There are two approaches investors use in evaluating stocks: fundamental analysis and technical analysis. Fundamental stock analysts focus on a company's ability to grow and make more money in the future. They do so by looking at: how much money the company has made in the past, how much money it has borrowed, how much dividend it has paid out to investors, how good its managers are, and other things that may affect the long-term profitability of the company. In considering how good a company's managers are, a fundamental analyst might look at the qualifications of a new Chief Executive Officer (CEO). If the new CEO is coming from another company that he whipped into shape and made more profitable, this is great news for the fundamental analyst. The fundamental analyst would be optimistic that this CEO will do wonders for his new company.
Unlike fundamental analysts, technical analysts focus on how stock prices move up and down and how many shares of a company's stock are bought and sold on a day-to-day basis. Pure technical analysts don't usually concern themselves with the company's historical earnings or how wonderful the management may be. They are more likely to chart the up and down movements of a company's stock price for a period of time. By looking at the pattern of such movements, good technical analysts can sometimes predict which direction stock prices will move. The truth of the matter is that there are probably no pure fundamental or technical analysts. Fundamental analysts often apply some technical analysis, and vice versa. In this chapter, we will teach you the first rule of basic fundamental analysis: understanding what a company does.
Knowledge of what a company does and the various kinds of businesses it is in is perhaps the most important item to understand when you first begin your evaluation of a company. In addition, you should identify other companies that may be in the same business as the company you are investigating; this way, you can make comparisons between this company and its competitors.
Unlike fundamental analysts, technical analysts focus on how stock prices move up and down and how many shares of a company's stock are bought and sold on a day-to-day basis. Pure technical analysts don't usually concern themselves with the company's historical earnings or how wonderful the management may be. They are more likely to chart the up and down movements of a company's stock price for a period of time. By looking at the pattern of such movements, good technical analysts can sometimes predict which direction stock prices will move. The truth of the matter is that there are probably no pure fundamental or technical analysts. Fundamental analysts often apply some technical analysis, and vice versa. In this chapter, we will teach you the first rule of basic fundamental analysis: understanding what a company does.
Knowledge of what a company does and the various kinds of businesses it is in is perhaps the most important item to understand when you first begin your evaluation of a company. In addition, you should identify other companies that may be in the same business as the company you are investigating; this way, you can make comparisons between this company and its competitors.
No comments:
Post a Comment
Your Comment will be visible after approval. Post Free classified ads at www.pkbazaar.com to increase your traffic