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Fundamental Analysis - The process of stock picking

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dreamxite

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I guess I haven't been clear when i made a post previously about the challenges and obstacles in stock investing.

Basically I like to find out if others have come across any challenges, obstacles or frustration during the process of stock picking. That is from finding & screening opportunities or ideas, research, analysis to valuation, making buy decision, portfolio allocation/composition etc. This process also include decision making in every stage of the investing from when to buy or sell, to buy or not to buy etc.

Personally, I think the challenging part for me is the research part. Trying to understand the business side and do a deep research, the ability to find information is a frustrating one and analysing those information after you got them.

Just want to see if others have any challenges in any stage of the process or the whole process is an obstacle that prevent you from starting at all, i.e. not time to learn etc. Cheers
 

I actually use a paid service advisory firm whose business it is to analyse and find sound companies based on Fundamental analysis as I do not have the time to do it myself.

Once I have this list of Fundamentally sound companies I use my Technical analysis skills to ensure they are being backed up technically and after that process I may then invest in the companies.

This process works well for me.
 

Same here for my SMSF.

StockDoctor narrows the market down to a current list of about 460 stocks and an Amibroker weekly scan has proven to be a worthwhile process with that list.
Currently the system is inhibited by the index filter.
 
Boggo said:
Same here for my SMSF.

StockDoctor narrows the market down to a current list of about 460 stocks and an Amibroker weekly scan has proven to be a worthwhile process with that list.
Currently the system is inhibited by the index filter.
Click to expand...

Some good stuff presented at noosapalooza regarding the use of fundamental research in tandem with a systematic approach....very encouraging results, however I believe they were still testing in order to get a larger sample.
 
Have any of you fundamental guys had a look at a company called Simply Wall Street (https://simplywall.st)

To a mostly technical analyst like myself who hates reading through reports it seems pretty comprehensive and easy to understand. Any flaws anybody can spot?
 

I haven’t. I’m only interested in raw data not the interpretation of it.

It would be like you relying on somebody else to interpret price information for you. – I bet you are more interested in just reliable accurate raw price data.


I doubt that a universe of “fundamentally superior” stocks will add to a technical approach. Actually I suspect it will detract. The volatility that TA should seek to harvest occurs mostly where there is too much uncertainty for FA to be of any use - the more fundamentally superior and understood the more bounded the price discovery is in the market. If your a good trader go for the inferior stocks - that's where the movement will be.
 

Unfortunately the information base is still delayed information of past performance hopeful future performance and meanwhile certain aspects within may have changed significantly.

Regardless of how the fundamentals are analysed the other consideration is the accuracy of the information, a few of many that have existed that come to mind are Allco, ABC Learning, Westpoint, Centro, Storm Financial, Opes Prime and Babcock & Brown.

I was an indirect victim of Opes Prime via my accounts at the time through TraderDealer. I would have to severely **** up technical analysis and catch way too many falling knives to even come close to that sort of loss again.

Only directors can polish a turd
 

I see you are now throwing in an unlisted dodgy broker that bit you on the bum otherwise you must have written that line a thousand time now - do you ever get tired of it? The bolded bit is what you consistently misinterpret about Fundamental Analysis - Used intelligently it can get you ahead of the ball game and tell you a lot more then directors/marketing/promoters/market momentum etc are telling you. Hey the principals can even be used to alert/avoid you taking unnecessary counter party risk.
 
craft said:
- Used intelligently it can get you ahead of the ball game and tell you a lot more then directors/marketing/promoters/market momentum etc are telling you.
Click to expand...

Would love to see how you can use misleading/inaccurate/false information intelligently, unless you have a way of identifying it and avoiding it.

All the ones I have mentioned were from the era when I thought this stuff could be trusted and I based everything on it, I have since found a more accurate alternative.
 


How accurate are those who's foot steps you are following with TA? what analysis do they use? Getting off anything that moves down does seem to make sense for you and worth the possible whipsaws - I'm glad you have found a way to keep yourself safe - but boy I do get sick of you laying the boot into FA because you couldn't apply it.

