Cannabis Stocks Spike Following Reports Marijuana Will Be Reclassified As Less Dangerous Drug
Fundamental vs. Technical Analysis
Fundamental and technical analysis are two of the most commonly used methodologies to study markets and securities. How and when you use them is a matter of personal preference. Both methods provide detailed insights into a company’s underlying business as well as its position in the broader economy. In simple words, fundamental analysis focuses on the quality of the stock, whereas technical analysis is more about the study of market trends. Let’s break it down further.
Fundamental Analysis
Fundamental analysis is a great tool for determining the growth potential of a company. It relies on metrics such as P/E ratio, dividend yield, debt-to-equity ratio, ROE (return on equity), etc. to identify stocks fitting certain criteria. Historically, investors have used fundamental analysis for long-term investments as it offers detailed reports on every financial aspect of a company. Their primary tools include:
Financial Statements
Economic indicators
Interest rates
News and updates
Technical Analysis
Technical analysis, on the other hand, bypasses the fundamental evaluation of a company and instead hunts for pre-studied trends that might foretell future price shifts and volume changes. Investors review historical data and volumes to determine how the price and volumes will shift over time. The main tools used here are:
Technical indicators
Volume analysis
Stock chart analysis
Studying support and resistance
Trend analysis
So, is one better than the other?
One might argue that exploiting market trends (what technical analysis does) to profit isn’t very sustainable, but reality says otherwise. Ideally, you want to combine fundamental and technical analysis as leaving out one might cause you to miss important clues. Begin by assessing intrinsic values such as financial statements and when designing an exit strategy, you can rely on technical analysis.
This approach might give you a more realistic picture of the market and its behavior allowing you to fine-tune your expectations and strategy. Nevertheless, it’s always better to have more information than less whether you eventually end up using or not. Not to mention, these techniques will enhance your market knowledge over time.
Whether you are a growth or value investor, market study can be a tricky joint these days given how diverse the market has become. Furthermore, years of accumulated data gives us an edge compared to a decade ago when most companies were in their infancy. What other tools do you use to identify stocks? Let’s hear your thoughts!
A Bad Day For Coffee Drinkers Everywhere (Or A Good Day If You're A Hater)
International coffee chain is down more than 10% in after market trading with these reports:
EPS $0.68 actual vs Est. $0.80 expected (15% miss)
Sales $8.56B vs Est. $9.13B (6% miss)
Are too many people making their coffee at home?
Momentum Investing
The upside of short-term investments is that you have access to your money when you need it. Those investing on a short-term basis are often doing so because they need to have the money at a certain time. For instance, if you have a down payment on a house or a loan to pay off, the money should be ready at the go. As a rule of thumb, any investment for less than three years is considered a short-term investment.
Risky But More Yield
Short-term investments can be profitable at the cost of more risk and can go sideways if not done carefully. Some of you might have heard of the term ‘Momentum Investing’. It’s a strategy used by short-term investors which in theory is based on Newton's Third Law of Motion, that is momentum is conserved. If something is moving, it will continue to move at the same speed unless another force acts on it.
Quite similar to this law, short-term investors aim to benefit from stocks that have built momentum in the market and are going up and will keep going up. At this point, I know what you might be asking next. How to design a good exit strategy for short-term investments? For this task, I’m going to use price and fundamental momentum combined with the quality of the stocks.
I typically shortlist stocks that have shown 3-month gains and one-year declines above 10%. All these companies have market capitalization of more than 2 billion USD to ensure they are firmly established. The next move is to secure competitive yields that often move closely in tune with federal funds rate. Here are some additional factors I consider:
Return on Equity > 15
Debt to Equity Ratio is less than 5
1-year revenue growth > 10%
1-year EPS growth > 10%
Here are some picks that fit that criterion, , , , ,
Note that these are not recommendations. I’m merely offering my take on the subject matter.
TSLA up 14%
Is Tesla Stock A Buy Or A Sell As EV Giant Adjusts Inventory Pricing Amid Global Layoffs?
