Fundamental Analysis For Dummies, 3rd Edition
- Length: 400 pages
- Edition: 3
- Language: English
- Publisher: For Dummies
- Publication Date: 2023-05-02
- ISBN-10: 1394159692
- ISBN-13: 9781394159697
- Sales Rank: #1126093 (See Top 100 Books)
Become familiar with the key concepts of fundamental analysis and learn how to put them into action in the real world
Fundamental Analysis For Dummies is a valuable guide for investors who want to know the future. Okay, it’s not a crystal ball, but fundamental analysis will help you gain insight into a company’s staying power, as you evaluate revenue, expenses, assets, liabilities, competitors, management, interest rates, and other key business details. This Dummies resource makes it easy to get a handle on the underlying forces that affect the well-being of the economy, industry groups, and companies. You’ll explore the tools and strategies of fundamental analysis, and you’ll get easy-to-follow examples of how they’re used in relation to stock and commodity investing. This latest edition is fully updated with coverage of today’s investment landscape.
- Apply fundamental analysis techniques to your investments and increase your profits
- Learn strategies for making smart investments in stocks, currency, bonds, and commodities
- Harness the same tools used by Warren Buffett and other successful investors
- Protect your investments during an economic downturn
Investors looking to become proficient in using fundamental analysis will love this plain-English breakdown of all the must-know information.
Title Page Copyright Page Table of Contents Introduction About This Book Icons Used in This Book Beyond the Book Where to Go from Here Part 1 Getting Started with Fundamental Analysis Chapter 1 Understanding Fundamental Analysis Why Bother with Fundamental Analysis? Some of the real values of fundamental analysis Driving home an example Putting fundamental analysis to work Knowing what fundamentals to look for Knowing what you need Knowing the Tools of the Fundamental Analysis Trade Staying focused on the bottom line Sizing up what a company has to its name Burn baby burn: Cash burn Financial ratios: Your friend in making sense of a company Making Fundamental Analysis Work For You Using fundamentals as signals to buy or sell The perils of ignoring the fundamentals Using fundamental analysis as your guide Chapter 2 Getting Up to Speed with Fundamental Analysis What Is Fundamental Analysis? Going beyond betting Understanding how fundamental analysis works Who can perform fundamental analysis? Following the money using fundamentals Comparing Fundamental Analysis with Other Ways of Picking Investments How fundamental analysis stacks up against index investing Comparing fundamental analysis with technical analysis Putting Fundamental Analysis to Work For You How difficult is fundamental analysis? Do I need to be math wizard? Is fundamental analysis for you? The risks of fundamental analysis Making Money with Fundamental Analysis Putting a price tag on a stock or bond Being profitable by being a “contrarian” The Fundamental Analysis Toolbox Introducing the income statement Balance-sheet basics Getting the mojo of cash flows Familiarizing yourself with financial ratios (including the P-E) Chapter 3 Gaining an Upper Hand on Wall Street: Why Fundamental Analysis Gives Investors an Edge Better Investing with Fundamentals Picking stocks for fundamental reasons Uses for the index investor Assisting technical analysts Dooming your portfolio by paying too much Sitting through short-term volatility Relying on the Basic Info the Pros Use What is “the Warren Buffett Way”? Checking in on Graham and Dodd The origins of value investing Using fundamentals to see when a stock is priced right Figuring Out When to Buy or Sell a Stock Looking beyond the per-share price Seeing how a company’s fundamentals and its price may get out of alignment Avoiding overhyped “story stocks” Pairing buy-and-hold strategies with fundamental analysis Looking to the long term Patience isn’t always a virtue Chapter 4 Getting Your Hands on Fundamental Data Getting in Sync with the Fundamental Calendar Which companies must report their financials to the public? Kicking it all off: Earnings season Getting the earnings press release Bracing for the 10-Q Running through the 10-K Flipping through the annual report (if there is one) There’s no proxy like the proxy statement Getting up to Speed with the Basic Accounting and Math Operating activities: Finding smooth operators Investing activities: You have to spend money to make money Financing activities: Getting