A value investing strategy should include fundamental stock analysis; the process of analyzing company financial statements, products, management, competitors, markets, and economic environment to determine the value of its’ stock. Both historical and present data can be used, with the goal being to forecast how the stock will perform in the future.
The most common data used in fundamental research and analysis would be revenues, expenses, profits, earnings per share, assets, liabilities, book value, dividend, cash flow, and projected earnings growth rates. Key ratios would include the price/earning ratio (P/E), dividend yield, dividend payout ratio, return on equity, price to sales, and price to book value.
An investor using value investing strategies would evaluate the data and ratios in comparison to the universe of stocks available. The goal of the investor is to invest in those companies with the best prospects given the current price.
Investment Management and Planning
Using both fundamental analysis and technical analysis should be a part of investment management and planning. But only after carefully mapping out a diversification strategy and asset allocation management analysis.
| AAAMP Blog by Ken Faulkenberry | |
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Ken Faulkenberry earned an MBA from the University of Southern California (USC) Marshall School of Business with an emphasis in investments. Ken has 25 years of investment experience and is dedicated to helping people with self-directed investment management through the Arbor Investment Planner. His asset allocation strategies have an outstanding performance record. |
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