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Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.

Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.

Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.

Writer's pictureSummit Puri

Fundamental and Technical Analyses

As a prelude to this discussion, I wrote about intrinsic and market value last week in the Investment Corner. This is a rare instance, so I recommend reading this post on fundamental and technical analyses and then further exploring intrinsic and market value with this post (Intrinsic vs. Market Price/Value).

 

Whatever path you’ve taken to understand security evaluation, hopefully, you will walk away with more information to guide your investment decisions.

 

Fundamental Analyses vs. Technical Analysis

Fundamental analyses evaluate a security by attempting to measure the intrinsic value (see the above post for more detail on intrinsic value). On the other hand, technical analysis focuses on statistical trends to find pattern recognition against moving day averages (time series dependent).

 

Both analyses are valuable tools professional data nerds—I mean, investment professionals—use to determine investment selection. Our research team at Whitaker-Myers Wealth Managers spends countless hours conducting the necessary research to provide our clients with the best portfolio options. To understand these methodologies further, let’s explore each one at a high level.

 

Fundamental Analyses

Fundamental Analyses are the primary tools business owners use to determine what a company is worth. This is where accountants and finance leaders review the organization's books with a fine-toothed comb. Reviewing balance sheets, statements of cash flows, and many other documents provide the necessary detail to determine ‘value.’ Value is a broad classification, but those combing through this data traditionally look for these key metrics (we’ll explore each of these in detail in future posts):

 

  • Price to earnings ratio (P/E)

  • Earnings per share (EPS)

  • Projected growth rate (PEGR) or Projected growth (PEG)

  • Free Cash flow (FCF)

  • Price to book ratio (P/B)

  • Dividend Payout ratio (DPR)

  • Price to sales (P/S)

  • Debt to equity ratio (D/E)

  • Return on equity (ROE)

  • Return on Assets (ROA)

  • Qualitative metrics

  • Macroeconomic and microeconomic variable

  • Company sentiment (influenced by news as well)

 

You may be familiar with many of these, but some you may not be familiar with. Don’t worry; we’ll have deep dives into each of these soon.  As you can imagine, in our current technologically connected lives, there are components of the fundamental analysis metrics that have value but do not appear in the abovementioned metrics. Think about a business with goodwill or intellectual property; how do we value those? Goodwill and Intellectual property are difficult to quantify since they are intangible in terms of assets or liabilities. However, these are essential variables when considering the value of a company.


Technical Analysis

A technical analysis uses mathematical calculations against time variables and other factors to create averages and trends. If you’ve ever heard an advisor talk about day-moving averages, this is part of a technical analysis. Different technical analysis components include historical data to support pricing trends and patterns, volume analyses, momentum tracking, support and resistance analysis, defined relative strength, and many other stratified calculations providing varying levels of granularity. This is an in-depth analysis looking at the correlation between historical events and security price fluctuations. This data is used to predict where the security may move in the near future.

 

Many complicated mathematical and graphical models are combined to create these charts. The traditional ‘candle stick’ graph (shown below in Figure 1) is frequently used in these analyses. These analysts use various candle stick patterns as they formulate their projections.

 

Figure 1


 

What is right for you?

Depending on where you are in your baby steps or investment journey, your financial advisor may recommend utilizing some of these tools to align your strategic goals. Our team at Whitaker-Myers Wealth Managers has the tools and knowledge to walk with you on your journey.

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Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.

Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.

Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.

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