Fundamental Analysis for Trading Stocks
Fundamental analysis, the study of profits, revenue, 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 is what mutual fund managers use today as their main tool. It is what is done by hundreds, if not thousands of brokerage house houses, stock market investor services, and mutual fund managers every day of their lives. Numbers poured over, feasted into software programs, then analyzed again. So much so that there is no single fundamental analysis surprise left to be found in large cap stocks. That is so fundamental to the success your large cap philosophy (www. livingonlargecaps. blogspot. com) that it bears repeating again. There is nothing new to be learned in fundamental analysis of large cap stocks. Everything has already been known.
I assume we should thank many analysts who put in a lot of time fundamentally analyzing the numbers for us so we don't have to. Because without them, we would have no beginning point. So is that to say fundamental analysis has a purpose? Of course it does. Do we use it? You bet. It is one of the first things we do use. We easily use in it screens, and we also use analyst's recommendations that are based largely on fundamental analysis. We buy no stock without corroboration of analyst's reports, and a lot of screens have an analyst's reports factor to them. So in this way fundamental analysis is The most important factor your selecting stocks. Without a good report from fundamental folks, we don't look deeper at the stock.
We know stock analysts also have opinions about where the market is heading, and about the sectors as well. We like that too. We want to be where the action is. An exceptional fundamental stock will not move, if people are not focusing on it MRNA. And there is the scrub with fundamental analysis, and that is why fundamentalist either make lousy traders or don't believe in trading. They are long term investors, philosophically superior to technicians in their way of thought. But stocks only move if they are the focus of traders. (traders for our purposes could be mid-term speculators as well, which seriously is probably where we fit in. ) So reading an analyzer report, or with large capitals you get the benefit of a pool of analyst's reports, gives you an idea whether or not the stock will be moving soon (3-6 months. ) A stock that is rated a hold is likely not to do much of anything rather than track the market or the sector. A stock that is rated a sell, likely has already tanked. But a stock that is rated a buy, is worthy of a technical look.
Do we analyze rates of growth, % of debt, stuff like that? No, it was already done. Our job is to find the hot sectors, and the hot large cap stocks in that sector. And then take those and see if they are poised to move.
Long term moves of an individual stock or the market in whole is a process of thought. But every shake and waggle along the way is a process of experience. A stock poised to rise, based on solid fundamental analysis should likewise have experience behind it, to essentially rise in our time frame. We are not interested in holding a stock with 15% growth rates for a year to see if that results in a 15% stock price increase. The fact of the matter is that stock is going to rise and/or fall 15% in a year's time no matter what. But if we know that it has received high marks for it's fundamentals, and then look at its stock chart and see technically it is also very healthy then we have something.