Stock Investing-Fundamental Analysis and its Shortcomings

Stock Investing-Fundamental Analysis and its Shortcomings

What is Fundamental Analysis

Fundamental analysis is an analysis of a stock or security from a financial point of view using financial statements. Fundamental analysis is commonly used in conjunction with technical analysis for investors and traders alike to estimate where the stock price is headed.

How does it help

Fundamental analysis allows people involved in the markets to see how well a company is performing in terms of their profitability. The figures of how much debt they have and where, their profit generation, as well as their equity are reported. 

Growth vs Value 

When performing fundamental analysis there is no one-size-fits all model of what can be seen as good or bad for a company. The obvious answer would be that profitability is of utmost importance and profitable companies can be counted on for good returns. 

However, when looking at growth companies traditionally they are at a net loss due to a large amount of their operations being funded by debt. This is because shareholders are willing to invest their money when they believe in the product or company. In the past these companies have yielded large returns (AMD for example).

Value companies such as Walmart and Apple will generally yield good returns as they have great financial returns and are extremely profitable. The returns, however, will be closer to small consistent returns than the potential large exponential returns of some successful growth companies.

Greed in the Market

Fundamental analysis is always key when looking at where to invest and trade your money. But when there is greed in the market, fundamental analysis is often ignored. This is because everyone is assuming almost every stock is going to go up and be profitable. When everyone makes assumptions that the market is strong, there will be more risks taken. Traders/investors will look to add money based on things such as hype and headlines rather than actual fundamental analysis. 

This was common during the COVID-19 pandemic when companies that had little to no fundamental qualities of a good investment, yielded traders millions of dollars. This was based on retail traders coming together to stir hype against hedge funds who were short selling these companies (GME, AMC etc.).


Fundamental analysis can be very powerful and useful when used in conjunction with other types of analysis. It is however, important to be aware that it is not the end-all be-all and can mean more for certain companies than others. The market does not give anyone a clear indication of where it will go so it is important to get corroboration from many different avenues.

This fall on November 12th we will have the Wealth Hacker Conference. There will be a Stock Hacker Academy course presented that can potentially help you learn how to cash flow with stock hacking the same way me and Erwin have been able to!

And don’t forget, those who never stop learning, never truly lose. Let’s win together.  You can also find more on how to generate cashflow from trading stock options here

Your Fellow Stock Hackers

Erwin and Cherry 

What do I do with this information?

Continue to educate yourself by joining our mailing list and receive free content along the way.  For those who would like to take action, we have premium (paid) products and services.   With the stock market and the general economy at crossroads, it is time to get educated so that you are ready for the next opportunity and/mitigate against the next potential dip in the stock market. 

That’s all for now.

Happy trading and investing,

Your fellow Stock Hackers,

🍒Cherry & Erwin

P.S. The market dropped almost 20% between January and June this year. Many are worried it could keep going. Will the market crash? What are you supposed to do if it does crash? We unpack all of these questions in our latest FREE report, “What to do if the Market Crashes in 2022.” Download your free copy now!

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