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Fundamentals, having fun
with da mentals !

Fundamentals can be very boring and time consuming, it is not the first place to do your studies , its the last ! as you go through these pages you will understand what i mean.

Only spend time with the facts and figures after you have found the group that is ready and have found the leaders in that group or groups. To many people spend to much time with the facts and figures and not with timing, you will hear me say many times its all about timing.

The only reason we will do some fundamentals is after we find the leaders in the groups we then want to focus our money on the best possible stocks and load up on that one , the best stocks are the ones with the best earnings, as we will see soon.

The main reason investors invest in stocks is to share in the flow of earnings and the net worth of the company, however the stock price can become over valued or under valued in the short term in relationship to its earnings.

There are times the stock market is trading for a long time above the historical level of its normal p/e ratio or below its historical normal p/e ratio , ( p/e = price/per earnings )

This is considered under valued or overvalued stocks the average p/e ratio for many years has been 15.

In 1995 to 2000 the average p/e was near 30 nearly double normal and so something had to happen either the earnings had to increase dramatically or the stock would have to come down in price to that normal fundamentals level , well quess what happened ? The stocks came tumbling down and they did fall by 50% in the next 2 years .

To calculate the p/e ratio just simply divide the prior 12 months earnings by the price of the stock ( example : stock is trading at 60.00 and the earnings are 3.00 just divide 60.00 by 3.00 = 20 thats the p/e ratio 20 )

Thats to see if the stock is considered under valued or over valued , however i do not put to much emphasis on this... unless where in a extreme market of over or under value then its good to get ready for a major correction like in 1973,1986 and 2000 !

The most important of course is earnings and thats all we look at for our fundamentals research ,we have the stocks and they broke out of there trend and all we want to do is to make a more intelligent decision on what stock to load up on.

We can do this relatively easy by the software that we use ,the same sofware that we use for the charts, yes, there is so much we can see with that software... its all just a click away ! We can look at insider buying or selling , like the stock that Warren Buffet just bought a billion dollars worth , would you like to know that one ? its moving now 12-15-06 ( subscribers only )

The way, we look at the earnings is important and you can find that out if you subscribe . Thanks for looking !