Chapter 8

Finding Companies Based on Their Fundamentals

IN THIS CHAPTER

Bullet Working your way down the ladder by assessing the market and the industry

Bullet Employing screens to discover swing trading candidates

Bullet Figuring out which method works for you

You can identify fundamentals-based trades (and technical-based trades for that matter) in two ways: by beginning with the security’s market and drilling down into the promising industries or by identifying candidates with promising characteristics on a grassroots level. One approach is top down, whereas the other is bottom up. Both ways have merit.

This chapter outlines how to identify promising candidates to buy using a fundamentally driven top-down or bottom-up approach — and how to determine which approach is right for you.

Seeing the Forest for the Trees: The Top-Down Approach

The top-down approach identifies promising swing trading candidates by starting with market analysis (looking at stock markets, commodity markets, currency markets, and the like). Then it drills down into specific industries before finally examining individual securities. This approach implicitly argues for greater weight on markets and industries over the merits ...

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