11 Tweets 10 reads Jun 19, 2024
Fundamental analysis can make you rich !
Lets find out
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Indeed Fundamental analysis is something which can create real wealth for you but their is one more factor ignored by majority of people which can do it faster and in a more efficient way.
Yes merging Technical analysis with Fundamental analysis.
Fundamentals will help you to stay with the Best sectors and companies with technical will tell you when is the right time to hop on the train and get out.
Fundamental analysis through Value evaluation tells us what is the fair value of the particular counter and the current price will tell us on the opportunity but when to get on it will be clear through Technical.
Additionally future growth opportunity combined with recent earnings will tell you on how the price might behave in few months and longer duration for coming years.
So, based on your intention you can pick best opportunities which may move very fast in short period of time or you can choose to stay with compounders.
Lets understand this through examples:
Alkyl Amine
After March 2020 results, PE stood around 20 with ROCE at 41% with a gap with historical PE also.
This shows that the current valuation are pretty cheap and a good quick move may unfold.
1400-1600 can be a price where market may find the price comfortable as per price. (Till the earnings grow)
Along with it Alkyl amine seeing growth in the company on both Revenue front and margin front which shows that it may even have a better year going forward. So, a growth opportunity as well.
But market is don't look too far in future so it will at max look at 1 year forward based on current earnings to calculate fair value and then adjust itself as per further earnings.
June 21 earnings were almost same so market kind of kept Fair price in same lines.
Now the next earnings Q2 FY21 showed a uptick giving market a sign that this year might be better.
Now this will update the fair price based on growth and current valuations through PE & Forward PE.
And the price moved to that price range and then now its around fair zones.
Time to wait for earnings going further.
Now fair price will get updated after Q3 but the gap between fair and current price will decide the move as if it is minute then might not move also and wait for further earnings.
But here ROCE is also bound to increase going forward so good gap is created.
Price kept on moving to fair price as the earnings kept on growing but in Q1 FY22 EPS dropped now if the drop is too much and market overvalued the stock then price can fall quick whereas if gap is small then it may wait.
EPS drop came which now brings the fair value down so price has to correct till things balance again and earnings starts to grow.
Its falling as the earnings normalized so, the price will get to new comfort fair zone till the value becomes better.
So, like this Value and growth works.
Along with it we can use technical to enter and exit also along with Fundamentals.
Note : Every sector has different way to work like broking sector don't get higher P/E so they move in P/E range instead of getting to new P/E range.
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Disclaimer: Everything shared above is for learning purpose only and nothing is in any form any advice.

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