I always check that the company I am about to do fundamental research on has low debt before proceeding. This is of high importance to me.
If a company has high debt I will probably avoid putting it through my fundamental analysis filters.
No. I'm not a fundamental investor.
Quote Originally Posted by Julia View Post
No. I'm not a fundamental investor.
Well, my goodness. Thank you so much for your sage advice! I'll attribute the somewhat extraordinary tone of your comment to naivete.That shouldn't stop you from considering other methods of choosing a business to invest in. Unless your fundamental approach has helped you beat the market consistently over a long period of time, if so, then carry on.
Well, my goodness. Thank you so much for your sage advice! I'll attribute the somewhat extraordinary tone of your comment to naivete.
You don't even appear to appreciate how contradictory are your remarks.
I have clearly stated that I am not a fundamental investor. Then you say "unless your fundamental approach has helped you beat the market......." etc.
When I don't take a fundamental approach, no such approach has allowed me to consistently beat the market.
You don't even seem to be aware that an alternative to fundamental investing is trend following/simple technical approach.
Further you kindly suggest that if my approach (which you clearly have no idea about) has helped me consistently beat the market, then I should "carry on".
Thank you so much. I will do exactly that.
OK, no worries.Erm, beg your pardon, I obviously misread your post. Apologies.
OK, no worries.
What do you see the benefits of technical investing are over value investing?
And isn't technical investing riskier than value investing? Technical investing also sounds like a lot more work than value investing?
If you do a search for "Technical vs Fundamental Analysis" on this forum you will find several threads, most of which are many pages long and cover a variety of approaches.What do you see the benefits of technical investing are over value investing?
Depends on your personal preference. I don't think a simple trend following approach is as risky as holding some 'undervalued' share as its SP drops, or buying such a company when it's in a clear downtrend. Yet this is what many fundamental investors do.And isn't technical investing riskier than value investing? Technical investing also sounds like a lot more work than value investing?
Indeed it is. No need to make it complicated. Essentially buy into an uptrend and sell in a downtrend. Protect your capital.Trend following is a fairly easy concept to grasp and execute.
Depends on your personal preference. I don't think a simple trend following approach is as risky as holding some 'undervalued' share as its SP drops, or buying such a company when it's in a clear downtrend. Yet this is what many fundamental investors do.
Indeed it is. No need to make it complicated. Essentially buy into an uptrend and sell in a downtrend. Protect your capital.
I think to get the most out of investing its wise to use a combination of both Fundamental and Technical Analysis. Each has their positives, each has their negatives but used in combination then there are particular tools that become valuable to the investor. If you can find a fundamentally sound stock and use technical analysis to find entry and exit points, rise and falls then isn't that the best way to look at it... My thoughts anyway..
Boggo - Most value investors would realise TLS is a junk stock.
It doesn't have to be either/or......there's no reason that both types of analysis can't be combined.
However, what most fundamentalists can't seem to comprehend is that technical analysis is actually a form of fundamental analysis.
Technical analysts believe 'THE TREND IS YOUR FRIEND'. Accordingly, they begin their analysis by identifying the trend of the stock or financial instrument in question.
Look at charts of big uptrenders of the past, e.g. GUD, BHP, WPL.
You could have comprehensively researched these companies to find out that their fundamentals were positive.
Alternatively you could have applied the most basic concept in technical analysis - TREND IDENTIFICATION - by simply looking at their charts and recognising that they'd recently begun a powerful new uptrend. And having recognised this powerful new uptrend, you could have put two and two together and realised that new uptrends are caused by the collective positive views of thousands of traders and investors, most of whom will have based their opinions on fundamental research.
A stock powering upward on the chart is a visual representation of investors and traders scrambling over each other to get a piece of the action, even if it means paying increasingly higher prices.
They do this because they believe the fundamentals to be positive.
Conversely, if a chart shows that a stock is sinking like the Titanic, it's a visual representation of investors and traders dumping the stock because they know something negative about the fundamentals.
Pull up charts of companies that went broke....PAS, HIH, SGW, ION. Their charts were heading south with a vengeance long before they went out of business.
Did you really need to fundamentally research those companies to find out they were in trouble?
Or could you have got that information simply by looking at their charts for five seconds? I'm sure you know the answer.
Regarding your comment about the risks of investing in a company that's on the brink of insolvency, consider this.....
If a company is in dire straits and is close to insolvency, do you think that maybe, just maybe, the research analysts might be well aware of this?
And that this information just might be known to the investment community?
And that investors, knowing this information, might be dumping the stock en masse, causing its price chart to be strongly downtrending?
No technical analyst worth his salt is going to buy a stock whose chart is strongly downtrending.
