Every investor needs to do some analysis before deciding which company's shares to buy. There are two types of stock analysis in the capital market world, namely fundamental analysis and technical analysis.
Fundamental analysis is the right choice for a beginner investor to get to know the shape of a public company. Here are the two-step approach and the factors that are usually considered.
Stock Fundamental Analysis Approach
1. Top-down
The top-down approach looks at analyzing factors from a broad perspective to a narrower one. Investors examine macroeconomic conditions first, then the performance of leading industry sectors, until it narrows down to microeconomics aka company performance.
2. Bottom-up
In contrast, the bottom-up approach analyzes factors from a narrow to a broader perspective. Investors select a target company, look at its performance and overall industry sector, take a quick look at the macroeconomy, and then determine whether the company's stock is worth buying or not.
Stock Fundamental Analysis Factors
1. Macroeconomics
An economic expansion phase with accommodative government policies favors price increases, while a contraction phase with tight policies would lower them.
2. Industry Sector Performance
When an industry sector shows positive growth, the share prices of companies within that sector tend to increase. Otherwise, if the industry is experiencing a decline in performance, its share price will fall as well.
3. Sector Growth Prospects
Focus on sectors or companies with broad market opportunities, continuous technological innovation and high demand. Also pay attention to market competition and dominance.
4. Market Sentiment
The term refers to the collective attitude or perception of experts, analysts, and investors towards market conditions that affect stock price movements. Market sentiment can be quickly influenced by certain news or events.
5. Company's Performance
The share price of a company with a good level of profit and operational performance will certainly be higher than a company that is facing obstacles, rumors, or deficits.
Disclaimer: The content is made for educational purposes, not a recommendation to buy or sell a particular stock. PT KAF Sekuritas Indonesia is licensed and supervised by the Financial Services Authority (OJK).
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