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Fundamental analysis - recommended books?

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markrmau

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Hi,

Can anyone recommend books on fundamental analysis?

I have read some of the basics from "A random walk down wall street", but I am after something a litttle more empirical such as looking at long term term debt, earnings growth etc. However I am somewhat wary of things like DCF valuation as the figures tend to vary enormously (garbage in garbage out).

Just as unreliable as technical analysis. LOL.

Thanks, Mark.
 
Hi Mark,

There is a good book called Investment Fables written by an American professor, Aswath Damodaran who sheds light on the fundamentals. It's truly a good read, but focusses on American stocks. It covers history to arrive at conclusions of the P/E ratio, book value, dividends, etc. It's not a theoretical book explaining the ratios etc. but mainly a book exposing the myths of "Can't Miss Investment Strategies"(quoted)

You can peruse a copy at any big book store. About $40 - 50.
 
Have a browse at the following books at the bookstore(s) if you have not done so already, to see whether useful to you:

1. Security Analysis
2. The Intelligent Investor
3. The Essays of Warren Buffett
4. Warren Buffett Speaks
5. The Winning Investment Habits of Warren Buffett and George Soros
6. Warren Buffett Wealth
7. The Essential Buffett
8. The Warren Buffett Way
9. Masters of The Market
10. Investment Analysis (not readily available)
11. Further Investment Analysis (not readily available)
12. Forbes Greatest Investing Stories
 
Masters of the Market gives you a good insight into what the top fundies do.
It'll give you some great tips but it is a bit of a drag.
 
Checkout Investopedia.com and you can print off free information about stocks, trading, bonds etc. The articles are quite good and cover many aspects of investing and trading.

Go to the left side and click on stocks for fundamental analysis. :goodnight
 
A definition from aireview:

Fundamental analysis - Analysis that seeks to determine the value and future prospects of an investment on the basis of facts and figures, even if it requires leaning on assumptions and forecasts. Company research often focuses on earnings, dividend prospects, macro-economic trends, expectations for future interest rates, tax regulations, currency effects and risk evaluation of the firm.
 
Fundamental Analysis Books

Hi Everyone,
I am a technical trader but I would like to see how the 'other' side works. Can any of you Fundy gurus out there recommend some good Fundamental Analysis books. I am interested in how you use P/Es, Sales Growths etc to determine what you consider a 'fair' value for a stock. eg when you do the calculations and decide that a stock is overpriced or underpriced as I think combining the best of both worlds (tech and fundamental) could be beneficial.
It could help confirm trend changes and set targets for profit taking (at least in a general ball park figure).
So what do you guys recommend? Any good websites are welcome too.
Cheers
 
Re: Fundamental Analysis Books

Valuing a stock is part science and part art, I dont think anyone can truly price a certain stock apart from Warren Buffett, but the guy is a mathematical genius even though he doesnt admit it.

From the way I see him calculate stuff on the fly, this guy has a quick mind for calculation and work out certain number very quickly.

The intelligent investor (value investing sort of book) - Ben Graham
Security Analysis - Ben Graham (boring but if you want to see how Graham think when the early 20th century bear market nearly wipe him out, he's a devoted value investing from then on ) - .
 
In some ways the concepts behind fundamental investing are boringly straight forward. Like any investment approach the key to making it succeed is to be extremely thorough on the research and patient and displined when it comes to putting money in and taking it out.

I would recommend Ben Graham, plus Warren Buffets stuff (the only thing I've read of his is a collection of his addresses at the berkshire agm's - not sure if he's actually ever published anything).

There don't need to be many complex books on fundamental analysis - its not complex. Value a company on current and historical earnings, make sure they have a sound balance sheet (and include dilution and debt from different equity classes when doing the valuation), and assess its growth prospects both quantitavely and qualitatively. Then compare it to other investments in the same sector and in other sectors and other investment instruments, and if you have compelling value then buy.

