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Fusion Analysis by V. John Palicka

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4VALUATION AND BROAD APPROACHES IN FUNDAMENTAL ANALYSIS

There tend to be two major approaches to valuing stocks on a fundamental basis. Similar to seeing two large rivers, they have many variations or smaller rivers flowing into them. They can actually converge, just like two rivers meeting at a common point. One approach involves reviewing balance sheets, while the other approach focuses on cash flows that are supposed to be generated by the balance sheet. There are other methods that can be used such as option pricing and even eyeball clicks in Internet companies, but they eventually have some dependence on these two major approaches.

Asset Approach

The first approach is Graham and Dodd’s value approach, where we look at a stock price and compare ...

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