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 Gold Customer
Joined: 12/2/2004
Posts: 28
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Greetings All
With July 28th's Worden Report in mind, where Sir Rocket Scientist presents his support for fundamentals, I present for your observation and analysis, HSR. an aerospace/defense co.
Year end earnings came out a couple hours after market's close. Fundamentals are very good, and earnings and revenue increased on an increase in sales. Technicals on the other hand are the complete opposite. Price is on the downside of a head and shoulders top with indicators failing.
It will be interesting and educational to watch what happens and see which has more influence. Techs or fundamentals.
Best Regards
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Not clear to me why fundamentals and technicals should be separated.
Sources from Valueline to IBD have show that stocks with good fundamentals tend to do better than those without.
There will always be the case where a financial powerhouse fails and
a stock with lousy fundamentals goes through the roof.
If you create watchlist of stocks with good fundamentals and use them for trading. It may bring nothing to the table but it certainly cant hurt.
Also your timeframe would come into play. I would think someone who
is in cash at the end of the day or holds stocks for 1 to 2 days would worry less about fundamentals.
Thanks
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Gold Customer
Joined: 12/2/2004
Posts: 28
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I agree diceman. I didn't mean to give the impression that I only rely on techs. There are those who believe only in techs but I will not invest or trade in a company unless there is actually something behind it. If my position goes south and for some reason I get caught in it, I like to know that there is something of substance behind the shares I own. My standards are not too strict, but for example,I will never buy shares of a company with negative BV no matter how good the techs look. It helps me get at least some sleep at night.
I find a stock like HSR interesting because here we have a chance to watch techs and funds square off. It will be interesting to see how it plays out.
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Registered User
Joined: 12/20/2005
Posts: 35
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Technicals are in my opinion most important. However, fundamentals also play a large role in selecting the right stocks. This has been extensively researched by William J. O'Neil and more information can be found online under his CANSLIM method.
I figure that funds do really in-depth research and will therefore understand more fundamentals then you can. However, you want to sort the speculative stocks making moves from traders and those being accumulated for the long-term by insitutions(and this is where fundamentals come in).
Additionally, if the fundamentals are good, the technical health of the chart will generally correspond(factoring in industry leaders etc).
Related to HSR:
The market is down, so it doesn't matter. However, the technical health of the chart is not as bad as you make it. It has been supported on the 50-dma by heavy volume. You will need to see some heavier breaking of 50-dma with failed rallies before you call this one.
Regards,
yweissberg
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Registered User
Joined: 3/25/2005
Posts: 67
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Would someone who is more into fundamentals suggest what types of minumum fundamental attributes would be required not to select the best fundamental qualities, but just to weed out the absolute junk?
I'd like to include some minimal fundamental requirements in my top level screen but don't want to overlook the "up and comers" that are experiencing some anomalous technical action. Things like - never have had earnings or sales, plus other factors that would lead one to believe that earnings or sales are not in the cards for the near future.
I realize this is a somewhat open-ended question, but any suggestions would be appreciated.
TIA,
JG
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Registered User
Joined: 1/28/2005
Posts: 6,049
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The "problem" when talking about fundamentals is there are two basic types of stocks.
Growth and Value.
In "What Works on Wall Street" James O' Shaughnessy found that a
combination of both types of screens worked best.
You would scan for both types and select stocks from both groups.
(diversification)
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Elements of value would be:
Low PE ratio
High dividend yield
Large cap
Strong Sales
Strong Cash flow
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Elements of growth would be:
PE ratio can be higher
Low or no dividend
Smaller to mid-cap
Strong earnings
Strong sales
High Relative strength
Thanks
diceman
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