Fundamental Analysis is a method of determining a country’s economy based on interest rates, inflation, production, employment, GDP, housing, etc., or a company’s value by examining its financial statements, health, competitors and markets. Fundamental investors search for companies whose stock prices are below their intrinsic value, expecting profits when the market reprices them until they reach their intrinsic value. In bottom up analysis investors start with the company and compare its prospects to the industry and overall economy, while top down investors start with the overall economy and work down to specific industries or companies. Contrast to Technical Analysis which focuses on stock trends and price levels and investors’ emotional responses to price movements. Investors commonly combine both fundamental and Technical Analysis.
