CANSLIM Investing Strategy: This "I" Factor Predicts HUGE Stock Gains (I in CANSLIM)

Hey everyone, welcome back to the Traderlion Channel! My name is Richard, and today we're diving into the "I" in the CANSLIM investing strategy, which stands for Institutional Sponsorship. In our previous videos, we’ve covered essential aspects of the CANSLIM methodology developed by the legendary William O'Neil. If you haven't checked those out yet, make sure to look for the links down below in the description!

Let’s get right into it!

What is Institutional Sponsorship?

William O'Neil emphasizes the importance of understanding not only how many institutional sponsors a stock has, but also whether that number has been steadily increasing in recent quarters. Here are some key insights from O’Neil regarding institutional sponsorship:

1. Increase in Fund Ownership: Investors should look for an increase in institutional ownership, particularly a significant rise in the most recent quarter.
2. Quality of Funds: The performance of mutual fund sponsors over the last twelve months, as well as the last three years, is a vital indicator. Aim for stocks with ownership from strong, high-quality funds.
3. New Positions Matter: A newly established position by an institutional investor is often more relevant than existing long-held positions. It indicates a proactive interest that may lead to further investment.
4. Volume of Transactions: Institutional trades are typically reflected in the ticker tapes with large volume transactions ranging from 1,000 to 100,000 shares or more. This activity can account for up to 70% of the trading in leading companies.
5. Avoiding Over-Ownership: It is possible for a stock to be over-owned. Excessive institutional sponsorship can lead to significant selling pressure if negative events occur.
6. Support During Sales: Institutional sponsorship provides a safety net for individual investors. If institutional investors are buying, you're more likely to find a buyer when you choose to sell.

The Benefits of Strong Institutional Sponsorship

Strong institutional sponsorship can have a profound impact on your investment strategy:

• Creating Long-Term Trends: Funds accumulate shares over weeks and months, generating significant price trends that individual investors can capitalize on.
• Providing Technical Support: Strong sponsorship often results in stocks finding support at major technical levels, such as the 10-week moving average or base pivots.
• Ensuring Liquidity: Stocks with strong accumulation are less likely to experience sharp declines during weak markets, ensuring better liquidity for individual investors.

Finding Quality Institutional Funds

So, how can you identify these high-quality funds? O’Neil suggested analyzing the past performance of particular funds. Following IBD’s research can also be helpful. Here’s a handy list of their flagship funds:

Consider looking for funds that have shown proven success over the past 5 to 10 years, particularly those focusing on growth stocks.

In Summary

Accumulation by institutional funds is key to creating long-term trends that individual investors can ride. Look for:

• An increase in fund ownership.
• Ownership by high-quality institutional funds.
• The understanding that true market leaders are born from extensive institutional accumulation.

These elements are essential for identifying stocks poised for explosive growth!

Thanks for joining me today! If you found this video helpful, please give it a thumbs up and make sure to subscribe if you're new to the channel. I’ll see you in our future videos!

- The TL Team

Here are some resources to help you level up your investing game:

• Learn Swing Trading from the US Investing Champion Oliver Kell (941% Return)
• Learn How To Trade from Market Legend Stan Weinstein
• Level Up Your Trading Psychology with Mental Game Expert Jared Tendler

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