Its the detail, the patience, and the discipline (particularly on exit as well as entry) thats important to making it work. I see a lot of fundamental investors make the mistake of getting emotionally attached to a stock and holding onto it even though the underlying fundamental situation for the particular stock has changed, or macro market circumstances that will impact that stocks business has changed. (e.g. interest rates, exchange rates, commodity prices, consumer sentiment, inflation etc.).
 
Re: Fundamental Analysis Books


Forget P/Es they are useless in determining in value. Many have tried to synthesize Buffet's methods, "The Warren Buffet Way" became enormously popular with its concept of 'owner earnings.' What most don't realize is that Buffet didn't endorse the book and the method outlined in the book is not particularly useful.

One book will sort you out. 'Market Wise' by Brian McNiven (he's an aussie), explains everything you need to know about valuing companies. Worst part of this book is the free CD, just repeats verbatim what is written in the book, otherwise it's a fundies bible.
 
Completely agree with Dhukka. Brian McNiven also has another book called ' a wonderful company at a wonderful price' Very similar to 'market wise'. If you can understand the concepts in these books you will be streets ahead once you are done.
 
Cheers everyone.
I will definately check out those books. Before I got onto this site I wasted alot of money and time reading nasty "holy grail' system books but most of the recommendations I've read here are great.
I think combining Tech and Fundamental analysis has to be a good thing. While I've been trading with technical analysis I've come to situations where I get signals to short a "flashy" bluechip (eg. BHP, JBH or big 4 banks etc) but I have hesitated - thinking that it has to be a bad idea to short a fundamentally good company. That is where I have taken notice of posts by people saying that so and so stock is 'overvalued' - in which case the technical reasons to short that stock are confirming that stock is on its way down (even if only for the short/med term).
For example last year JBH had been making great profits and sales, and was trending up nicely and I made some $ last year from it. But by the end of the year it had formed a double top then I thought about going short after the failed rally. BUT - because it had such a nice uptrend and all I ever heard was how well they were doing, I didn't do it. That is where I think that even a ballpark figure of what the 'value' of JBH could have helped. If the fundamental analysis said it was overvalued COMBINED with tech analysis saying the there was a change in trend to down, then both styles of analysis would add to give solid confirmation and also help set profit taking targets.
In the everlasting disagreements between techies and fundies I always see techies saying to fundies that their style of trading is ok but they should use some type of tech analysis or charts to confirm their entry. However, I rarely see fundies saying how some form of fundamental analysis could help the techies.
Why can't we all just get along . . .
 
Hi Kingie

The best book ever on fundimentals, is "Huntleys' Shareholder", an annual book/cd that gives a description and ten years worth of 50 different fundimentals for the top 500 Australian Companies shares. It gives definitions for P/E, ebit, npat and all the rest as well as listing shares by top 50 by ebit, top 50 by dividend yield and so forth try the library or any decent book shop, I got last years in Darwin, so you should have no problem down there If you find it in a shop check out the begining and the end for definitions and lists and always remember You can always use an online dictionary if the Huntleys definition is too "technical" for you, I think I just accidentily made a funny .Remember all this is also on a disk so you can put it in the computer and you get an icon on your desktop and you can pull all the info at any time, so if you have a portable you dont have to carry the book or the disk its in the machine just hit the icon, The bad news? It is $99.99 and worth every flamin' cent, amazin book I am looking for this years version last year came out in april I think
Happyjack
 
Buffettology - the workbook, if you want a very simple, very easy to understand education on valuation and all those other quantitative AND qualitative philosophies that Buffett "apparently" applies!

Covers everything from long-term debt, EPS, ROE, future growth, cashflows etc. The only thing it really doesnt speak much about (if anything), is risk.

Good luck with your studies!
 
Hi Joe, thanks for that, I would have waited till April if you had not told me. I ordered a copy so I hope you get a commission.
Not sure if this edition has a disk or not but the last one is only 12 months out anyway. Forgot to say, when you load the disk it wants to know all sorts of stuff about internet connections so I did not load it as at that time I was not connected, then I thought bugger it and kept hitting the load button and it did, it turned out that it did not need the internet at all, works perfectly well on a non connected machine. ever since then all my curtains have scorch marks
from the names I called the twit who set up the disk autoload.
happyjack
 
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