|
 |
Fundamental Analysis
There are two major types of analysis for predicting the performance of a
company's stock - Fundamental analysis and
Technical analysis. The latter
looks for peaks, bottoms, trends, patterns, and other factors of a stock's
price movement. It is a technique many people attempt, though very few are
truly successful.
- Fundamental Analysis probes the Balance Sheet,
the Income Statement, and the Statement of Sources and Uses of Working Capital.
- Fundamental analysis is the examination of the
underlying forces that affect the interests of the economy, industrial sectors
and companies. As with most analysis, the goal is to derive a forecast for
the future.
- It's hard to apply fundamental analysis for
QQQQ timing (AMEX:
QQQQ), S&P 500 timing
(AMEX: SPY),
Dow Jones timing
(AMEX: DIA) since these are index derivatives. What really can help
here is the volume-based technical analysis for indexes.
- Some analysts analyze the company's balance sheet
to determine the the value of the company and try to buy the stock at
a price lower than the liquidation value or at a low price compared to the
valuation of the net assets of the company.
- Other fundamental analysts focus on the expected
future earnings of the company and try to buy the stock at a low price compared
to the future earnings (low PE: price earning ratio).
- Industry groups are compared against other industry groups
and companies against other companies. Usually, companies are compared with
others in the same group.
- Stocks move as a group. By understanding a company's
business, investors can better position themselves to categorize stocks
within their relevant industry group.
- Fundamental analysis is good for long-term.
- Fundamental analysis will help identify companies that
represent good value.
- Fundamental analysis is the development of a thorough
understanding of the business.
|  |
|
