Researching a Company!
Fundamental analysis simply means conducting basic research on a company. When analyzing a company, you may want to choose companies that have the following qualities:
A competitive advantage (such as key patents, a dominant share of the market or the fastest growth of new customers in a growing industry).
A record of consistent earnings growth or a strong indication of future growth.
A healthy balance sheet (low debt, strong cash flow).
Substantial ownership by management and, perhaps, recent insider buying.
Strong minority stakes by outside investors.
Conversely, you may want to be wary of companies with:
Substantial and growing competition and low barriers to entry.
A shortfall in earnings, or a possible future impediment to growth, such as new regulations or tax changes.
A weak balance sheet (high debt, declining cash flow)
Low ownership by management and/or insider selling.
Recent resignations of key officers.
Fundamental analysis is a lot more work ...
But therein lies its appeal!
Crowd psychology can be a powerful yet fickle force in the markets. You, yes you, as a smart investor, you've got to stay constantly alert for when the herd reverses direction!
Fundamental analysis definitely takes time, effort and hard work ...
But properly done ...
It will most certainly allow you to identify strong companies!
