What is Fundamental Analysis and how to use Fundamental Analysis to pick stocks to buy? You should read this post and watch the videos I’ve included below to easily understand this method widely used by investors in choosing a company to invest with.
If you’re investing and trading in the stock market, I’m sure you’ve heard of fundamental and technical analysis but you don’t want to know of them that much because they sound so complicated and technical. Perhaps you attended a seminar about them and you got the concepts but when you went home, nothing sank in your brain.
I understand the sentiment that is why I made this post to share the best, easiest and amazing way I learned about basic Fundamental Analysis without too much confusions. Ok, let’s start.
What is Fundamental Analysis?
The stock market puts the price tags from the buyers and sellers of stocks. How would you know if the stock price they offer is cheap or expensive? The answer is Fundamental Analysis.
It is simply analyzing the company’s fundamentals (P/E, P/BV, EPS, Debt/Equity, Return on Equity, Net Profit Margin), to determine if the stocks you want to buy from it are worth it.
Fundamental also means important basics.
Why should we use Fundamental Analysis?
Because it is based on facts, not opinions. The latest figures from the company’s Balance Sheet, Income Statement and Cash Flow Statements determine if the stock being offered to you is undervalued or overvalued.
Because you are looking and analyzing for the most important criteria to determine the company’s worth.
Because in buying stocks, you should be looking for a company that has the following criteria:
- Stable growth
- Strong Balance Sheet
- Long term corporate life
- Great management
- Less Debts
- High Profit
- Huge Cash Reserve
How to use Fundamental Analysis in choosing stocks to buy?
Right now, there aren’t many tools to evaluate a good stock in the PSE using fundamental analysis. If there are, they are only for exclusive banks and brokers. Honestly, even the tools from online broker platforms are very basic. There are available comprehensive tools that can follow your market indicators in a snap but they are for big stock markets like NASDAQ, NYSE and the like.
You no longer have to compute for a company’s P/E, EPS, P/BV ratios etc. because some tools and market sources already provide them but you need to use 4 sources or more. Luckily, there is one app that provides just everything we need to analyze the fundamentals of a company.
I’m sharing here the tool I use for fundamental analysis.
It’s called Bing Finance. This is the newest tool from Microsoft although MSN Money is still available.
Bing Finance is an app and it’s automatically available if you use Windows 8 and higher. You can also download it for free if you have the latest version of Microsoft Silverlight in your Windows computer. You can also download it if you have any other Windows phone or tablet.
I made a one-minute video below to show you how easy it is to see all the important values you need in fundamental analysis.
In the video above, I checked out SMPH. Using this app you can determine if the stock you want to buy is cheap in terms of price to book value ratio, price to earnings ratio. Usually, (but not all cases) the lower the P/E and P/BV, the better. I follow a certain margin for these ratios. You can also see the company’s Revenue Growth, Net Margin, Return on Assets, Return on Equity, Net Income, Revenue, and Cash Reserves which can help you decide if the company is worth investing with right now and for a long term.
Want to invest on stocks? You really should start it because it’s very rewarding.
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22 thoughts on “How to use Fundamental Analysis to Pick Stocks to Buy”
Do you know any stockbroker? Or are you a stockbroker? Can you pls answer our survey questionnaire. It’s for our thesis. Thank you
Ms. Fehl, thank you for sharing your knowledge and encouraging others to invest.
hi fehl what can you comment about jfc now? its bloody . time to buy? or stop loss
I just bought it today actually. It’s FV is 215 and it’s 211 right now so it’s a buy. HOLD your shares if you have some and continue buying if you’re into INVESTING or into Magic 10 strategy.
Miss Fehl .very nice blog. Wanna ask a brand of cellphone that can have bing finance app? Latest nokea phone is possible?
Bing Finance changed its name into MSN Money after the recent update. The app is available for devices with Windows OS. In the mean time, just visit MSN Money website if you cannot download it.
tenkz mam Fehl for the very useful ang imformative!,,starting to learn a lot..more power and God Bless!
My pleasure to share posts about stock market investing. cheers!
Very nice article from lovely Fehl.
My pleasure 🙂
I just read several forums and blogs about fundamental analysis and they’re quite confusing. But this article made it clear for me. Thank you! you’re a Money Angel.
Yes, you’re not alone. That is why I shared the easiest ways here 🙂 Fundamental is what it is – the important basics. Cheers Yce! Always happy to see you here
Hello Ms Fel
What is your opinion on Jollibee JFC? It has a very high P/E ratio but still its stock price keep going up. Thank you
JFC is one of those stocks I’d likely invest permanently for long term because
1. it is the # Filipino food chain that’s also partnered with other food chains (Greenwhich, Chowking, Mang Inasal etc.)
2. Food is King
3. JFC chart from 2007 says it all
4. They are expanding global branches
5. It has huge Market Cap
6. It is immortal
7. The chart says it all
8. Again the chart says it all 🙂
Haha nice reply.
Do I wait for its price to go down to buy or start now using cost averaging? Is it even likely that it will ever go down? What are the indicators that it will keep going up.
If you’re investing for long term and PSA and you’re a passive investor, you just go for it and invest slowly without a care about emotions, speculations, predictions and the up and down assumption. But yes, obviously typhoons make them prices lower so take that chance. 🙂
Hello Ms. Fehl
Great blog as always! I have a question about stocks. Have you read Mark Minervini’s book: Trading like a stock market wizard? He uses a method he calls the “Specific Entry Point Analysis or SEPA” do you think this is useful for the PSE? or is it just for US stocks? I just want to know your opinion on this 🙂
Hi Stef! Nice to see you here. Nope, didn’t read his book yet but I’ve heard of him. He’s one of those successful stock traders who were known for their own strategies. As you trade, you learn a lot of things and if you get serious about it, you learn some patterns and tricks. Anyone can become the next Minervini or Sykes or Buffett.. Don’t forget me if it became you 🙂 Yes, SEPA concepts and strategies can also be applied to PSE stocks. But their specific tool can only be used for US Listed Stocks (as of now)
Hi! Good job for being so comprehensive and up to date! Anyway, i just wanted to ask if there’s also an iOS app similiar to bing finance? Thanks.
Thanks Agmi! Bing Finance is for Windows gadgets only as of now. You can use Bloomberg but it’s not as comprehensive as Bing Finance
This is very useful to me. Thank you for keep on updating this site(^_^)
Wow, Dannie thank you for being the first to comment 🙂 xo