Technical analysts believe 'the trend is your friend'. Accordingly, they trade with the trend, not against it.
Finally, let me give you a couple of quotes.
The first comes from John Murphy, author of 'The Visual Investor', resident technical analyst on stockcharts.com, and considered one of the worlds foremost technical analysts................
"Chartists are cheaters. Why? Because charting is a shortcut form of fundamental analysis. It enables a chartist to analyse a stock or industry without doing all the work of the fundamental analyst. How does it do that? Simply by telling the analyst whether a stocks fundamentals are bullish or bearish by the direction its price is moving.
If the market perceives the fundamentals are bullish, the stock will be rewaded with higher prices."
The second quote is from Marty Schwartz, a man who made squillions on Wall Street and is featured in the book 'Pit Bull'..........................
"I always laugh at people who say they've never met a rich technician.
I love that! It's such an arrogant, nonsensical approach. I used fundamentals for nine years but got rich as a technical analyst".
I guess Marty Schwartz would have got a good laugh at the expense of Renee Rivkin, who was fond of saying "I've never met a rich chartist".
Rivkin, an avowed fundamentalist, was recommending PAS as a buy while one of my mates who owned PAS was dumping the stock as soon as it began downtrending.
Rivkin continued recommending PAS as a buy while it plunged towards oblivion.
Bunyip
I think to get the most out of investing its wise to use a combination of both Fundamental and Technical Analysis. Each has their positives, each has their negatives but used in combination then there are particular tools that become valuable to the investor. If you can find a fundamentally sound stock and use technical analysis to find entry and exit points, rise and falls then isn't that the best way to look at it... My thoughts anyway..
I suspect you'll start to get what a simple trend following approach can achieve.
I would have trouble with the discipline of when to get enter and exit without a understanding of the intrinsic value of the security.
That's a reasonable point. The idea, however, is to always have protecting your profits and capital as a first priority. The tax should not unduly influence you in this main priority. Imo, of course.Different strokes for different folks!
For me I would be horrified if capital gains were incured during every correction because a chart said to sell (or stop losses kicked in)
This has been well and truly covered elsewhere. Whilst I understand what you're saying, you're still putting your capital at risk by holding through a clear downtrend.I have a view that the companies in my portfolio will be worth materially more in 5-10 years time. Why would I sell when the price falls? (due to macro factors) I prefer to buy more in these times.
Perhaps consider that, despite your most painstaking fundamental analysis, if market sentiment is against that stock you so like, that's all that matters.I am glad you have done well with a trend approach Julia but I know it does not suit my personality. I would have trouble with the discipline of when to get enter and exit without a understanding of the intrinsic value of the security.
Ves, I may be wrong but I have the impression most people approach the market from a fundamental point of view. I know I did. But I've mentioned earlier the 'light bulb moment' when I read Weinstein's book. My whole approach changed and my profitability increased exponentially.Thank you for the technical perspective Boggo & Julia. I will read both of the books that you have mentioned. Whilst as a beginner I have been influenced by fundamental analysis firstly, I think having knowledge of trends (ie trend trading) will add balance and better entry points to my stock selections.
The comment about "technical analysis being a short cut to fundamental analysis" is a good one. You cannot expect to know any more than the market as a small time investor. It is often not what you know, but what you do not know.
Being an investment orientated thread that would mean a secular upward trend being a capital growth criteria. I think robusta does experience or assumes fundamentally sound companies will maintain a secular upward trend with bearish market conditions providing an opportunity to buy for less. Mind you some charting knowledge could enhance these discount buying opportunities.but rather to have a simple understanding of how to recognise trends so that you don't get trapped into losing not only your profits but some of your capital.
Let the market tell you robusta.
The difficult bit is narrowing the field from over 1900 stocks to a couple of hundred with upside potential.
Using the ASX 300 or similiar is ok to a point, the real meat was when they were on way to there, ideally you are looking for the new ASX 300 entrants.
(I have to give fundamental credit where it is due and say that this is where I have found that StockDoctor did really excel)
This extract from Bunyip's post that Julia has quoted sums it up, its no more complicated than this...
The first comes from John Murphy, author of 'The Visual Investor', resident technical analyst on stockcharts.com, and considered one of the worlds foremost technical analysts................
"Chartists are cheaters. Why? Because charting is a shortcut form of fundamental analysis. It enables a chartist to analyse a stock or industry without doing all the work of the fundamental analyst. How does it do that? Simply by telling the analyst whether a stocks fundamentals are bullish or bearish by the direction its price is moving.
If the market perceives the fundamentals are bullish, the stock will be rewarded with higher prices."
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