Like I say I don't think a superior FA universe will improve a good technical ability. But if somebody thinks a stock selection universe can increase return and does go the track of sub-contracting FA to a service like Porper referenced - I would suggest not having faith in anybody else's interpretation of FA unless you can fully understand their recommendations yourself. In that circumstance a technical overlay for safety more so than performance gain is a logical protection.
 
Spot on craft, furthermore no one with any level of understanding of company financials would have held positions in any of the companies he mentions.

I guess that lots of brokers and advisors give FA a bad name by implying they use it as a basis for their research - in most cases that is patent nonsense.
 
craft said:
....but boy I do get sick of you laying the boot into FA because you couldn't apply it.
Click to expand...

Would hate to be cause of you getting sick, maybe just ignore my posts if you have difficulty with the facts of the past if you see the facts as laying the boot in.

That stock you didn't like in my earlier post, just remove that and replace it with Sons of Gwalia.

Maybe just give ASIC a call too and tell them that they no longer need an expensive department to monitor the behaviour of company directors and reporting procedures, tell them that it's unfair to be laying the boot in because of past behaviour and directors have promised to be good little boys.
Tell them to instead on focus on those nasty and annoying little people who work on reality and use actual data as a guide, they are shifty little buggers with foot fetishes.
 

What can you say - I got nothin!!!!

I think I live on a different planet and I should just head back there.
 

You may suggest it but that does not mean you are correct either. If some one has the time to learn FA then fair enough if that is what they like to do and can then make it work for their investment timeframe.

I also fall into the category of subscribing for my FA and I do not understand the ins and outs but understand the methodology that is being used to select the most financially healthy companies and since I spent my years understanding technical's and how combining the two FA/TA I can profit from the market that is all I require.

I also see it not just as a safety overlay but also to advance my performance with market or stock timing ..... entering or exiting at a more opportune time for whichever timeframe I may be using.....
 
galumay said:
I guess that lots of brokers and advisors give FA a bad name by implying they use it as a basis for their research - in most cases that is patent nonsense.
Click to expand...

Enlighten me please, in your opinion what might these brokers have been using as basis for their research ?
 

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Boggo said:
Enlighten me please, in your opinion what might these brokers have been using as basis for their research ?
Click to expand...
Turn the chop mate, a few people on this very forum put an avoid on DSH in the same time period and I can tell you now they weren't all techies.
 


Exactly why I use approx 460 of StockDoctor safer stocks and I apply TA to those.
(At the moment I am actually running the All Ords constituents of about 490 stocks in parallel).

At the first sign of a weekly chart technical heads up I find that I actually am ahead of the inevitable FA caution or warning.

For galumay - https://www.aussiestockforums.com/forums/showthread.php?t=6931&page=5&p=867465&viewfull=1#post867465

and - https://www.aussiestockforums.com/forums/showthread.php?t=6931&page=5&p=873098&viewfull=1#post873098

(click to expand)
 

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Forget F/A vs T/A. Instead, it's you're psyche against the market. Or rather, it's actually you vs you.

Price data and financial statement data (and other data, for that matter) contain useful information about stocks that you can (theoretically) exploit to potentially, 'beat the market'. As I've posted before, data is data. It's not F/A vs T/A...on my planet it's quantitative vs qualitative. And I'm in awe of anyone who can do this (beat the market) via a qualitative approach - which is why I hold craft in high esteem as the, 'Aussie Buffett' Same would go for any chartist with a qualitative approach and similarly impressive results.

To act as if price is more "pure" and therefore puts you more on the right track is absurd (and something I've seen said on chartist type forums). It's a ridiculous idea. Proven by the fact that most traders / investors (call yourself what you will) can screw themselves over quite adequately with price data, charts and T/A just as much as the would be investor poring over the footnotes in a financial statement.

Look at a chart, read an income statement, listen to the news or subscribe to a service...it doesn't really matter. That's not what is going to help you. The odds are that you will not beat the market. Because of you.




N.B. Comment inspired by, but not directed at Boggo or craft; simply made in the spirit of hoping to provoke critical thought in interested readers.
 
When my trades start going wrong, I know it can only mean one thing, namely, my dartboard is long overdue for servicing!
 
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