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Basic Understanding of fundamental_analysis

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Fundamental Analysis
What is Fundamental Analysis?
Fundamental analysis involves examining the economic, financial and other
qualitative and quantitative factors related to a stock in order to determine its intrinsic value
(True Value). Typically this method is used to evaluate the value of a company’s stock; its
use can be extended for any kind of security, such as bonds or currency Fundamental
analysis, which is also known as quantitative analysis, involves delving into a company’s
financial statements (such as profit and loss account and balance sheet) in order to study
various financial indicators (such as revenues, earnings, liabilities, expenses and assets).
Such analysis is usually carried out by analysts, brokers and savvy investors.
As with most analysis, the goal is to derive a forecast and profit from future price
movements. At the company level, fundamental analysis may involve examination of
financial data, management, business concept and competition. At the industry level, there
might be an examination of supply and demand forces for the products offered. For the
national economy, fundamental analysis might focus on economic data to assess the present
and future growth of the economy. To forecast future stock prices, fundamental analysis
combines economic, industry, and company analysis to derive a stock's current fair value and
forecast future value. If fair value is not equal to the current stock price, fundamental analysts
believe that the stock is either over or under valued and the market price will ultimately
gravitate towards fair value.

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Fundamental Analysis: Two Approaches
While carrying out fundamental analysis, investors can use either of the following
approaches:
Top Down Approach: The top down approach consists of analyzing securities from "the
top downwards." This means evaluating in the following order:
1. The entire market (is the market headed up or down?)
2. The Sector (is the sector hot or cold?)
3. The Industry (is this particular industry hot or cold?)
4. The specific stock (evaluate the specific stock fundamentally if it passes the first 3)
Example:
1. You do a study and decide that the stock market will continue to go up.
2. You evaluate the Technology sector and determine that it's hot
3. You evaluate the Internet industry and determine that it's hot
4. You evaluate Yahoo and analyze it fundamentally, and decide whether the stock
will go up or down.
Bottom Up Approach: Just the opposite of the Top Down approach. You start from the
bottom and analyze upwards.
Example:
1. Evaluate Yahoo and analyze it fundamentally
2. Evaluate the Internet industry and determine whether it's hot or cold

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Fundamental Analysis What is Fundamental Analysis? Fundamental analysis involves examining the economic, financial and other qualitative and quantitative factors related to a stock in order to determine its intrinsic value (True Value). Typically this method is used to evaluate the value of a company’s stock; its use can be extended for any kind of security, such as bonds or currency Fundamental analysis, which is also known as quantitative analysis, involves delving into a company’s financial statements (such as profit and loss account and balance sheet) in order to study various financial indicators (such as revenues, earnings, liabilities, expenses and assets). Such analysis is usually carried out by analysts, brokers and savvy investors. As with most analysis, the goal is to derive a forecast and profit from future price movements. At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition. At the industry level, there might be an examination of supply and demand forces for the products offered. For the national economy, fundamental analysis might focus on economic data to assess the present and future growth of the economy. To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis to derive a stock's current fair value and forecast future value. If fair value is not equal to the current stock price, fundamental analysts believe that the stock is ...
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