기본적 분석, Fundamental analysis

 

source: www.investopedia.com/terms/f/fundamentalanalysis.asp

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Fundamental analysis

 

it represents that doing the analysis with the following indicators: the stock's annual dividend payout, earnings per share, P/E ratio, and many other quantitative factors also its brand recognition.

 

also the market as a whole can be evaluated doing Fundamental Analysis of such as S&P 500 reports

 

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Qualitative Fundamentals to Consider

there are 4 key fundamentals to cosider: 

The business model

what does the company do?

making money from selling chicken or on royalty and franchise fees?

 

Competitive advantage

brand name or domination

 

Management

some believe that management is the most important criterion for investing in.

board members, how well did they perform in prior jobs? have they been unloading a lot of their stock shares recently?

 

Corporate Governance

describes the policies within an organization denoting the relationships and responsibilities between management, directors and stakeholders

 

 

also important to consider: company’s industry like customer base, market share among firms, industry-wide growth, competition, regulation and business cycles.

 

learning about how the industry works will give you a deeper understanding

 

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Financial Statements: Quantitative Fundamentals to Consider

3 most important Financial Statements below:

Balance Sheet

represents a record of a company’s assets, liabilities and equity at a particular point in time.

 

named by that financial structure balances Assets = liabilities + shareholders’equity

 

Income Statement

not a snapshot like Balance Sheet but a measurement of performance over a specific time frame

you could have a Balance Sheet for a months or a day but can only see reports of Income Statement quarterly and annually

 

info about revenues, expenses and profit

 

Statement of Cash Flows

represents a record of cash inflows and outflows over a period of time

 

focuses on cash-related activities:

 

Cash from investing(CFI)

cash used for investing in assets and the proceeds from the sale of businesses

 

Cash from financing(CFF)

Cash paid of received from the issuing and borrowing of funds

 

Operating Cash Flow(OCF)

Cash generated from day-to-day business operations

 

*important because it's very difficult for a business to manipulate its cash situation. some investors use it as a conservative measure of a company’s performance

 

 

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The Concept of Intrinsic Value

Fundamental Analysis is based on 3 assumptions:

1. the stock price doesn’t fully reflect a value of the company
2. the value from the company’s fundamental data is more likely to be closer to a true value of the stock
3. in the long run, the stock market will reflect the fundamentals

 

investors use a lot of different methods to arrive at the intrinsic value of a stock

 

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Criticisms of Fundamental Analysis

comes from proponents of Technical Analysis and believers of Efficient Market hypothesis

 

Technical Analysis

solely based on the price and volume movements of stocks using charts and tools. trade on momentum and ignore the fundamentals

 

the tenets are that the market discounts everything meaning all news about a company is already priced into the stock so price movements give more insight

-> I think it means there can't be the difference between stock's price and the true value of it

Efficient Market hypothesis

 

usually in disagreement with Fundamental Analysis and Technical Analysis because the market efficiently prices all stocks on an ongoing basis