What is the difference between fundamental and technical analysis?

Fundamental analysis studies a company's financials and business model to determine a true value. Technical analysis studies historical price movements and trading patterns to predict future movements. Amos Value relies exclusively on fundamental analysis.

How long does a fundamental analysis take?

A proper analysis of a company takes days to weeks. Annual reports are read, competitors are studied, and the market is analysed. It is methodical work, not a quick scan.

Can fundamental analysis predict share prices?

Not in the short term. Fundamental analysis gives a picture of a company's value, but the market can deviate from that value for a long time. Over the long term, share prices tend to follow the development of the underlying business.

What is the most important metric in fundamental analysis?

There is no single most important metric. A combination of return on equity, earnings per share, free cash flow, and debt levels gives a picture of the company's capacity to create value. But the analysis of the business model and competitive advantages is just as important as the numbers.

Glossary

Fundamental Analysis

The method of analysing a company's financials, business model, and competitive position to assess its true value. The foundation of conviction-based active management.

What it is

The company behind the share price

Fundamental analysis is a method for assessing a company's true value by studying its financial position, business model, competitive standing, and management quality. Unlike technical analysis, which focuses on price movements and trading volumes, fundamental analysis examines what actually drives a company's profitability. The aim is to determine whether a stock's current price reflects the company's true prospects.

Financial analysis: A review of the income statement, balance sheet, and cash flow statement. Revenue growth, margins, debt levels, and capital efficiency are all examined. Numbers always tell a story if you know what to look for.
Business model and competitive advantages: How does the company make money? What prevents competitors from taking market share? Is there an economic moat protecting profitability? These are the questions that determine whether growth is sustainable.
Valuation: The final step is putting a value on the business based on the analysis and comparing it to the current share price. If the price is lower than the estimated value, the company meets the margin of safety requirement.

In practice

Business analysis, not price chasing

A fundamentally driven process seeks companies whose underlying business justifies a price the market has not yet priced in, not companies that may rise for technical reasons. That requires more work. It requires patience. But it is also what creates the opportunity to buy quality at the right price.

“We chase quality, not hope.”

Amos Fonder

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Common questions about fundamental analysis

Related concepts

Glossary

ISK (Investment Savings Account)

The most common account type for fund savers in Sweden. You pay a flat-rate tax based on the account's value rather than capital gains tax on every sale.

Dividend

The portion of a company's profit paid out to shareholders. A dividend can be a sign of financial strength, but it is never the only thing to consider.

Index Fund

A fund that mechanically tracks a market index and holds all constituent companies proportionally. Low cost is the advantage. The absence of selection is the trade-off.

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