Stock Profits: Getting to the Core—New Fundamentals for a New Age

isolate your analysis to only the major core adjustments, it simpli-

fies the process.

A larger question, but one of equal importance, is how to use

fundamental volatility as a measurement of market risk. For the

long-term orientation of the fundamental investor, market risk has

always posed a dilemma because short-term volatility cannot be ig-

nored or discounted entirely. We have to accept price volatility as a

symptom of potentially troubling fundamental problems (such as

high core earnings adjustments) as a possible cause. At the very least,

we can use price volatility as one point of entry to a more in-depth

analysis of fundamental trends.

Endnotes ...