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Investing & Trading Lesson: Chasing Fundamentals

By Charles Payne, CEO & Principal Analyst

Did you miss the big move in Amazon? It may sound counterintuitive to buy the market higher. But for me, it’s about psychology and knowing we have shaken out all the weaker hands.

There is a difference between chasing fundamentals versus chasing stocks. Moreover, investors shouldn’t be afraid to chase fundamentals, which is decidedly different than chasing stocks.  This is so important because today I had someone contact my office and say he likes cheap stocks around two to five dollars a share.

Most stocks around two to five dollars a share are overvalued. 

Conversely, most people wouldn’t buy a stock trading above one hundred dollars and fewer would consider a stock trading over one thousand a share.

Chasing Amazon

This brings me to Amazon, which is the perfect example of chasing fundamentals.  I first featured the stock on July 19, 2004, and most recently recommended it June 16, 2017, at $989 a share.  I’ve hiked my target since then from $1,300 to most recently, $2100. 

For those looking for a quick way to assess improving fundamentals, follow consensus earnings. Granted, make sure it’s all apples to apples as companies make acquisitions or spin off businesses.  You could have chased AMZN in April and would be up more than 22%, which beats most money managers.

The buy signal* was the ever-improving earnings consensus for the next fiscal year.

*Note:  The huge earnings increase from April 10 to April 26 was a massive buy signal.  The shares were changing hands at $1,460 on April 26 and have rallied 23% since. 

Chasing Fundamentals

Amazon FY 2018 Earnings Consensus


Earnings Consensus

Share Price

April 10



April 26



May 10



June 11



June 19



July 3



July 10




Measuring Progress

There were periods of time when Amazon traded sidewise, and even lower, as it had to convince investors it was wiser to pile money back into the business to capture market share and build out its ability to meet future demand. 

So, while the company was in the process of becoming the retail juggernaut with an eye to have a presence in all industries, it was also building a cloud services juggernaut.

It has always been easy to identify improving fundamentals for Amazon by combing through its financial releases, but the quick glance of Wall Street earnings consensus has been a remarkable short cut, too.

There are many other steps in fundamental analysis, but this is a technique that can help you find ideas and begin the journey to dig and learn even more.  

Click here to watch Charles clip on Fox about chasing performance 

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Charles Payne
Wall Street Strategies


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