Fundamental Analysis For Dummies, 2nd Edition

Chapter 1

Understanding Fundamental Analysis

IN THIS CHAPTER

Getting a solid overview of why fundamental analysis is worth your time

Stepping through some of the main concepts that are critical to fundamental analysis

Understanding the ways that fundamental analysis can fit into many investment strategies

Grasping how to use this book to further your understanding of fundamental analysis

Before you gulp down that neon-colored energy drink or pour yourself a bowl of super-sweetened cereal that looks like it was made by Willy Wonka himself, you probably do something first. It’s probably not a bad idea to take a glance at the nutrition label that spells out what ingredients are in the box.

You might not know what guar gum, guarana, or other ingredients that often show up on the labels of such processed foods are, but you can get a pretty good idea of what’s good for you and what’s not. If a bottle of apple juice, for instance, has a list of ingredients longer than your arm and is filled with stuff you can’t pronounce, you know you’re not drinking squeezed apples. Being aware of what’s in a food may or may not sway your decision to eat it, but at least you know what you’re putting into your body.

Companies and stocks, too, come with similar labels. All companies that are publicly traded, or that take investment money from the public, are required to disclose what they’re all about. Just as food processors must list all the ingredients that go into their products, companies must tell ...