Fundamental investing is dying... Or is it?

Why I say this is because human participants no longer make up most of the participants in the stock market. In fact, over 80-85% of the $S&P 500(.SPX)$ volume comes from algorithms, most of them high frequency trading algorithms.

Now, understanding technical analysis is more important than ever. These algorithms are programmed to be net delta neutral. With the market having same day expiry options all days of the week, intraday volatility is determined by the positioning of these algorithms and how they achieve net delta neutrality.

In many cases, we have seen that undervalued companies are depressed far below their fair value. However, the stock made no attempt to increase to the fair value. Instead, it continued to plummet. This is because of algorithms in general!

Technical analysis also helps you to determine what is a good long term entry point for a stock. An investor who understands technical analysis would not have bought $Alibaba(BABA)$ at $300, for example, because they might have perceived a regression to the mean or a drop in its valuation, or significant downside due to chart topping patterns.

That being said, fundamental investing does give you clues about what a company might do next. For example, for biotech companies, companies which spike on a positive catalyst might suddenly do an offering, which depresses the stock price, because they have little cash on hand and they need it to fund their day to day operations. It might also give clues about Chapter 11 and Chapter 7 scenarios. These are all clues to tell you to get out of a stock. 

In other cases, valuation multiples (i.e. P/E ratio) give you an idea as to how a stock is trading relative to its peers in the industry and the market in general! Stocks trading at higher P/E ratios than its peers could be overvalued and might suggest a correction is coming at some point in time, as we saw with electric vehicle stocks (EV) in 2022. Many stocks such as $ChargePoint Holdings Inc.(CHPT)$  $Tesla Motors(TSLA)$ and $Lucid Group Inc(LCID)$  came back down to earth.

So... Fundamental investing is NOT dying. Instead, it should serve as a complement to technical analysis and vice versa. 

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