in tune with high finance Learning a key fundamental math skill: Percentage changes How to Get the Fundamental Data You Need Getting acquainted with the SEC’s database Step-by-step directions on accessing company fundamentals using EDGAR Pulling fundamental data from websites into spreadsheets Finding stocks’ dividend histories Getting stock-split information Part 2 Performing Fundamental Analysis Yourself Chapter 5 Analyzing a Company’s Profitability Using the Income Statement Digging Deep Into the Income Statement Taking in the Top Line: Revenue Breaking down a company’s revenue Keeping tabs on a company’s growth What are the company’s costs? Digging into costs What is the company’s bottom line? Calculating Profit Margins and Finding Out What They Mean Differences between the types of profit margins Gross profit margin Operating profit Net profit margin Finding out about earnings per share Comparing a Company’s Profit to Expectations The importance of investors’ expectations Comparing actual financial results with expectations Chapter 6 Measuring a Company’s Staying Power with the Balance Sheet Familiarizing Yourself With the Balance Sheet Separating your assets from your liabilities The most basic equation of business Understanding the Parts of the Balance Sheet Covering your bases with assets Getting in touch with a company’s liabilities Taking stock in a company’s equity Analyzing the Balance Sheet Sizing up the balance sheet with common-sizing Looking for trends using index-number analysis Appreciating working capital Analyzing here and now: The current ratio The Danger of Dilution How stock can be watered down Knowing how stock options can contribute to dilution Soaking up extra shares with buybacks Chapter 7 Tracking Cash with the Statement of Cash Flow Looking at the Cash-Flow Statement As a Fundamental Analyst Getting into the flow with cash flow Breaking the cash-flow statement into its key parts Examining a company’s cash flow from operations Depreciation and amortization Stock-based compensation expense Tax adjustments (also called deferred income tax benefit) Gains on divestitures Asset impairments or losses on sales of discontinued operations Accounts receivable Accounts payable Inventories Other Net cash provided by (used in) operating activities Considering a company’s cash from investments Getting into a company’s cash from financing activities How Investors May Be Fooled by Earnings, But Not by Cash Flow Understanding the Fundamentals of Free Cash Flow Calculating free cash flow Measuring a company’s cash-burn rate Chapter 8 Using Financial Ratios to Pinpoint Investments Using Financial Ratios to Find Out What’s Really Going on at a Company Which financial ratios you should know and how to use them Using ratios to grade management Return on equity Return on invested capital Checking up on a company’s efficiency Accounts receivable turnover Inventory turnover Accounts payable turnover Evaluating companies’ financial condition Debt to equity Quick ratio Interest coverage ratio Getting a handle on a company’s valuation Price-to-book ratio Dividend yield Dividend payout ratio Earnings yield Getting Familiar with the Price-to-Earnings Ratio How to calculate the P-E What a P-E tells you about a stock Putting the P-E into Perspective Taking the P-E to the next level: the PEG Evaluating the P-E of the entire market Chapter 9 Mining the Proxy Statement for Investment Clues Getting up to Speed with What the Proxy Statement Is Uncovering info in the proxy statement Getting your hands on the proxy Expanding Fundamental Analysis Beyond the Numbers Appreciating corporate governance Getting to know the board Stepping Through the Proxy Getting to know the board of directors Analyzing the independence of board members Delving into the board’s committees Finding potential conflicts between the board and the company Understanding how the board is paid Auditing the auditor Finding out about the other investors in a stock How Much Are We Paying You? Understanding Executive Compensation Figuring out how much executives earn Checking out the other perks executives receive Where the real money comes from: Options and restricted stock Comparing CEO pay to employee pay Checking In on Your Fellow Shareholders Finding out who else owns the stock What’s on other investors’ minds: Shareholder proposals Part 3 Making Money with Fundamental Analysis Chapter 10 Looking for Fundamental Reasons to Buy or Sell Looking For Buy Signals from the Fundamentals Finding companies that have staying power Liquidity: Cash is king Low debt loads Stable cash flows Looking for