Fundamental Analysis

Fundamental Analysis Vs. Technical Analysis – These two methods of analysis have for years created great debate in the investment community about which is better for predicting future stock prices. Fundamental analysis focuses on valuing a company based on its financial numbers, growth, supply and demand for its products/services, and intrinsic value. Technical analysis focuses on identifying patterns in price and volume movements and profiting by buying and selling at the right time. A market technician believes that past price behavior can be used to forecast the future price of a stock. Fundamental analysts study quarterly financial reports while technical analysts study price & volume charts. When the price of a stock goes down for no apparent reason, it becomes more valuable to the fundamental analyst but often times triggers a sell signal to the technical analyst.

Each method of analysis has its merits and you will hear differing opinions. Technical analysis just isn’t suited for the nature of our service. It requires close monitoring of the market and making timely trades which conflicts with our long term approach, buying and selling only a few stocks once a month. Since the MarketBeaters portfolio can only add or remove position at the end of each month it is obviously not going to benefit from market timing. We are true fundamentalists at MarketBeaters anyway and don’t think you can predict the future price movement of a stock just by looking at a chart. We feel a better indication of a stock’s future performance is its value in terms of free cash flow.