Stock Valuation and Fundamental Analysis
Stock Valuation and fundamental analysis purpose is to try to uncover future stock prices based on intrinsic or real value of the company.
When you use stock fundamental analysis techniques, you learn as much as possible about the financial and market position of a company, and then determine from those fundamentals whether or not the company's future looks promising.
Value Investing is the investing strategy used in conjunction with fundamental analysis.
If your analysis of historical growth patterns and profit patterns of the company show a steadily growing organization, and your research indicates that the management of that company is sound and and competent, fundamental analysis techniques concludes that you have good reason to believe the company will continue its positive growth momentum into the future.
The biggest element of the stock valuation fundamental analysis technique, is the element of time. You have to be willing to put your money into those fundamentally sound companies for a long period of time in order to profit from their growth. This strategy is generally profitable over the course of years, and not necessarily weeks or months.
Multi-millionaire Entrepreneur, Author and Investor Robert Kiyosaki says "fundamentals are having very good fundamentals". Sounds pretty simple, doesn't it?
In his books The Cashflow Quadrant
and Retire Young Retire Rich, Robert states that having "Financial Intelligence" is to get educated and gain experience. This is leverage.
Being an uneducated investor is being a risky investor. It's not "don't take risks" it is ”learn to manage risks”. Gain Financial Intelligence. Get in control. If you focus on this you will gain tremendous wealth.
Fundamental analysts attempt to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and company-specific factors (like financial condition and management).
The end goal of performing fundamental analysis is to produce a value that an investor can compare with the security's current price, with the aim of figuring out what sort of position to take with that security (underpriced = buy, overpriced = sell or short).
This method of security analysis is considered to be the opposite of technical analysis.
Fundamental analysis is about using real data to evaluate a security's value. Although most analysts use fundamental analysis to value stocks, this method of valuation can be used for just about any type of security.
And part of financial intelligence is to understand Financial Literacy. Financial Literacy is understanding basic accounting and understanding Financial Statements and Cash Flow.
Financial literacy is fundamental to fundamental investing.
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The most well known fundamental stock valuation analysis guru today is Jim Cramer.
Jim Cramer shows how to compare stock prices in a way that you can understand, how to spot market tops and bottoms, how to know when to sell, how to rotate among cyclical stocks to catch the big moves, and much more.
Jim Cramer's book Real Money is filled with insider advice that really works, information that Cramer himself used to make millions during his fourteen-year career on Wall Street.
Jim Cramer is America's #1 financial guru and stock valuation fundamental analyst. Every day he advises investors on how to get ahead of the markets and stay ahead on his daily television show, Mad Money.
Jim Cramer is also co-founder of The Street.com, the exciting financial news Internet Web site that has become one of the most trusted news sources-and the go-to investment site-in the world of finance.
His books have all been national bestsellers and have helped educate hundreds of thousands of investors about the perils and promises of the financial markets.
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Next: Understanding Financial Statements
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Recommended Stock Valuation Fundamental Analysis Tools and Resources
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