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Chapter 4. Confirmation: A Powerful Anal... > Translating Confirming Indicators to...

Translating Confirming Indicators to Stock Selection Criteria

Quantifying growth potential is always difficult when using fundamentals. Because this involves backward-looking data to project forward-looking estimates, the process—even using confirming indicators—is far from perfect. The most common criticism of fundamental analysis is that the information is outdated by the time it is published. A flaw in this criticism is that it assumes the fundamentals should be used in timing purchase or sell decisions. In other words, the fundamental information is “outdated” in comparison with market price. Remember, though, that our point here is to concentrate on long-term fundamental change. We are not concerned with the outdated fundamental information in comparison with market value. In fact, we want to discount market value in favor of investment value.

Some useful additional tools can be employed to select stocks. Besides using the confirming techniques described in this chapter, you can employ three other techniques:


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