The Preponderance of Stock Picking Techniques: The Practice of Applied Money Managers

Abstract

This study examines the diverse methods practitioners of money management use in order to choose stock investments. Practitioners mainly use fundamental analysis and technical analysis. Very few use the Efficient Market Hypothesis as a key method. We emphasize fundamental analysis and the diverse techniques which are subsumed under it. Market timing and industry analysis are two contenders to stock picking, even though, it is possible to have stock picking together with the other two techniques. When we deal with stock picking techniques, we discover they use discounted cash flow, multiples and balance sheet approaches. Additionally, they consider industry forces such as demographics and psychographics.