What Is Fundamental Investing?

By Kristi Waterworth – Updated Jun 17, 2025 at 1:00 PM

Key Points

Fundamental investing analyzes a stock's value by examining company and industry health.
Top-down and bottom-up are main strategies of fundamental analysis, each focusing differently.
Unlike fundamental analysis, technical investing predicts stock prices from past trade data.

Whether you've been investing for a while or are brand new at it, you're almost certainly looking for more ways to better choose the best stocks for your portfolio. Fundamental investing (also called fundamental analysis) is a common technique that makes it easier to understand why stocks have a given value.

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Drilling down into XYZ, Inc., though, you see some issues. They have been taking on a lot of debt recently (not great news). Then, you discover that the debt is for a new factory because they simply cannot keep up with the demand for snack cakes (maybe good news). There's ample cash on hand, so the move could simply be to grow the company faster without sacrificing its financial pad.

The company has been in business for 150 years and has been in solid hands the entire time. The same family has owned it and continues to pass the torch on to leaders who share the same conservative business philosophy. They do spend some money on new product development, but their biggest sellers are traditional favorites.

So, between the massive increase in sales for several quarters in a row, the overall health of the snack cake industry, and the fact that XYZ's conservative leadership has decided to leverage debt to expand rapidly rather than waiting on their cash on hand to be enough to build a new factory, you decide to buy, in hopes that you'll be ahead of their future growth wave.

This is a very simple example of how you might examine a company using a fundamental analysis approach. The next hardest step is holding on through the bumpy years, because the stock market always has bumpy years.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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