dhoni answered “ My jersey number is 7 and I do follow seven criteria like Line, Length, Swing, Wind direction, Amount of water in the air, Batsman position, Bowling End. “ ( Source – Start sports 1)

But this is all in the cricket right!

What if we apply the same efficiency in order to choose the stocks from the tons of companies listed on the exchange. That’s where the Great strategy comes from the American investor cum stockbroker William O’Neil.

7 Step Criteria 

  • C – Current quarterly EPS(Earnings per share) can be more than 10%, but the higher the better.
  • A – Annual EPS can be more than 10% for at least the last 3 years. 
  • N – New factor-like new business line, new revenue stream, new product which pushes the stock to new highs.
  • S – Scarce Supply for Strong Demand, which will create excess demand and eventually stock price soars. 
  • L – Choosing Leader over laggard in the same sector. We can take the help of RSI (Relative Strength Index) through the technical chart.
  • I – Interest of Institutional Investors. (This is street smart, but only these criteria can burn your hands. But in this case, we are considering many other factors as well)
  • M – Moving Averages, we can consider 50-day Moving Average and 100 Day Moving Average (50 DMA & 100 DMA) by applying technical tools from tickertape.

Combination of Fundamental & Technical

This strategy is a combination of Fundamentals & Technicals. We are considering EPS, growth of the company, Institutional Holding, RSI & DMA. The first three are fundamentals whereas later were technicals. 

Fun Fact

When one has done a survey for “ What to consider to pick stocks for the Short term period? ” for market traders and investors back in Bombay, 63% of them told I choose the Canslim strategy. (Source: Unknown)

Here, the short term indicates somewhere in between 100 days – 150 days holding period.

Which is why we created CANSLIM – esque smallcase. We rebalance these stocks once every 3 months, so this is a go-to smallcase for those who are looking for a short period of time. The benefit of investing in this smallcase gives us an added advantage to stay invested in this smallcase for a longer period as well because of their quarterly rebalancing.  So, we as an aggressive investor can take advantage of this strategy and can see ourselves in a scenario for high return exposure.

Reason

Because this strategy is made up of considering both Fundamentals & Technicals.

Note

Canslim is a Bullish strategy for fast-growing economies, so this is not everyone’s cup of tea. This is a strategy to hold having high growth potential stocks in the near future, this is high risk and should be chosen those whose risk appetite is high in nature.

Investors who are averse to this can go for low-risk smallcases like All Weather Investing & Smart Beta smallcases. These are absolutely Low risk in nature, in fact, no risk.

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