Horti-Business Management (2+0)

1. Fundamental analysis

• Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings, and management. When analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use; bottom up analysis and top down analysis. The term is used to distinguish such analysis from other types of investment analysis, such as quantitative analysis and technical analysis.
• It is performed on historical and present data, but with the goal of making financial forecasts. It is based on the notion that the underlying supply/demand conditions in a given market ultimately determine price. The market may be “shocked” by new information; resulting in traders’ changing their assessments of what the equilibrium price will be in the future. Fundamental analysis attempts to both anticipate changes in supply/demand information, and to evaluate the direction and range of price movement resulting from new information.
Strengths of Fundamental Analysis

• Long-term Trends
• Value Spotting
• Business acumen
• Knowing who's who
Weaknesses of Fundamental Analysis

• Time Constraints
• Industry/Company Specific
• Subjectivity
• Analyst Bias
• Definition of Fair Value