Alpha measures the excess returns on an investment relative to the market returns. It represents the amount of return expected from fundamental causes like the growth rate in earnings per share. It contrasts with Beta, which measures volatility.
The bottom-up approach to investing prioritizes the performance and fundamentals of individual companies over broader market or industry trends. This method involves selecting stocks based on their individual merits rather than focusing on the macroeconomic environment.
Fundamental analysis involves evaluating a company's financial statements, health, competitors, and markets to assess the intrinsic value of its stock. This method helps determine whether a stock is undervalued or overvalued.
The Graham and Dodd Method, also known as value investing, is an investment approach outlined by Benjamin Graham and David Dodd in their landmark book 'Security Analysis,' initially published in the 1930s. This method advocates for buying undervalued stocks based on thorough fundamental analysis, with the expectation that these stocks will eventually appreciate to their true intrinsic value in the marketplace.
Intrinsic value refers to both the inherent worth of a physical asset and the theoretical valuation of an asset derived from fundamental analysis.
An essential metric in fundamental analysis, the Price-Earnings Ratio (P/E Ratio) compares a company's current share price to its per-share earnings, helping investors determine whether a stock is under or overvalued.
Value investing is an investment philosophy that focuses on buying stocks that are trading at bargain prices based on fundamental analysis, then holding them until they become fully valued.
