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Fundamental Analysis

investment strategy
Definition
Evaluating a security's intrinsic value by analyzing financial statements, industry conditions, management quality, and economic factors.

Explanation

Fundamental analysis, pioneered by Benjamin Graham and David Dodd in their 1934 book 'Security Analysis,' seeks to determine what a stock is truly worth, independent of its current market price. The approach examines: revenue growth, profit margins, return on capital, competitive advantages (moat), management quality, balance sheet strength, and valuation relative to peers and history. When intrinsic value exceeds market price, the stock is a 'buy.' Fundamental analysis contrasts with technical analysis (which focuses on price patterns and trading volume).

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