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Stock Fundamental Analysis

Stock Fundamental Analysis-Whether you want to be an investor or a trader, fundamental analysis is a must before you enter the investment world. The fundamental analysis method is a method to see the performance or worthiness of an investment instrument that you are intrinsically looking for.



Unlike technical analysis, which uses historical data trends to predict prices, fundamental analysis is not used to predict prices. This analysis provides a better picture of the company's performance both from the company's internal side and external factors.

Interested in learning about fundamental analysis? Listen to the end!

Definition of Fundamental Analysis

Fundamental analysis is a tool to evaluate an asset instrument by measuring its intrinsic value.

The trick is to study all aspects that affect the performance of an asset such as macroeconomic conditions, industry performance, financial strength, to company management. One example is the performance of public companies, which are usually published regularly, which investors or traders usually analyze in the stock market.

Analysts usually use this method to analyze macro to micro perspectives. The point is, so you can know what the real price of an asset you are after is.

Although fundamental analysis is generally carried out by stock traders in the capital market, this analysis can actually be used for other instruments as well. Debt securities, secondary markets, and futures markets require knowledge of fundamental analysis too, you know!

However, fundamental analysis does not always accurately read the direction of asset price movements in the short term. However, this analysis provides a relatively honest picture of the company's performance and prospects outside the market mechanism.

There are two categories of fundamental analysis commonly used by analysts, namely qualitative and quantitative fundamental analysis. What is the difference?

1. Quantitative Fundamental Analysis

Quantitative fundamental analysis usually focuses on indicators that can be measured by numbers. For example, in stock investment, investors usually pay attention to capital, assets, liabilities, net income, debt, to book value.

Where do these values ​​come from? Now, following the example of stock investment, investors or traders can view these data through the publication of financial reports which are usually released in conjunction with the Annual General Meeting of Shareholders (GMS).

The published report is very important for analysts so that they can analyze the company's performance. Then, they will create a model to identify the estimated book price of a company from the results of this analysis.

If the market price is lower than the analysis results, the analyst will give a buy recommendation. On the other hand, if the price is too high, the analyst will recommend selling.

However, analysts only give opinions based on science and data, while the market moves by a different mechanism. Although useful, the recommendations given are not always correct.

2. Qualitative Fundamental Analysis

One of the factors that causes quantitative analysis to often fail are factors that cannot be measured by numbers. Therefore, this is where qualitative analysis plays a major role. Qualitative analysis includes the quality of company leaders, product patents, technology use, business competition, business models and so on.

Sometimes, the dim performance of a company that has healthy financial statements is caused by an unfavorable competitive position. Inadequate use of technology can also be a factor.

In addition, modern society has also begun to pay attention to corporate governance. Consumers sometimes question the company's ethics that are proven to be less concerned about the welfare of workers or are still doing animal testing. Some healthy companies often still do not comply with taxes or violate government regulations.

Although not reflected in the numbers, qualitative factors greatly affect the company's prospects. This analysis also considers the consumer base, market share, industry growth, competition, regulation to the business cycle.

Fundamental Analysis Is A Long-Term Investor's Weapon

The market mechanism moves in a supply and demand equilibrium, making it difficult to predict. If you are planning to become a short-term speculator trader, this analysis may only serve as additional knowledge.

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