Fundamental analysis: Through the eyes of a techie
Oh not that old chestnut, you groan! No chance, not here that’s for sure. The arguments and discussions surrounding the relative merits of fundamental versus technical analysis are too old hat, blinkered and dreary and only for the bigoted. But unfortunately too many economists and accountants still are working in the dark ages; I suppose, having spent a lot of time and money picking up the rudiments of their trade, the idea of re-training is too taxing.
However, as in all walks of life, an enlightened few not only embrace new ideas but are happy to acknowledge their usefulness in their own work. Having recently read Anthony Bolton’s 2009 book ‘Investing Against the Tide’ I was delighted to find that Chapter 12 was called ‘Technical Analysis and the Importance of Charts’ with the subtitle: ‘Technical analysis forces you to cut losses and run profits’. How refreshing.
His Wikipedia entry reads: Anthony Bolton (born 7 March 1950) is one of the UK’s best known investment fund managers and most successful investors, having managed the Fidelity Special Situations fund from December 1979 to December 2007. Over this 28-year period the fund achieved annualised growth of 19.5%, far in excess of the 13.5% growth of the wider stock exchange, turning a £1,000 investment into £147,000. (ISBN: 9781905641116)
He kicks off: ‘almost the first thing I will want to review is the stock chart (normally a three to five year chart) to put today’s price in the context of…recent price history’, noting that charts also tell him whether he is early in hearing an interesting story about a company he has not looked at in a while.
His interest in the subject was sparked in the early-1970’s when working at a small bank called Keyser Ullmann who had a full time technical analyst called Arthur Abrahams – as well as an economist and a fundamental analyst. (Notice how he distinguishes between these last two). He sees technical analysis as a framework, overlay, and discipline to his stock picking. He is happy to use outside parties and particularly rates (the now deceased) Mal Roesch of Quantative Analysis Service of the US.
I could go on but suggest you consider reading his book. He has lots of practical ideas on money management, risk, analysis, and more. But you too, dyed in the wool technical analysts, must approach it with an open mind.
Tags: charts, Fundamental analysis, marketing timing
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