In the battle of technical vs. fundamental analysis, the best tack may be a combination

By Money Matters Editors

In the battle of technical vs. fundamental analysis, the best tack may be a combination.

Many investors in stocks know that there are numerous ways to evaluate the suitability of a stock. Two major methodological camps are fundamental analysts and technical analysts.

Each camp is broad and diverse, with teams of analytical brainpower - not to mention tens of millions of dollars in Wall Street research money - dedicated to each methodology.

Fundamental analysts concentrate on revenue, earnings, cash flow, revenue per employee, same store sales, book value, operating expenses, long-term debt and other balance sheet and income statement data etc. Fundamental analysts argue that performance data determines a stock’s price, i.e. that very little can be deduced from a stock’s price absent information on fundamentals.

Technical analysts, meanwhile, concentrate on clues provided by a stock’s price, emphasizing such indicators as chart formation, the 50-day and 200-day moving averages, its relative strength indicator, the MACD histogram, stochastics, and Bollinger Bands, among other technical data. Technical analysts argue that all public information about a company’s performance as already been priced in to a stock.



A synthesis

What’s the evaluation method preferred by Money Matters Editors? Our analysts and economists are eclectic: they use both fundamental and technical indicators, combine them with several proprietary variables, to arrive at what we believe is an informed, independent recommendation of a stock, sector, or market.

So when you see a Stock Review, Sector Analysis, or Market Analysis on Money Matters, know that it doesn’t favor a fundamental approach or technical analysis, but rather draws on both, and other variables, to provide a comprehensive look at a respective asset/investment instrument.