Should You Go Digging Through Financial Statements? Fundamental Fridays Follow-Up
December 26, 2008 by Tisa Silver
Filed under Finance
Since this is the final Friday of 2008, I decided to take it back to the basics…of stock valuation!
In late October I began hosting Fundamental Fridays to see if trading on the fundamentals could yield profits. So far I have used ratios like price-to-earnings (P/E), return on equity (ROE), and return on assets (ROA) to examine the valuation of four companies: Dell, Alcoa, Amazon.com and Nike.
Here are the results:
10/31: Dell (Ticker: DELL) - Recommendation: BUY, 12/24 Price: $10.65. At the time of this recommendation, shares of Dell were trading at $12.20…strike one!
11/14: Alcoa (Ticker: AA) - Recommendation: BUY, 12/24 Price: $9.39. Alcoa’s shares were trading at $11.20 at the time of this recommendation…strike two!
12/5: Amazon (Ticker: AMZN) – Recommendation: SELL, 12/24 Price: $51.44. Amazon is trading about $3 higher per share since this recommendation was issued…strike three! :(
12/19: Nike (Ticker: NKE) – Recommendation: BUY, 12/24 Price: $49.13. Nike’s shares have fallen more than $3 since this recommendation…there is no such thing as a fourth strike, looks like we are just out!
In this economic environment, who could have predicted that Amazon would have the best Christmas ever? As for Nike, Alcoa and Dell…I have no explanation!
TST’s Fundamental Fridays analysis uses old information about annual figures (earnings, dividends, assets, cash flow, etc.) to determine if a stock is undervalued, overvalued or fairly priced. It will take longer than a couple of weeks or a couple of months to determine if fundamental analysis is accurate.
Hopefully, the next quarterly review will yield more positive results!
