You are already a fundamentalist. How?
We’ll show you.
Every price tag you check marks another example. Price matters. It’s fundamental. Buying a home? Square footage and price are two primary measures for home buyers. Such measures are known as “metrics” in equity investing terms. Divide the price by square feet and you have another metric, price-per-square-foot. Now comparisons between any two homes is a snap. Same with stocks, almost.
“Valuation.” Sound familiar? Evaluating stocks works exactly like homes. The P/E is like price-per-square-foot. The P/E, or “multiple” is Price-to-earnings. Right now the S&P 500 multiple is 23. That’s high historically.
The P/E tells us how expensive a stock is. Example: the average price-to-earnings multiple of the 500 companies which comprise the S&P 500 is 23. That is the average of all 500. The price is what the stock trades for now in the open market. The earnings are annual, one year. A P/E of 23 says it would take 23 years to double your investment at that rate. That’s based on current company earnings.
That’s why we don’t buy average.
The fundamentals of stock investing include four main groupings of measures; valuation, growth, momentum, and financial, better known as “management effectiveness or execution.” And there you have it–four sets of numbers all telling a story.
Clarity is attainable. Stock investing requires clarity. Grounded thinking is useful. Both notions are fundamental; “forming a necessary base, or core.” The fundamentals are the numbers. These numbers are known as “metrics.” Metrics are milestones which together form the narrative. Every stock in the market, and the market as a whole, are stories with global reach. You want real drama?
Stocks are stories. If you own them, know them.
Do you like “House of Cards?” Then check out the crazed tale of Martin Shkreli and Turing Pharmaceuticals. These epics host a cast of thousands and include old favs. No sub required.
Fundamental research is our way of making sense of all investing vehicles; stocks, bonds, options, and real estate. No matter ones choice of investing vehicle, fundamental research forms the footwork.
Fundamental and technical research combined create the very best equity investing map available.
Fundamentals include”catalysts,” events believed to likely cause stock price moves up or down. The NBA Finals proved a “catalyst” for Under Armour.
Stock analysis begins with the Price-to-earnings multiple, and even better, the price to earnings growth ratio, or the “PEG .”
Images sourced from Pixabay.