KC Zieg on Fundamental Analysis

Investing involves a very limited number of decisions:

What stock (futures contract, equity option, index option, or other item) should I buy?
When should I buy it?
Having purchased it, where should I sell it?

To be a successful investor, one needs to do more than just select the best stocks or commodities to own. They must be purchased correctly. The investor must then employ appropriate exit strategies to stop losses and let profits run.

Most investors, investment services, newsletters, advisors, and brokerage firms select stocks to purchase through the use of fundamental analysis. Fundamental analysis involves the study of the quality of the company, its sales, earnings, management, and other factors relating to how the company has recently performed, how it should fair in the future and how it compares with other firms within its industry. There are hundreds of factors, ratios, and indicators that can and are employed to track past performance, anticipate future results, and measure one company against its peer group. A few of these fundamental factors for stocks are listed in Exhibit 1.1***. The goal of fundamental examination is to determine what stock to buy.

Fundamental analysis of commodities involves an entirely different set of factors often unique to the futures product being reviewed. For example, in studying soybeans one would consider weather, planting intentions, crush, storage levels, import/export, feedlot activity, carry charges, and the like.

***Included in the exhibit are: asset turnover, beta, book value growth, book value per share, capital spending growth, capital spending per share, cash per share, current ratio, debt to equity, debt service to EPS, dividend growth, dividend rate, dividend yield, EPS% change, EPS growth rate, float, free cash flow per share, gross margin growth, gross margin, PE, historic relative PE, insider ownership, institutional ownership, interest coverage, inventory turnover, last split date, last split factor, payout ratio, receivables turnover, return on assets, return on equity, return on investment, return on sales, revenue growth, revenue per employee, revenue per share, shares outstanding, short interest, short interest ratio.

KC Zieg, Point and Figure Commodity and Stock Trading Techniques