Hey friends. My (Part I) post on the subject matter was several weeks ago. Today’s post concludes this discussion.

Hindsight is, of course, 20/20. A stock chart reflects what’s in the rear view mirror. To the degree past prevalent behavioral patterns toward stock buying and selling are repeated in the future, a stock chart may indeed provide some predictability of future stock prices. As discussed last time, my personal focus for investment decisions is to use available fundamental data coupled with management commentary toward a company’s fundamental outlook in order to define true value of a business and, from that, extract a true (fair) value per share of ownership — that is, a per share stock price. After doing the needed fundamental analysis, a stock chart can provide additional color toward, for example, setting the exact prices when buy or sell limit orders are placed.

In my view, the stock market cannot be consistently “timed.” No fundamental or technical approach can time unexpected “news” from a company — or even the market’s wild mood swings.

Good businesses should be undervalued when bought and held until let’s say “not undervalued” as opposed to saying until “fully” valued. Defining “fully” valued is more abstract than defining undervalued as fully valued encompasses a present value assignment to a future stream of earnings. Of course, the future is uncertain; thus “fully” is impossible to define beyond a good ballpark attempt. This “fundamental” analysis does not guarantee positive outcomes but is structured intuitively for rational success. I think even a person completely bent on the superiority of technical analysis (trading) might concur that fundamental analysis would be a less stressful approach since it doesn’t demand the same level of constant monitoring of stock price movements as does following chart patterns to determine buying and selling decisions.

See you next time.