Seven Key Questions All Fundamental Analysts must Answer

January 30, 2019, By smallpicksfirm,

Like most investors, one of your top goals has been to enjoy financial freedom at whatever age you choose. So it stands to reason that your money should ideally generate above-market returns with below market risk.

That’s Rule No. 1.

To help others do just that, we combine the very secrets of billionaires, like Warren Buffett, Baron Rothschild and Sir John Templeton with unfairly valued stocks that are fundamentally and technically over-extended in overbought or oversold territory.

We’ve covered quite a few ways to look at a stock technically.

Now, let’s begin to understand what makes the engine run.

To do so, we ask ourselves a series of questions, hoping for an understanding before sinking money into any trade. Remember, any one can trade a stock.

But it takes good discipline and research to pick a great one.

That brings us to Rule No. 2 – Understanding the Nuts and Bolts

All too often, we’re told to ignore 52-week lows because stocks hitting new lows tend to continue making new low. But that’s not always the case.

In fact, many stocks hitting 52-week lows are there undeservingly. It’s your job to find out which ones hold the most value and the most “bang for your buck.”

To do so, you must begin to understand the underlying nuts and bolts of the stock.

  1. Is is fundamentally strong?
  2. Is it fairly valued, or unfarily over- or undervalued?
  3. Is it trading at or below growth, per PEG ratio?
  4. Is the company profitable?
  5. Is it trading well in comparison to sales?
  6. Is it standing shoulder to shoulder with competition?
  7. Are its earnings strong or is it losing money?

Earnings are the bottom line.

By simply answering those questions, you should able to generate above-market returns with below market risk.