Fundamental vs. Technical Analysis
Fundamental and technical analysis are two of the most commonly used methodologies to study markets and securities. How and when you use them is a matter of personal preference. Both methods provide detailed insights into a company’s underlying business as well as its position in the broader economy. In simple words, fundamental analysis focuses on the quality of the stock, whereas technical analysis is more about the study of market trends. Let’s break it down further.
Fundamental Analysis
Fundamental analysis is a great tool for determining the growth potential of a company. It relies on metrics such as P/E ratio, dividend yield, debt-to-equity ratio, ROE (return on equity), etc. to identify stocks fitting certain criteria. Historically, investors have used fundamental analysis for long-term investments as it offers detailed reports on every financial aspect of a company. Their primary tools include:
Financial Statements
Economic indicators
Interest rates
News and updates
Technical Analysis
Technical analysis, on the other hand, bypasses the fundamental evaluation of a company and instead hunts for pre-studied trends that might foretell future price shifts and volume changes. Investors review historical data and volumes to determine how the price and volumes will shift over time. The main tools used here are:
Technical indicators
Volume analysis
Stock chart analysis
Studying support and resistance
Trend analysis
So, is one better than the other?
One might argue that exploiting market trends (what technical analysis does) to profit isn’t very sustainable, but reality says otherwise. Ideally, you want to combine fundamental and technical analysis as leaving out one might cause you to miss important clues. Begin by assessing intrinsic values such as financial statements and when designing an exit strategy, you can rely on technical analysis.
This approach might give you a more realistic picture of the market and its behavior allowing you to fine-tune your expectations and strategy. Nevertheless, it’s always better to have more information than less whether you eventually end up using or not. Not to mention, these techniques will enhance your market knowledge over time.
Whether you are a growth or value investor, market study can be a tricky joint these days given how diverse the market has become. Furthermore, years of accumulated data gives us an edge compared to a decade ago when most companies were in their infancy. What other tools do you use to identify stocks? Let’s hear your thoughts!
A Bad Day For Coffee Drinkers Everywhere (Or A Good Day If You're A Hater)
International coffee chain is down more than 10% in after market trading with these reports:
EPS $0.68 actual vs Est. $0.80 expected (15% miss)
Sales $8.56B vs Est. $9.13B (6% miss)
Are too many people making their coffee at home?
Momentum Investing
The upside of short-term investments is that you have access to your money when you need it. Those investing on a short-term basis are often doing so because they need to have the money at a certain time. For instance, if you have a down payment on a house or a loan to pay off, the money should be ready at the go. As a rule of thumb, any investment for less than three years is considered a short-term investment.
Risky But More Yield
Short-term investments can be profitable at the cost of more risk and can go sideways if not done carefully. Some of you might have heard of the term ‘Momentum Investing’. It’s a strategy used by short-term investors which in theory is based on Newton's Third Law of Motion, that is momentum is conserved. If something is moving, it will continue to move at the same speed unless another force acts on it.
Quite similar to this law, short-term investors aim to benefit from stocks that have built momentum in the market and are going up and will keep going up. At this point, I know what you might be asking next. How to design a good exit strategy for short-term investments? For this task, I’m going to use price and fundamental momentum combined with the quality of the stocks.
I typically shortlist stocks that have shown 3-month gains and one-year declines above 10%. All these companies have market capitalization of more than 2 billion USD to ensure they are firmly established. The next move is to secure competitive yields that often move closely in tune with federal funds rate. Here are some additional factors I consider:
Return on Equity > 15
Debt to Equity Ratio is less than 5
1-year revenue growth > 10%
1-year EPS growth > 10%
Here are some picks that fit that criterion, , , , ,
Note that these are not recommendations. I’m merely offering my take on the subject matter.
TSLA up 14%
Is Tesla Stock A Buy Or A Sell As EV Giant Adjusts Inventory Pricing Amid Global Layoffs?