There are millions of stocks on the market, and it is really difficult to choose stocks for investment. Where should we start with fundamental stock selection? What are the key points to focus on? Below is a specific summary of the essentials of fundamental analysis:

1. Stock selection based on economic cycle

Everyone knows that macroeconomics follows a cyclical process of prosperity, recession, depression, and recovery. Stocks of companies in different industries perform differently in the market at different stages of the economic cycle. Some companies are extremely sensitive to the impact of economic cycle changes. When the economy is prosperous, the company's business accelerates its development; On the contrary, during an economic recession, its performance also significantly declines. The other type of company is less affected by economic prosperity or recession. Therefore, during periods of recovery and economic prosperity, investing in cyclical industries often yields significant benefits.

2 . Check company performance

When we evaluate stocks, we usually mention performance first. Everyone should remember that company performance is the fundamental driving force behind changes in stock prices. If a company has excellent performance, its stock price will steadily and continuously rise, otherwise it will decline. Therefore, performance is of paramount importance in fundamental analysis. The most important indicators for measuring a company's performance are earnings per share and its growth rate. According to the current situation of companies in China, those with a post tax earnings per share of 0.8 yuan or more and an annual growth rate of 25% or more generally have medium to long-term investment value.

3. Check the net asset value per share of the company

The net asset value per share is the "gold content" of a stock, which is the intrinsic value of the stock and the equity that truly belongs to shareholders and exists in physical or cash form in the company's immediate assets. Normally, the net asset value per share must be higher than the face value of each stock, but usually lower than the market price of the stock, as the market price always includes investors' expectations. Under a constant market price, stocks with higher net asset value per share have greater investment value. The saying goes, 'The road ahead knows the horsepower.' No matter how long your company has been established or how long it has been listed, as long as your net assets continue to increase, especially the net asset value per share, which is constantly improving (with a growth rate greater than 0), it indicates that the company is in the process of continuous growth. On the contrary, if the net asset value per share of a company continues to decline, the company's prospects are not good. Therefore, everyone should choose stocks with high net asset value per share for investment.

4. Check the company's price to earnings ratio

Price to earnings ratio is a comprehensive indicator, from which long-term investors can see the turning point of stock investment, while short-term investors can observe the high and low of stock prices. Generally speaking, stocks with lower P/E ratios should be chosen. But stocks with long-term low P/E ratios may not be worth choosing, as they may be inactive and not favored by most investors, and the market is always determined by public behavior. Therefore, its price is also difficult to climb. There is no absolute standard for what level of P/E ratio stocks are worth choosing. From the current economic development and corporate growth situation in our country, a P/E ratio of around 20 is not considered high.

5. Check the per share provident fund

The per share housing fund is the housing fund divided by the total number of shares. Provident fund is the "last reserve" of a company, which serves as both the material foundation for future expansion and the hope for shareholders to receive bonus shares in the future. A listed company without a provident fund is a listed company without hope. Therefore, the per share provident fund is also an important indicator that cannot be ignored. The main financial indicators of individual stocks can be seen in stock trading software by pressing F10.

6. Select industry sectors based on the message surface

Everyone knows that the Chinese stock market is a policy market, and it is essential to watch news hotspots. Choosing industries that benefit from positive news and avoiding sectors with negative news is also a key aspect of fundamental analysis. The skill in this area cannot be achieved overnight. To practice this skill, start by reading news every day and cultivate a keen sense of catching hot topics.