Anyone who has been around the block has likely been involved in the ongoing debate of fundamental vs. technical analysis and both camps love to preach why their way is the only way to view the market.

I hope to layout my personal strategy when it comes to picking stocks and how I use BOTH to look for the best picks.

Strategy: Run prospective stocks through my own fundamental and technical analysis looking for what I call a "confluence" of indicators.

Lets start with the Fundamentals:

P/E Ratios - A companies Price to Earnings (P/E) is a great indicator to help understand the true "value" of a stock and is relative to the industry in question. What you are looking for is a low "relative" ratio. So, if the stock you are evaluating has a PE that is less than its industry average or less than a specific competitor this is a way to determine which is "cheaper" despite the individual stock prices potentially being radically different.

Below is a table of averages to give context.

Market Cap - This is simply the number of shares multiplied by the price of the asset or "enterprise value". It helps you understand the size of the company you are dealing with. Often referenced as "small cap, mid cap, or large cap". The reason this is important is because the larger the market cap, the harder it is to grow it. If you think about basic math.. it is a lot easier to turn $1 into $2 vs. $100B to $200B both are increasing at the same rate but one is much easier to attain than the other in reality.

Shares Outstanding - This metric is often overlooked but I hope to articulate why it shouldn't be. I use the share count in confluence with volume (which will be covered in the technicals later). The more shares outstanding the more volume is needed to move the stock price. Conversely, the lower the share count the less volume needed to achieve the same increase in price.

Charts - everyone has likely seen a stock chart with tons of lines and crazy color schemes etc. indicating where the stock is headed. This was historically looked at as essentially financial witchcraft or tarot cards telling the future.. However, over time, and especially as the market has moved more and more to computer based trading these charts have become somewhat of self fulfilling prophecies. An example being, the classic "Cup and Handle" pattern which is very bullish. If you see it.. chances are others see it also and it will naturally attract more buyers as they believe it to be headed higher. Couple that with the algo's looking for these patterns the self fulfilling prophecy begins taking shape.

MACD - or "Moving Average Convergence Divergence" is a momentum indicator measuring simply short vs. longer term interest in the stock. If they are perfectly aligned the MACD will show 0 on the scale. Oversold will be indicated by a negative number and overbought will be indicated by a positive number. I use this to help me gauge good entry and exit points and/or the "power" of a particular move in price.

Volume - as the name implies it is measuring how many shares are moving in a given trading period. It is exceedingly helpful to determine how much interest a stock is receiving and how much any news story impacts the stock. For example, if a company announces a new product and the stock pops on "High" volume that is a very bullish sign. If the stock does not move or has very little volume it indicates that the news is not really getting the response the company was likely looking for and could be a red flag. Conversely, if some news comes out that you think is no big deal, but the volume is heavy and negative.. you may want to rethink your position on that news as the market is saying they feel strongly about it.

Bringing Them Together: As mentioned at the start of this memo, use all the tools available to you when making a decision on buying or selling a stock. The confluence I mentioned before is simply adding up indicators (like the ones above, but there are many many more) and if you have positives across a few indicators it is justification for starting or adding to a position. If there are a number of indicators that are negative, it can be perceived as justification to reduce or sell a position. Keep in mind, the market is ever evolving and you should run your stocks through this type of analysis regularly.

I hope some of you find this useful and that you are able to learn and apply some of these metrics next time you are evaluating a new or existing position!