It’s no surprise that the biggest S&P 500 companies now referred to as BATMMAAN (yeah, I know) get the most analyst coverage. Why is that? 


"Wall Street analysts are like weather forecasters: they're always wrong, but people still listen to them." — Warren Buffet

Well honestly it’s easier and less risky to be bullish the big companies based on past performance. If you end up being wrong a for a while during a correction or a crash, then everyone else is wrong too. The less fearful investors and those with cash on the sidelines end up buying the big companies at a discount. The market recovers and analysts appear to have known this the whole time. Though multiple studies have shown that when groups share information and differing points of view, it leads to better decisions. At the same time, however, people have a natural tendency to simply conform.


And let’s face it, the BATMMAAN is a mega-cap behemoth that fundamentally drives the stock market. One earnings report from any of these constituents on a given day can single-handedly sway the market in one direction or another—so yeah it makes sense for the analyst bandwagon to be full.


Several of these companies are also very likely to be around for many generations. I predict that some sort of cooperative involving BATMMAAN and the output of their combined technologies and innovations will be required to achieve scalable interstellar travel one day. But that’s just the sci-fi nerd in me talking.

At UVstocks.io we aim to highlight potentially “UnderValued” stocks for our subscribers by aggregating analysts ratings from a variety of stock market platforms and finding broader consensus that transcends analysts at both boutique and big firms. However, since this cross-section of analysts uses a blend of both fundamental and technical methodologies, UVstocks.io’s algorithm attempts to do the same. 


This week, at a high-level, we’ll briefly go over fundamental and technical analysis. We’ll then dive deeper into each one in the following weeks.


Fundamental Analysis

When looking at the fundamentals of a stock, it generally means evaluating revenue, valuation and industry trends to determine whether a stock is undervalued or overvalued. To determine value, a fundamentalist would look closely at a company’s assets, expected earnings growth, dividend payouts, the level of market interest rates, and risk. Most analysts would claim to lean more toward using fundamentals over technicals in their stock ratings. An analyst’s success in employing fundamental analysis largely comes down to accurately estimating future earnings.


Technical Analysis
Proponents of a technical approach look closely at stock charts to predict future price movement. They assume that all the information regarding financial elements such as earnings, dividends and a company’s future performance is naturally incorporated in previous stock prices. These “chartists”—now more commonly referred to as technicians—also adhere to the principle that a stock on the rise continues to rise. And a stock at rest will tend to stay at rest. Consummate technicians could care less about a company’s industry or the business it’s actually in, so long as they can analyze the stock chart. But it’s hard to deny real examples of talented and/or lucky technical analysts yielding significant returns, especially in highly-speculative assets such as crypto.  However, the majority of technicians are not actually able to consistently outperform the broader market year-over-year.


Stay tuned next week when we dive deeper into the fundamentals of Fundamental Analysis.


P.S. I'm sharing some investment information, but it's important to remember that what I'm providing is for informational purposes only and should not be construed as financial advice.


Happy Investing,

John


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