Fundamental Analysis For Dummies, 2nd Edition

Chapter 10

Looking for Fundamental Reasons to Buy or Sell

IN THIS CHAPTER

Exploring fundamental indicators that give you some insights into an investment’s attractiveness

Understanding how to determine which companies have resources to endure tough times

Uncovering warning signals of when might be a good time to consider selling

Considering the importance of dividends and what they tell you about the value of a stock

Wouldn’t it be nice if financial publications and websites put a big red dot next to the stocks that are going to fall in the next six months and a green dot next to the ones that are going to rise? Investing would be so simple.

Investing is not that easy. Deciding whether to buy or sell a stock — if you’re a fundamental analyst — requires more thought. There are dozens, if not more variables, that go into this very important decision. You not only need to size up the health of the business and evaluate whether it has enough cash to survive, but also consider whether the stock price is attractive.

Fundamental analysis may not be a crystal ball. Cheap stocks can get cheaper and pricey stocks can soar. But fundamental analysis can at least give you some guidance on buying and selling so you can spot stocks that are on sale or those that are wildly overvalued.

This section of the book explores some of the aspects of fundamental analysis that can help you intelligently approach investing with your eyes wide open and your calculator fired up. You’ll discover how to apply ...