Fundamental Analysis

Value investors and momentum investors have long debated the merits of fundamental analysis versus technical analysis, with value investors, of course, opting for the more conservative fundamental approach. Both strategies definitely have merit, and whenever possible, it is preferable to buy stocks that are both underpriced and gaining momentum. Since this is easier said than done, however, investors usually choose between the two strategies.

If economic history has taught us anything, it is that undervalued stocks, identified through disciplined fundamental analysis, are more profitable long-term investments than high-priced stocks with surging upward momentum. In fact, value investors often find the greatest opportunities when stock prices are falling.

Fundamental Analysis Spots Opportunities
Negative press, a decline in overall investor confidence, terrorist attacks, and natural disasters can all influence stock prices, regardless of whether these factors influence the success of individual businesses. By performing a thorough fundamental analysis of a company, however, investors can determine whenever the stock price has fallen below its intrinsic value. This is the perfect time to buy.

A technical analysis of declining stocks almost always leads investors to sell or avoid purchasing the stock. As a result, momentum investors miss the most lucrative long-term opportunities. ValueSheet, an Excel spreadsheet developed here at Analytic Research LLC, makes fundamental analysis simple and efficient for anyone with a basic knowledge of investing. Research conducted with ValueSheet can be an integral part of an overall investment strategy that is based on value and long-term growth.

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