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Finance: What is Fundamental Analysis? 7 Views


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Description:

A fundamental analyst is basically the opposite of a chartist - they care about a company's earnings, profit margins, gross rates, etc.

Language:
English Language

Transcript

00:00

Finance a la shmoop what's the difference between a chartist and a

00:06

fundamental analyst? okay here's Bob the trader no relation to Bob the Builder [Bob the builder appears]

00:12

that is literally his name Bob the trader his parents were bearish on

00:16

social security ever really being there for him so you know Bob the trader was

00:22

their social security sort of how things work in China today they bet the ranch [Ranch appears]

00:26

on Bob and Bob makes bank by trading stocks for silverman slacks Partners on

00:32

Wall Street he makes ten million bucks a year by

00:35

looking at charts and trading patterns like ascending triangles and double [Trading patterns appear on sheets of paper]

00:40

bottoms we cannot lie and triple top like that obB is a chartist and really

00:46

kind of an astrologist too and well just kind of weird but he's rich so people [Bob carrying stacks of money]

00:51

call him eccentric well Bob the trader is basically the opposite of a

00:56

fundamental analyst how so well Bob the trader knows and cares almost nothing

01:01

about the companies behind the stocks he trades, he doesn't know what they do for

01:05

a living or what their earnings are or what they manufacture or what their

01:10

profit margins are or what their gross rates are or who runs them or even how

01:16

you spell their corporate name.... well Bob just knows that this week the

01:21

stock appears to be starting a major break out and he wants to bet big by [Break out appears on grading patterns]

01:26

being long the stock either by owning it or by owning call options with a strike

01:31

price right up around here okay so that's Bob the trader all right now meet

01:35

Izzy the investor and yep you guessed it that's her real name would have been [Isabel as a baby with her parents]

01:39

Isabel but well same deal on the parents and the social security bearishness

01:43

thing..Izzy the investor is her parents social security she too makes ten

01:48

million dollars a year on Wall Street only she makes like three trades a year

01:53

Bob the trader makes that many in an hour

01:55

Izzy the investor is a fundamental analyst or a fundamental investor so she

02:00

makes big bets on a concentrated handful of stocks which then represent the

02:06

investment portfolio she manages and is evaluated again it's like relative to

02:10

some index like the S&P500 five hundred so what does a fundamental

02:13

analyst care about other than having fund she looks at everything that

02:19

comprises real and tangible or meaningful value in a company like all [Man discussing fundamental analysts]

02:24

the stuff we described earlier mainly well, the cash it produces or will

02:28

produce in the future like if she's paying a hundred bucks share for a stock

02:32

what financial returns or value do you get for that stock? ten bucks in real

02:37

cash earnings a six percent dividend how our profit margins are they trending up

02:42

or down? what about revenue growth our revenues

02:44

in fact growing and what about management do they get the biz or are

02:48

they just in the rolls for a you know investment bank or golf well how does

02:52

the company manage its cash does it buy back stock how well does their product

02:56

mesh with the future like are they making operating systems for robots or

03:01

paper and pulp so yeah that's what a fundamental analyst does they pick [Stock transfers to Izzy]

03:06

stocks using the fundamentals that make up the value of the stock and they really

03:11

don't care a whole lot about the charts and yes the key thing is that they get

03:16

down to the fundamentals of what makes a company tick especially if that company [Izzy sitting in office and clock ticks]

03:20

makes clocks for a living

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