Originally published on Blossom on April 19th, 2024 Please find retrospective commentary at the end. Without a doubt, the most important step to evaluating the direction and magnitude of a companyās stock price over an investor TIME period is fundamental analysis. Sorry, technical analysts and order flow analysts. Thatās not to say those approaches donāt have incredibly valuable insight.....even over the long-term and investor TIME periods. But, fundamental analysis requires a deep dive into the balance sheet for an understanding of leverage ratios (debt levels), growth rates in revenue, gross and net profit margins, free cash flows, share issuance, executive compensation, revenue per employee, price to sales, price to book, capital expenditure plans, on and on, etc. Now once we have all these indicators, we need to analyze the company trend in these indicators over TIME, relative to competitors, relative to other industries, or not relative to anything if a company doesnāt have a long enough history. NOW...we also have to keep in mind these ratios are constantly changing.....so we need to monitor these as well. @bradleytalksmoney on Blossom made an insightful observation the other day when doing a fundamental exercise on investing in Blossom and arriving at the conclusion that itās just too early to be able to fundamentally handicap the company AND THAT YOU ARE REALLY MAKING A BET ON THE LEADERSHIP TEAM TO EXECUTE. And of course, we ALL want Max and the Blossom team to knock it out of the park! Congratulations again to their amazing work!Ā This observation is so true.Ā For all companies and their corresponding stock prices, a longer term INVESTOR (as defined by KTS #11) is really just buying into the capabilities, the vision, and the talent of the leadership team. If theyāre not good, the company will suffer setbacks or even fail, and the stock price will follow. Conversely, a management team that can execute on plans to grow the company will see its stock price rise. And @stocksonthego2.0 is exactly right in always making sure you know what you own from a fundamental perspective. Oh geez..fundamental analysis is exhausting and sounds like A LOT OF WORK!Ā It is. And thereās no escaping this.Ā You really need to put the TIME in to understand companies ā especially once you own them! You canāt do as Old Charlie used to say, āBuy a few great companies and just sit on your ass!ā without staying on top of the fundamentals. After all, Ole Charlie/Warren frequently reversed course on huge investments theyāve made based on an initial fundamental analysis only to not sit on their ass and quickly scale down in a big way or just plain exit when the fundamentals change (e.g. Wells Fargo, U.S. Bank, BYD, on and on). BUT ā I have a Cliff Notes version for you that gets you close and takes into account a lot of it. Or for younger generations that donāt know what Cliff Notes even are, I have a Chegg or probably now, a ChatGPT easy button (pronounced today with a valley girl dialect ābutt-inā). OK, OK, I couldnāt resist.Ā RISING ANNUAL EARNINGS ESTIMATES FOR INVESTORS.Ā There it is. Wall Street wants you to think the financial world is so complicated with endless computer screens and complex algorithms, jargon terms that make them sound like guru experts, premiums, durations, volatility, flows, accreditation, derivatives, risk tolerance, 60:40 models, allocation levels, etc. They want you to think it is overly complicated..... because itās not. Think about that. They want you in the ocean, but without any life preserver so they can use their predatory behaviors like sharks. The reality is that there are a lot of dummies dominating that industry (not to disparage the several brilliant ones that I have learned to follow and read with the privilege to ride along ā like a kid chasing an autograph). But thereās a lot of wealthy people tied to Wall Street that fell into dumb luck and consider themselves experts. Donāt buy it. If you really believe them to be authorities, then you are just taking the bait. Thatās the mysterious world they want you to think it is.Ā So recommended exercise for over this weekend: jot down the tickers for each of your holdings (spreadsheet is nice for electronic archival). Then, look back at the TREND IN ANNUAL earningsĀ estimates over the past 3 years ā PROVE TO YOURSELF that THE TREND IN EARNINGS ESTIMATES is HIGHLY CORRELATED to stock price movements. What you will see is that companies whose earnings per share rises, their stock price rises. If the earnings estimate trend is flat, then so is the stock price. If the earnings estimates are falling, so is the stock price. WOW! Really? Yes, really. In the end, it all is quite rational (despite periods of irrational markets or unloved/overloved stocks). You will see this correlation in virtually all your stocks and in virtually all stocks in the entire universe. So for INVESTORS, always know the direction of the change in ANNUAL earnings estimates.Ā More coming on the trends in earnings estimates. Retrospective commentary - October 9th 2026 Beskar Capital giving Bradley a shoutout when he says something that makes sense! š¤£ We recently built a fundamental report card for our members ā a new tool to assess the overall fundamental strength of their holdings. Anyone who mentions āReport Cardā in the comments will receive a private message with instructions to receive a special discount on our website membership. ššø Fundamental analysis has been relegated to the minor leagues in terms of consideration and importance in the investing social space. Exactly what we would expect during the meltup phase of the real estate/banking crisis cycle. Multi-year periods of easy credit will do that. But fundamental analysis is slowly beginning to come back into vogue as the credit tightens. As we said in the original publication of this KTS: thereās no escaping it. The cracks are starting to show. You can feel it. The environment isnāt as rosy as it used to be, and youāre starting to feel like you need more than a few posts from popular finfluencers to build conviction and buy a stock. You need something more solid. And you know it. KTS #65 is a mandatory re-read if you want to build a rocksolid foundation. Most of these finfluencers have no real idea how to assess a companyās fundamentals. I even came across a popular account on this platform that claimed $VST was a natural gas company. š¤£ You wonder if they ever do their own research! š Anybody can make an AI text to hype you up on tech stocks with a story that sounds bullish and completely convincingā¦ā¦without any earnings. This is the meltup. A TIME when you may be better off LEARNING THE FUTURE š., which can save you a lot of moneyā¦š¤šø Even when there are specific TIMES when minimizing the role of fundamental analysis is warranted and frankly a good idea, fundamentals must remain at the core of every successful long-term investorās strategy.Ā Knowing the type of market you are in with respect to the real estate/banking crisis cycle is key to understanding what comes next. I always give you my Best! š This is the Way! šš
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4 Comments
Blair
@tackaberry17 Ā· 1d
Getting a lot of use out of your Report Card - not only for existing portfolio but also for any new prospects I'm looking at ā ļø
Eddy @eddypalmer Ā· 1d
;-7 & jx m n no P M JP
Brooklyn
@lavenderjones Ā· 21h
Report card
Michelle Womack@spartangreen Ā· 1d
I thought I would start things off by commenting, āReport Cardā
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