Warren Buffett is a well-known figure in the investment sector. Yes, this figure, who is one of the five richest people in the world, is one of the most successful investors who uses fundamental analysis method. What is actually fundamental analysis? Let’s take a deeper look at it before you start investing!
What is Fundamental Analysis?
Fundamental analysis is a method of measuring a security’s intrinsic value by examining related economic and financial factors. Based on Investopedia, normally, fundamental analysts study from macroeconomic to microeconomic factors to see if a company’s stocks are correctly valued within the market.
To put it simply, fundamental analysis is a method of determining a stock’s real fair market value from an economic perspective. So, if a stock’s fair market value is lower than its market price, Warren Buffett, as well as other fundamental analysts, will buy or increase the ownership share.
What to Analyze
Considering this method is based on economics, to do fundamental analysis, anything related to the economic and financial factors must be taken into account. Investopedia groups these fundamental factors into two, quantitative and qualitative.
Just as the name suggests, quantitative factor is information that can be shown in numbers and amounts, such as financial statements, income statements, and other documents shown in numbers and amounts.
Meaning, you have to study a company’s financial and income statements for a certain period of time to get a detailed picture of the financial ratio, asset’s value, liabilities, cash flow, operating expenses, revenue, expenditures, debts, and receivables of that company.
By analyzing this quantitative data, you can also calculate the Compound Annual Growth Rate (CAGR) of the company. If the sales and net income have increased during the past 5 years, it means that company has a healthy financial foundation.
On the other hand, qualitative factor is information related to the nature or standard of something, rather than to its quantity, such as the quality of a company’s key executives, its brand-name recognition, patents, and proprietary technology.
Meaning, you will also need to understand the details of the company. Including who the board of directors and commissioners are, how big the market cap is, what patents and technologies it owns, its business model and competitive advantages, and its corporate governance; in the case of looking for good potential stocks using fundamental analysis method.
Stocks That Warren Buffett Owns
As one of the most successful fundamental analysts, Warren Buffet, who is also the CEO of Berkshire Hathaway, collects his best issuers through fundamental analysis method. Top stocks that Warren Buffett owns include:
- Apple. Through Berkshire, Buffett owns 41,4% of Apple’s stocks as of July 24th, 2022. According to The Motley Fool, this technology company is the backbone or the core business of Berkshire.
- Bank of America (BofA). Buffett also invested 10,2% of Berkshire’s assets in BofA. It is said that BofA’s interest rate sensitivity is one of the main reasons.
- Coca-cola. Still through Berkshire, Buffett also invested 7,3% of his assets in this multinational beverage company. The stocks are said to be Buffett’s oldest stocks position.
- American Express (AmEx). Buffett invested some of Berkshire’s assets in this credit service company. AmEx is Buffett’s second oldest stocks position after Coca-cola.
And that sums up the fundamental analysis and things you should consider in doing the analysis. If you are eager to follow in Warren Buffett’s footsteps, you can buy those four stocks mentioned above, as well as other global market stocks, directly from Nanovest application! Just download the application on Play Store or App Store, register your account, and then you are able to invest in the top stocks picked by Warren Buffett. Ready to follow in the fundamental analyst Warren Buffett’s footsteps?