a company on the rise Betting on the brains behind the operation Minding the earnings yield Knowing When to Bail out of a Stock Breaking down some top reasons to say adios to a stock Why selling stocks everyone else wants can be profitable What Dividends Can Tell You about Buying or Selling a Stock Calculating the dividend yield Knowing if you’re going to get the dividend Making sure the company can afford the dividend Using dividends to put a price tag on a company Chapter 11 Finding a Right Price for a Stock Using Discounted Cash Flow How to Stop Guessing How Much a Company is Worth How minding intrinsic value can help you Getting up to speed for the discounted cash flow A company’s cash flow Understanding the time value of money Performing a Discounted Cash Flow Analysis Starting out with free cash flow Getting the company’s shares outstanding Estimating the company’s intermediate-term growth Going way out: Forecasting long-term growth Measuring the discount rate Taking a cue from bond investors Using the Capital Asset Pricing Model (CAPM) Putting it all together Forecasting the cash flows for the first five years Forecasting the cash flows for years five and beyond Discounting all the cash flows to current value Comparing intrinsic value to market value Making the Discounted Cash Flow Analysis Work for You Websites to help you do a DCF without all the math Knowing the limitations of the DCF analysis Chapter 12 Using the Annual Report (10-K) to See What a Company Is Worth Familiarizing Yourself with the Annual Report First, a word on the difference between the annual report and the 10-K Introducing the 10-K Highlighting the annual report to shareholders Getting your hands on the 10-K Dissecting the main sections of the annual report Business Risk factors Unresolved staff comments Properties Legal proceedings Executive officers Market for registrant’s common equity Selected financial data Management’s discussion and analysis Quantitative and qualitative disclosures about market risk Financial statements and supplementary data Changes in and disagreements with accountants Controls and procedures Part III: Corporate governance Exhibits and financial statement schedules Executive sign-off Auditor opinion How to Tackle a Massive Annual Report Starting from the bottom up: The footnotes Assets and liabilities that aren’t on the balance sheet Understanding pension liabilities Changes to accounting and inventory Debt repayment timeline Effects of tax rates See what management has to say for itself Forward-looking information An examination of the real risks Comparing a company’s promises with reality Being aware of legal skirmishes Paying close attention to amended 10-Ks Examining What the Auditor’s Opinion Means For Investors Paying attention to tiffs between a company and its auditors Understanding the importance of financial controls Reading the audit opinion Chapter 13 Analyzing a Company’s Public Comments and Statements Using Analyst Conference Calls as a Source of Fundamental Information Understanding the purpose of analyst conference calls The dimming guiding light of guidance Unique things to look for in analyst conference calls How to access the analyst conference calls Getting in Tune with Fundamental Information from the Media Bolstering your fundamental analysis with media reports What fundamental analysts look for in the media When to be skeptical of executives’ claims in the media Knowing When to Pay Attention at Shareholders’ Meetings What to expect during a company’s annual meeting Putting the “fun” in fundamental analysis Chapter 14 Gleaning from the Fundamental Analysis Done by Others Reading Analysts’ Reports for Fundamental Analysis Clues Why reading analysts’ reports can be worth your time Understanding the types of firms that put out stock research Broker research Independent research Keying into the main types of analyst research How to read between the lines of an analyst report Getting your hands on analyst reports Interpreting Credit-Rating Agencies’ Reports For Fundamental Analysis The role of reports issued by credit-rating agencies Getting your hands on the credit rating Knowing when a company’s credit rating is suspect Finding Fundamental Data about Companies Using Social Investing The origins of social investing Why it might be worth paying attention to nonprofessionals How to plug into social networking Following the moves of big-time investors Finding out who a company’s biggest investors are Following famous investors moves using Morningstar Chapter 15 Performing “Top-Down” Fundamental Analysis Broadening Out Fundamental