Fundamental Analysis for FIRE: The Framework I Use to Evaluate Stocks

If you haven’t read it yet, this post builds on an earlier one where I shared my first failed attempt at stock investing and why technical analysis didn’t work for me. That experience shaped how I invest today—and why I eventually chose a different approach.

For a long time, I thought my failure with stock investing meant I wasn’t cut out for it. I had tried, studied, and put in the hours—and still ended up frustrated and second-guessing myself. Walking away felt easier than forcing something that didn’t fit.

Years later, when I came back to investing, what changed wasn’t my discipline or intelligence. It was my approach. Instead of focusing on price movements and patterns, I started looking at businesses themselves—how they made money, how durable they were, and whether I’d be comfortable owning them for a long time.

This post isn’t about claiming that fundamental analysis is “better” than technical analysis. It’s about explaining why it worked better for me, and how I analyze stocks for FIRE.

WHAT FUNDAMENTAL ANALYSIS MEANS FOR LONG-TERM FIRE INVESTORS

Many people who buy individual stocks do so without meaningful research or stock analysis. They treat stocks like collectibles, not ownership in a real business. They bet on the stock’s price rising, but do not know why it could go up or down.

Some may buy a certain stock because their friends are doing so, and they don’t want to miss out on the action. Or maybe they received a tip from someone who seems smart. Others may buy a company’s stock simply because they’ve heard of the company before and assume that notoriety is a sign of a solid company.

People who buy stocks without any research, however, are essentially gambling. And it’s difficult to win when gambling because of the uncertainty. Fundamental analysis aims to reduce that uncertainty. Let’s look at sports betting as an example.

There are 30 teams in professional basketball. At the beginning of the season, if you had to bet $10,000 on a single team to win the championship that year, how confident would you be? No team has won twice in a row in nearly a decade. And so many things can happen in a year that would change a team’s fortunes. Your chances of winning wouldn't be great.

What if, however, you simply had to choose a team that would have an overall winning record over a 10-year span? It doesn’t matter if they never win the championship. They could even have a losing record in any given year, so long as they have an overall winning record over the 10 years.

It’s obvious your chances of winning are much higher. You have a wider margin for error that is helped by a longer timeline.

And how would you choose your team? You’d look at past performance, the players and coach, and the competition they face.

Researching a sports team like this and forecasting its long-term success is just like fundamental analysis for long-term investing.

WHY I START WITH THE BUSINESS WHEN EVALUATING A STOCK

The biggest shift for me was realizing that owning a stock means owning part of a real company. And once I made that connection, it was easy to understand why a stock’s price may rise or fall. If a business consistently does great, then the stock’s price will rise, and vice versa.

But how do you find a great business? You start by asking the same type of questions you would if you were buying the whole company, such as:

• Do I understand how this company makes money?

• Can I see this company growing and still doing well 10 years later?

• Who is running the business, and are they good at it? Do I trust them?

• Is this company financially healthy?

And one of the most important questions to ask is whether the company has a durable competitive advantage, also known as an economic moat. All companies face competition, so what makes one more likely to succeed than another?

If we go back to the earlier basketball example, a winning team could have a once-in-a-generation type of player, like LeBron James. Or maybe they have a unique offensive system that no other team can replicate.

Would you expect a team without any competitive advantage to win? Of course not. In fact, it’s probably the first thing you’d look for when choosing a winning team.

It’s the same with investing in companies. We’ll dive deeper into economic moats in future posts, but just know that investing in companies with no competitive advantage is a risky gamble.

WHY TIME HORIZON IS THE REAL EDGE IN LONG-TERM INVESTING

Companies with durable competitive advantages do well over the long-term. And over the long-term a stock’s price trajectory matches a company’s business trajectory. But look at any stock chart, and you will never see a perfectly straight upward-sloping line. There will always be many dips along the way.

Just one more basketball analogy, I promise.

In professional basketball, there are 82 regular-season games. If you have a great team, you wouldn’t bail on them if they lose two games in a row. You know their season isn’t shot because, in the long-term, it’s a minor setback.

Yet, many stock investors do the opposite. They hear a small bit of bad news, and they assume the company is doomed and sell shares in a panic.

But just like great basketball teams make adjustments along the way, so do great companies. One incident of financial bad news doesn’t define a company’s business prospects.

Evaluating a great company through a long-term lens smooths out any bumps in the road. It allows you to filter out the day-to-day noise, such as daily price moves and short-term news. In the short term, even great companies can do poorly and terrible companies can do well. But only great companies shine in the long term.

In the short run, the market is a voting machine, but in the long run, it is a weighing machine.

-Benjamin Graham

This quote by Benjamin Graham, the mentor of billionaire investor Warren Buffett, says it all. In the short term, a stock’s price is influenced by people buying and selling the stock based on emotion. But in the long term, a company’s stock price reflects the company’s true value.

WHEN FINANCIAL NUMBERS MATTER IN FUNDAMENTAL ANALYSIS

If even terrible companies can do well in the short term, you may be wondering how to know if a company is a great one or a dud.

After you’ve found a company whose business you understand and you’re satisfied with its leadership, competitive advantage, and long-term prospects, then it’s time to look at the financial numbers. Whether a company is good or bad will reflect in its numbers.

If that’s the case, why not start with the numbers first? you might be asking yourself. Here’s why I don’t.

Without a great leader, a company can’t navigate through downturns. Without understanding the business, I won’t know if the company’s competitive advantage is still intact and what its long-term prospects are. Without a competitive advantage, the financial numbers don’t mean much because they only reflect past performance.

Past performance is no guarantee of future performance. But the numbers still hold a lot of useful information, including a hint as to how they might perform in the future.

We’ll do a deep dive into financial numbers and what to look for in future posts.

INVESTING IS ABOUT FIT, NOT FORMULAS

When I first tried investing, I didn’t fail because I was lazy or undisciplined. I failed because I was using a system that didn’t fit how I think, how I handle uncertainty, or how I want to build wealth.

Technical analysis asks you to be fast, reactive, and comfortable making decisions with limited context. Looking for patterns in charts and predicting short-term moves might be exciting for some, but for me, it was exhausting. I was constantly second-guessing myself.

Coming back years later, fundamental analysis didn’t suddenly make me smarter. It just gave me a framework that matched who I already was. I’m patient. I like understanding what I own. I want to own a piece of a business, let time do the heavy lifting, and get on with my life.

That’s why this approach stuck.

There is no single “correct” way to invest. Some people find success with technical analysis. Others may do well with spreadsheets. But FIRE isn’t about finding the most impressive strategy—it’s about finding one you can stick with for decades.

For me, fundamental analysis gave me something I never had the first time around: confidence rooted in understanding. When I own a company now, I know what it does, why it makes money, and why I believe it will still be around years from now. That makes it easier to hold through downturns, ignore the noise, and let compounding do its job.

That’s the real lesson from my first failure. I didn’t need a better formula. I needed a better fit.

And if this approach gives you that same sense of clarity and calm, then it might be the right fit for you, too. Check back again as we do deep dives of fundamental analysis.

See you at the finish line!

---

Disclaimer: I’m not a licensed financial professional. This blog shares my personal experiences and opinions around money, investing, and early retirement. It’s for informational and educational purposes only—not financial, legal, or tax advice. Always do your own research or consult with a qualified professional before making any financial decisions.