For an individual investor, making wise stock choices can be a daunting task
Frequently, investors will make stock picks based on little information or the recommendation of a biased “expert.” Unfortunately, this style of investing does not always translate well in the market. For individual investors to benefit from active investing, they require a set of financial analysis tools that provides them with a competitive advantage in the market.
Full analysis of a stock requires comprehensive research into a company’s financial statements, competitive position, ratio analysis, and macroeconomic changes. Using publicly available information, an amateur investor can form a basic evaluation of a company’s competitive position and speculate about the effects that macroeconomic changes will have on the value of the company’s stock. However, completing a comprehensive ratio and financial analysis is both time consuming and beyond the capability of the average investor.
Quantitative firms have realized consistent profits from the use of a fundamental, quantitative analysis of stocks. This complex analysis allows for an unbiased valuation of a stock and can provide a “buy,” “sell,” and “fair market” price recommendation. The tools behind this analysis have been developed by teams of in-house mathematicians and statisticians and are, consequently, unavailable to the average investor.