Analysis to Include Monitoring the Economy How the economy has an overriding effect on a company Ways the economy can alter your fundamental analysis How interest rates can alter what companies are worth Analyzing the Key Measures of the Economy’s Health Being aware of the business cycle Using government statistics to track the economy’s movements Getting a Jump on the Future Using Leading Economic Indicators Paying attention to the Conference Board Leading Economic Index Using the stock market as your economic early warning system Part 4 Getting Advanced with Fundamental Analysis Chapter 16 Digging into an Industry’s Fundamentals Realizing How a Company’s Industry Can Influence Its Value What’s in an industry? Following the ups and downs of industries How to Track How Sectors Are Doing Keeping tabs on a sectors’ fundamentals Tracking the stock performances of sectors Using exchange-traded funds to monitor sectors and industries Adding Industry Analysis to Your Fundamental Approach Sizing up a company’s financials relative to its industry’s Find out who a company’s competitors are Considering industry-specific data Taking stock of raw material costs It’s mine! Paying attention to market share Chapter 17 Pinpointing Trends Using Fundamental Analysis Understanding Why to Consider Trends When trends can be very telling about a company’s future Attempting to forecast the future using trends Attempting to forecast the future using index-number analysis Applying moving averages to fundamental analysis Finding Trends in Insider Trading Information When a CEO is bullish, should you be, too? Paying attention to when a company buys its own stock Watching when the insiders are selling How to track insider selling Designing Screens to Pinpoint Companies Examples of what screening can tell you Step-by-step instructions on building a sample screen Chapter 18 Avoiding Investment Blowups with Fundamental Analysis Uncovering the Dangers of Not Using Fundamental Analysis Why investing in individual companies is risky business Ignore the fundamentals at your own risk Why digging out of a hole is so difficult Avoiding bubbles and manias Price-to-earnings ratios getting inflated Dividend yields sagging Price-to-book ratios skyrocketing Profitability becomes meaningless Finding and Avoiding Financial Red Flags A real-life pattern for suit-worthy shenanigans The rationale behind shenanigans Red flags that signal shenanigans Swelling accounts receivable Overvalued intangible assets Massive big-bath and “one-time” charges Low “quality” earnings Increasing borrowing, or leverage Chapter 19 Marrying Fundamental Analysis with Technical Analysis Understanding Technical Analysis Reading the stock price charts What technical analysts are looking for in the charts How technical analysis differs from fundamental analysis Blending Fundamental and Technical Analysis Using stock prices as your early-warning system Looking up historical prices The Primary Tools Used by Technical Analysts Getting into the groove with moving averages Keeping an eye on trading volume The ABC’s of Beta The long and short of short interest Keeping a Close Eye on Options Understanding the types of options Paying attention to put and call price levels Watching the put-to-call ratio Using the market’s fear gauge: The Vix Applying Technical Analysis Techniques to Fundamental Analysis Giving fundamental data the technical analysis treatment Following the momentum of fundamentals Part 5 The Part of Tens Chapter 20 Ten Things to Look at When Analyzing a Company Measuring How Much of a Company’s Earnings Are “Real” Considering How Much Cash the Company Has Making Sure You Don’t Overpay Evaluating the Management Team and Board Members Examining the Company’s Track Record of Paying Dividends Comparing the Company’s Promises with What It Delivers Keeping a Close Eye on Industry Changes Understanding Saturation: Knowing When a Company Gets Too Big Avoiding Blinders: Watching the Competition Watching Out When a Company Gets Overly Confident Chapter 21 Ten Things Fundamental Analysis Cannot Do Ensure You Buy Stocks At The Right Time Guarantee You’ll Make Money Save You Time When Picking Stocks Reduce Your Investing Costs Protect You from Every Fraud Easily Diversify Your Risk Over Many Investments Predict the Future Make You the Next Warren Buffett Protect You from Your Own Biases Overcome the Danger of Thinking You’re Always Right How to measure your portfolio’s return How to measure your portfolio’s risk Sizing up your portfolio’s risk and return Index EULA
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