Fundamental analysis, the analysis of profits, earnings, income, assets, etc. etc.. It was the mainstay of stock market investing for decades and decades. Finding a diamond in the rough, was what investors looked for, it’s what mutual fund managers use today as their primary tool. It’s what is done by hundreds, or even thousands of brokerage houses, stock market investor solutions, and mutual fund managers every day of their lives. Numbers poured , fed into software applications, then examined again. So much so that there isn’t one single basic analysis surprise left available in large cap stocks. There’s nothing new to be learned in basic analysis of large cap stocks. Everything is already known.
I suppose we ought to thank the countless analysts who put in countless hours basically assessing the numbers for us so we do not need to. Because without them, we would have no starting stage. So is this to say basic analysis has a goal? Obviously it does. Can we use it? You bet. It is among the first things we do use. We use in it displays, and we also use analyst’s recommendations which are based mostly on basic analysis. We buy no inventory without corroboration of analyst’s reports, and lots of our displays have an analyst’s reports variable to them. So in a sense basic analysis is easily the most important factor of our picking stocks. Without a fantastic report from basic folks, we do not look any further in the stock.
We all know stock analysts have opinions about where the industry is heading, and about the industries also. We like that also. We want to be where the action is. An exceptional fundamental stock won’t move, if people aren’t focusing on it. And there’s the rub with basic analysis, and that’s the reason fundamentalist either make bad traders or do not believe in trading. They are long term investors, philosophically superior to technicians in their own way of consideration. But stocks only move if they’re the attention of traders. (traders for our purposes could be mid-term speculators also, which honestly is probably where we match.) Read an analyst report, or with big caps you get the advantage of a pool of analyst’s reports, gives you an idea whether the inventory will be moving in the near future (3-6 months.) A stock that’s rated a hold is likely to not do much of anything instead of track the sector or the sector. A stock that’s rated a market, likely has tanked. But a stock that’s rated a purchase, is worthy of a specialized appearance.
Can we examine rates of growth,% of debt, stuff like this? Nope, it is already done. Our job is to get the hot industries, and the hot big cap stocks in that industry. Then take those and see whether they’re poised to move.
Long term moves of an individual stock or the market in whole is a process of thought. But each wiggle and waggle across the way is a process of emotion. A stock poised to rise, based on strong fundamental analysis must also get emotion behind it, to really rise within our time frame. We aren’t interested in holding a stock with 15% increase rates for a year to find out if this leads to a 15% stock price increase. The simple fact of the matter is that inventory will rise or drop 15 percent in a year’s time no matter what. However, if we understand that it has received high marks for it’s fundamentals, and then examine its graphs and see technically it’s also very healthy then we’ve got something.
A stock that doesn’t fair well through analyst’s reports isn’t even worhty of our looking at its’ chart. There are so many choices in large cap stocks that we need EVERY advantage we can get. We want every choice for a winner. When your typical trade only nets you 4 percent, you can’t afford to be wrong.