I enjoy trading… more than I should. I’m often impatient and have an itchy trigger finger. But, this is contrary to what I’ve done my whole life. When analyzing companies, patience is a virtue.
Fundamental analysis can be learned. I had no background in finance and so, I learned from books and people. I learned by doing. I learned from experience.
But, once I learned how to analyze industries and financial statements. I couldn’t see anything else. Fast forward 18 years, I’m still not bored.
Fundamental analysis takes time to play out. But, when you’re right on a call, you can end up being very, very right.
The market will never respond to your timelines and quite often you’ll get a surprise here and there. You’ll even question your thesis and really on occasion you will still get it wrong.
But when you reach a certain level of proficiency in fundamental analysis - you can end up being a serious winner. Case in point, Warren Buffett.
Over the last few months, as I saw the number of websites pop up, it amazed me how people with 1-2 years of experience wrote stock reports. It took me years to connect the numbers, know a company inside-out.
Well, we see the result now, don’t we? A lot of these people have led many to ruin. And yet they still don’t concede. I look at many of these companies that got bid up to astronomical levels and when I take look under the hood, I have no idea why. I guess it really is true - anyone can be genius in a bull market.
Fueled by cheap money this market made everyone a genius. Except, they never learned how to spot the trouble coming from a mile away. I’m not always right but, I started downsizing my longs in Dec 2021. There were signs. There were definite signs with the macro and with the companies. People just refused to see it.
And they still refuse.
It’s not just that the market has turned on the macro but, the fundamentals are also coming home to roost.
Here’s when it gets fun though. When you learn how to read a company and an industry well enough, you can spot trouble from a mile away.
Sure, companies will always surprise you here and there, but you can get scary good at predicting at least 90% of what happens next. You get what people call a “gut feel” but in reality it’s just putting in the work and gaining the experience.
Because regardless of the market, the macro and the technicals… companies are “fundamentally” the same.