Back to Library

How to Make Money in Stocks Trilogy

by William J. O'Neil (2013)

Quick summary -- an in-depth PhD-level extended summary (10-30 pages) for this book is coming soon.

How to Make Money in Stocks Trilogy

By William J. O'Neil

Quick Summary

This three-book compilation contains William J. O'Neil's complete CAN SLIM investing system. The CAN SLIM methodology was ranked the #1 investment strategy by AAII with a 2,763% return from 1998-2009, averaging 35.3% per year versus 3.3% for the S&P 500.

Executive Summary

The "How to Make Money in Stocks Trilogy" bundles three complementary books by William J. O'Neil, founder of Investor's Business Daily: the core "How to Make Money in Stocks: Complete Investing System," "Success Stories" featuring real investors who applied CAN SLIM, and "Getting Started" which provides a step-by-step guide to implementation. Together, they constitute the most complete presentation of O'Neil's growth stock investing methodology, which combines fundamental and technical analysis into a unified system.

Core Thesis

The best-performing stocks in every market cycle share identifiable fundamental and technical characteristics before their major price advances. By studying the patterns of past winners (O'Neil studied every top-performing stock since 1880), investors can identify future winners early. The CAN SLIM system codifies these characteristics into seven key factors that must all be present before purchase.

Key Concepts and Frameworks

  1. C - Current Quarterly Earnings -- EPS should show strong year-over-year acceleration.
  2. A - Annual Earnings Growth -- Five-year track record of increasing annual earnings.
  3. N - New Products, Management, or Price Highs -- Innovation or change driving the company.
  4. S - Supply and Demand -- Small float, increasing volume on price advances.
  5. L - Leader or Laggard -- Only buy market leaders with high relative strength.
  6. I - Institutional Sponsorship -- Increasing ownership by quality institutions.
  7. M - Market Direction -- Only buy during confirmed market uptrends.

Practical Applications for Traders

  1. Screen for stocks meeting all seven CAN SLIM criteria.
  2. Buy only during confirmed market uptrends (M factor).
  3. Cut all losses at 7-8% below purchase price without exception.
  4. Let winners run; sell only when the stock shows distribution or fundamental deterioration.
  5. Study chart bases (cup-with-handle, double bottom, flat base) for optimal entry points.

Critical Assessment

Strengths

  • Backed by one of the most comprehensive historical stock studies ever conducted
  • Independently validated as the #1 strategy by AAII
  • Combines fundamental and technical analysis into a unified system
  • Practical, rules-based approach that reduces emotional decision-making
  • Success stories provide real-world validation

Limitations

  • Requires significant time for stock screening and monitoring
  • Growth stock focus means higher volatility and deeper drawdowns
  • The system works best in trending markets; can struggle in choppy conditions
  • Requires discipline that many retail investors find difficult to maintain

Conclusion

The CAN SLIM system remains one of the most thoroughly researched and independently validated stock selection methodologies ever developed. O'Neil's insistence on studying market history and following price action rather than opinions has created a framework that has produced exceptional returns over decades.