Basic Stock Fundamental Analysis

As an investment instrument, the basic fundamental analysis of stock can indeed be viewed from different sides. Shares are traded every day on the stock market so the price will continue to change depending on the market sentiment. Shares, which in essence is a sign of ownership of an enterprise (company), can be viewed as a commodity. A fairly wide range of trade each day allows us to profit by buying and selling at the right time. If we look from this side, we position ourselves as a trader. No doubt many traders who managed to get the advantage of using this way.

But if we want to be a purist and view the stock as ownership of a business, so before you start investing in stocks, we should know how a company's business is run. If we can take advantage of trading, why do we bother doing fundamental analysis of a stock? After all, by observing the chart, we can make a good analysis as well.

One thing to remember, in the short term, the market is a voting machine, whereas in the long run, the market is a weighing machine (Weighing Machine). What does he mean?

In the short term, market participants psychological conditions will change often. Every day the news and information that came flooding will stir the emotions of the traders and affect their views on the prospects of a stock. Experienced traders will be able to take advantage of the psychological condition of the perpetrators of this market and earn profits. Because in the short term, stock prices will vary according to the behavior of the trader. Therefore, in the short term is called a voting machine.

What happens in the long run. Any extreme stock price volatility, in the end the performance of the company behind it will make the gap between the value of companies with stock prices traded on the stock. As a result, stock prices inevitably will follow the performance of the company. Therefore, in the long run, the market is called the Weighing machine.

If the basic us in investing in stocks is to analyze the business behind it, then we are called to do fundamental analysis. Fundamental analysis itself is actually very broad. A business can not help being influenced by external conditions (economic conditions, levels of competition, government regulations, and the phase of an industry where the company is located).

Even so, a well-managed company will be able to anticipate changes in external conditions. What was done by a company to face a variety of weather in Luat company will be reflected in the strategies that they employ. How do we know? One source that is reliable enough in their annual reports. In the annual report, management will report a lot of things about the company, ranging from performance, challenges, strategies to expand its business, and how its financial condition. In short, we can begin to understand a business by reading the annual report.