Fundamental Analysis - Medium To Long Term Buy & Hold Stocks Trading Strategy
Fundamental analysis? What's that? Sounds too complicated?
Relax, it is easier than you think. You don't need to perform an in depth analysis. You only need to know a few fundamental company information to see if the stock is right for buy & hold purposes.
Together with technical analysis, I have made some money by using the following criteria to search stocks & also the stocks I was interested in.
The company earnings growth rate of greater or equal to 20% for the last 3 years.
Earning per share
EPS. This is the company earnings for the past 12 months divided by the number of shares that company has outstanding.
I look for a consistent increase of around 15 to 20% earnings per share every year.
The forward or forecast growth earning per share also need to be 15-20%
This is your most important part of fundamental analysis.
From share holder and most investor's view earnings per share growth are the most important factor. Share price react violently to any surprise in EPS when earning report is out.
This is payments made by a corporation to its shareholders. The amount you'll receive is based on the number of shares you own.
Look for companies with
as well. This is normally a sign of good company and that it will be able not just to continue paying a dividend, but also a rising dividend.
Company Revenue (Sales) Growth rate need to be at least 10% per year
This is the measure of short term financial condition. It measures whether the company can pay their bills.
This equates to Current Asset divided by Short Term Liability. I look for a figure of 1 or greater.
Net Profit Margin
This need to be 10% or more.
Price/Earnings To Growth ratio. It determines the relative trade-off between the price of a stock, the earnings generated per share (EPS), and the company's expected future growth.
This needs to be less than 1.
PEG ratio of less than 1 indicates a stock is undervalue & overvalue if the PEG ratio is greater than 1
Analyzing Recommended Stocks
If some one recommend you to buy & hold a particular stock, you need to do the above basic fundamental analysis first. You 'll be surprised to see how many pass & fail the test. The one that I analyzed and passed the test using the basic fundamental analysis & technical analysis had made me very happy!
Tools for filtering /analyzing stocks
I use www.advfn.com
to analyze it. You need to register with them to use this free tool. It's a great site offering a lot of free research materials, including a filter to search the stock using the above criteria. Pick the required stock screener from drop down menu under Charts & Research.
You can also use this tool to analyze the stock you are interested.
There are other free & pay for sites which are quite good for filtering stocks to trade.
Click on stock screener for more infos.
Value Investing Approach
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