Wednesday 24 June 2009

Why we buy? Because of the fundamentals

Let us examine the basic premise behind our "buy" strategy - over the long term, investors gravitate toward stocks with strong fundamentals because those are the strongest companies, and that causes those stocks' prices to rise over time.

We buy because of the fundamentals - not just because the price is high or low or rising or falling.

Remember, the only way price comes into the decision to buy is in how it relates to the stock's fundamentals - that is, in the form of such variables as the price-sales ratio or price-earnings ratio.

When you're building your portfolio, then, you want to pick the stocks that have the best fundamentals - because (sorry to repeat) over the long run, investors gravitate toward stocks with strong fundamentals because they are the strongest companies.



Related posts:
Why we buy? Because of the fundamentals
Why we hold? Because of the fundamentals
Why we sell? Because of the fundamentals
Always buy, hold or sell based on fundamentals.

No comments: