If I were writing the headline for this column (which I don't get to do, by the way), I'd call it "Confessions of a Fundamental Technician." What's that, you ask? I'm a fundamental investor by early training and psychology. Looking at a company's balance sheet and long-term business prospects just seems like the right way to start a stock pick. But over the years, I've gradually applied more and more tools for technical analysis -- which examines trends rather than numbers -- to my stock picks. I'm still not comfortable beginning my analysis with price trends, but by experience, I've come to believe that technical tools can improve fundamental analysis of a stock. And that makes me a fundamental technician.
Getting Down to the Tools
To illustrate what this means, let me show you a few examples of fundamentally attractive stocks that I've researched further, using the tools on MSN Money for technical analysis. Let's say your fundamental research has led you to shares of Stryker ( SYK), the world leader in joint-replacement devices. You're attracted by the company's history of delivering 20% or better annual earnings growth in 19 of the last 20 years. (The exception is 1998, when charges for acquiring Howmedica broke the string.) And you like the way that an aging population plays into Stryker's strength in orthopedic implants and rehabilitation services: The company is one of the few in this economy that still has pricing power, and Stryker has been able to raise prices by 2% to 3% a year recently. But what if the bear market isn't over? Am I still interested in buying this stock? I certainly don't want to buy Stryker, no matter how good its fundamentals, if the stock sinks like a stone whenever the market stumbles.