In the previous article, we already discuss three kinds of investing styles, growth investing, value investing and GARP investing. This article will continue the discussion of stock picking strategies by describing the final two stock picking strategies, fundamental analysis and technical analysis.

Fundamental Analysis

Fundamental analysis is a stock picking strategy whereby an investor or analyst tries to estimate the intrinsic value of a company based on financial facts. Although this strategy requires time and effort, it is more suitable for long-term investors.

Through fundamental analysis, investors seek to understand the trends of earnings of a company and expected future profits rather than market sentiments. In addition to revenues and earnings, investors also focus on factors such as, ROI (Return on Investment), ROE (Return on Equity), cash flows and P/E ratio etc.

Technical Analysis

Technical analysis, also known as chart analysis, is an investment strategy through which investors predict the future price movement of a stock based on past performance. Technical analysis mainly depends on supply and demand for particular stocks and trading volume.

Technical analysis is completely opposed to fundamental analysis. Technical analysts or chartists do not care much of the intrinsic value of the specific title.

Despite the advantages and disadvantages of each stock picking strategy, many investors are making millions regardless of the strategies they choose.

A choice of investors of a particular strategy should depend on its market knowledge, industry trends and potential for business growth. Above all, investors devotion of time and ability to calculate risk play important role in the choice of a particular stock-picking technique.