How does one create a fundamental analysis investment system?
There's so much information to analyse (not to mention having to actually learn how to analyse stock in the first place) that it gets overwhelming pretty fast. Obviously no one wants to waste their time poring over multiple financial statements etc, just to decide it's not worth investing.
Is there a more efficient way of doing things? Or does that just come with the fundamental analysis territory?
Keen to hear your thoughts! And if you've got your own system, would you mind sharing it, or at least how to came to realise it was the system for you?
- JerryLv 79 years agoFavorite Answer
Learn about fundamental investing first:
One Up On Wall Street - Peter Lynch
A Random Walk Down Wall Street - Burton Malkiel
The Intelligent Investor - Benjamin Graham
Security Analysis - Graham & Dodd
Once you have an idea of desirable characteristics, there are tools called "stock screeners" to help you focus your research. Any decent brokerage account has a screener, as do most financial sites. AAII (American Association of Individual Investors) has a lot of good information about stock screens including templates for many famous investors; Buffett, Lynch, Graham, etc.
Example of a simple stock screen:
Small cap stocks
Yield > 3%
Upside surprise on last quarterly earnings
Debt less than 30% of total capitalization
You can limit your analysis of financial statements to cases where there is reason to believe you might buy if everything checks out.
This is different from sell-side fundamental analysts who typically cover most companies in an industry, regardless of investment merit.
- underexposed...Lv 79 years ago
Ask a Fundamental Analysis question and @ELF... gives you a TA answer but does not call it as such .
I would be interested in the responses here as well. I am trying to add pieces of FA to my bag of tricks as well. There is quite a bit to it...more than meets the eye but I have never seen a systematic approach to FA.
In my own struggle to get a handle on it...I have cherry picked a couple of Financial Sheet values to stop looking at companies that have little or negative revenue and/or high short/long term debt. This weeds out a lot of the deadwood...however you must temper that with the type of industry you are talking about.
By that I mean, if it is mining and oil and gas juniors you are looking at...These are start-up companies that can take years to establish themselves...so in spite of the fact they have little or no revenue, I still like to see some debt in their quarterly report....watching such companies reduce their debt and start adding revenue...even though the net may be negative with each quarter is very positive to me.
Why? because they are showing that they are actively pursuing the development of their mine/oil company. It is a sniff test that I use to eliminate the exploration companies that are content to publish drilling results or other fluff but never seem to move beyond that point.
I would love to understand the subtleties of cash flow but that is a work in progress for me.
I think it is like doing TA...you take things one step at a time and understand that step...then work out your own step by step process....doing it by yourself makes it better IMHO
- ?Lv 44 years ago
interpreting and interpreting Charts a million. The Bid and Ask direction 2. the straightforward Quote strikes 3. the straightforward Quote Formations 4. beginning Gaps, Splits and Consolidations 5. Volumes: Get the real image 6. information the quantity's Pulse 7. helps, Resistances and traits 8. ignore the ‘Legs' 9. putting all of it mutually
- Anonymous9 years ago
Im an independent equity analyst and work on mainly fundamental analysis. I have over 10 years experience as a qualified accountant and can drill down companies financials to see key issues. I then summaries using a financial dashboard (mainly focused on cash) but also depends with companies. I tend to use intrinsic value measures like enterprise value, Graham formula, cash + liquid asset value etc ---all these tend to look at value investing. I guess one can also use stock screens to compare different stocks. If you need detailed explanation i can provide my excel templates and past reports. contact me on email@example.com.
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- DavidLv 79 years ago
Just Google "fundamental analysis pdf" or ". . . book" and you'll get lots of professional help. Or type "fundamental analysis" into the Search Y! Answers box.
Fundamental Analysis: Introduction | Investopedia
Fundamental Analysis Articles | Investopedia