Fundamental Analysis worth it??

Discussion in 'Trading' started by short&naked, Sep 12, 2008.

  1. It seems to me that in applying the Buffet style, fundamental value investing, a lot can go wrong.
    This type of analysis is very complex and the odds of over looking an oddity related to a specific sector/company are great. Also, there is the burden of long term risk. A lot can change in the next 10 years.

    A lot of time and little return.

  2. Joab


    Your right !

    The richest man in the world is a complete idiot.

    What is he thinking ?
  3. 75% Technical Analysis

    15% Fundamental Analysis

    10% News
  4. The richest man in the world rode the greatest Bull Market ever, look at the DOW / FT30 / S&P500 yearly index, not futures.
  5. There are a few ways to skin the market's cat. Buffet is a "value" player... makes a big effort to try to find a company that has been mispriced by the marketplace so he might buy it for 50% of his perceived value.

    Another type of FA is "theme"... example, "Much greater nuclear power is in our future".. so you buy-and-hold nuclear-related stocks. If that turns out wrong, or "the future" is further out than you imagine, or some development occurs between, you can take large losses.

    Technical Analysis is in a different realm entirely.
  6. If you're familiar with the business, such as working in the industry or specific co OR you are familiar with the business and have access to management (assuming you know what questions to ask and management tells you the truth), then this would be a starting point, then one might focus on macro issues.

    Imo, trying to reconstruct f/a from a 10k and outside sources without knowledge of how management pursues future business issues (not being on the inside) is quite a tough task. Mis-extrapolation (not sure if that is a word) of any key points could result in fatal errors.
  7. So... (1) FA is difficult, time consuming, and exposes one to inordinately large risks, and (2) "TA doesn't work".

    Where does that leave us? Up the proverbial crick without a paddle?
  8. It gets worse. The more you know, the higher your confidence level and the gap between accuracy and confidence become Huuugggeeeeee!!!!

    "In another experiment, Lichtenstein and Fischhoff gave people market reports on 12 stocks and asked them to predict whether the stocks would rise or fall in a given period. Once again, even though only 47, percent of these predictions were correct (slightly less than would be expected by chance), the mean confidence rating was 65 percent."
  9. Perhaps we should all just blow our money on whores and cake before the market takes it away from us... :D
  10. Fundamentals rule in the long run.

    However markets may make significant short liver runs against the fundamentals, so technical analysis is still needed to make money.
    #10     Sep 12, 2008