Importance of fundamental analysis

Importance of fundamental analysis

mainly the fundamental analysis is used by value investors and long term investors.it method used to determine the intrinsic value of stock.this style of analysis is more usually done by mutual fund managers to dive deep in company's financials and fundamental characteristics.many retail investors think fundamentals are boring and takes more time to quantify but they are worth doing.

6 STEPS TO ANALYZE FUNDAMENTALS OF COMPANY

1)MANAGEMENT INTEGRITY

2)INDUSTRY ANALYSIS

3)PROFIT AND LOSS,BALANCE SHEET,CASH FLOW STATEMENT

4)RATIOS ANALYSIS

5)VALUATION ANALYSIS

6)CONVICTION BUILDING

First i want to discuss with you about the value of 6th step conviction building which is a key differentiator between long term investor and a short term guy.After analyzing all the above 5 steps you will get a good fundamental company .but if and only if you hold it for a long period of time.when writing this blog i recalled the Warren Buffet's quotes it is

now i think you had learned the value of long term investing ,

but how we can hold a stock for more than 5 years or even 10 means .by building conviction on a good company .let me tell you an example, a person A invested his money in a company name X and wanted to hold it for a decade for big multibagger returns, for the first year all was good but at the 2nd year in his investment journey he faced big Stock Market crash and he was seeing all were panicking ,then his portfolio was also hitted a 40 % decline which shivered him he sold his investments by booking loses even though it is a good fundamental company.if we come to the 2nd scenario of the person B who researched and invested in a good fundamental company name x which person A also invested but not now which is a different story.this person A also scene his portfolio of a 40% DECLINE but due to his conviction towards the company he considered it is an opportunity and invested still more capital now after 10 years and after facing many temporary ups and downs his Investment given him multifold returns and booked his profits to enjoy them

The Moral of the story is conviction towards the company helps him to stay at good returns after a decade of time period 

in my next blog continued, 

[disclaimer here with only fundamentals  and conviction you can't get returns. as if you might choosed the wrong company and developed conviction towards it. it might effect your portfolio returns significantly negative so please try to do your own research or consult your financial advisor]