Fundamental Analysis for Stocks

There are people who are overly obsessed with fundamental analysis. They analyze everything and become paralyzed. For me, I only want to be a trader or private investor. I have small capital and not interested to own the company (as with Warren Buffett). My goal is to ride on the price movement. So, I only do superficial fundamental analysis. I look at basic numbers as in profit trends, margin trends, NAV, Liability vs Assets, EPS and cash flow statement. I will also look into the sector and general market conditions. I based my decision mainly on my technical analysis.

It is common to have bought into a company with good fundamentals and yet the stock price drop and stay depressed for a long time. If your aim is to own a company, that is OK. You don't sell it. It will eventually come around but may take 2-3 years especially very small cap stock.

Most people overlook on key aspect of Fundamental Analysis which is "unusual events". For example, if someone where to invest in a company in Indonesia that produces Palm Oil and has vast plantation in Sumatra. With all the favorable fundamentals, one would expect the company to increase profits every year. However, if an earth quake occurs and a tsunami wipe away half of their plantation, the company will be in trouble. The profit will be wipe out.

As a trader or investor, we can't be an expert in every field that we invest in. For those who want to rely heavily on fundamental analysis, they may want to choose to invest only in certain sectors where they can be expert in that sector.