01. How Institutions Conduct Stock Analysis
Most securities institutions follow a structured framework and systematic process for analyzing individual stocks, which can be summarized in the diagram below.
First, securities analysts conduct three fundamental types of analysis:
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Fundamental Analysis: Primarily focuses on company profitability, current valuation relative to intrinsic value (whether undervalued or overvalued), financial risks, and industry potential. Fundamental analysis essentially examines whether there are internal drivers for stock growth.
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Sentiment Analysis: Market sentiment is influenced by short-term events , including news, policy stimuli, and commodity prices. Sentiment-driven price fluctuations can be significant and often create short-term peaks and troughs, presenting opportunities for entry or exit. However, some sentiment impacts can evolve into long-term trends that affect fundamentals. For example, one or two news events about a brand may not affect fundamentals, but repeated public relations incidents involving the founder can evolve into questions about the founder's ability to support the stock price, thereby impacting fundamental analysis.
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Technical Analysis: Compared to the above two analyses, technical analysis focuses purely on stock prices, trading volume, and other market data. Technical analysis has long been controversial. We believe that technical analysis is both a reflection of fundamentals and sentiment, as well as an expression of collective investor behavior. Technical analysis must be viewed in combination with the other two.
While these three analyses may seem straightforward, each step requires meticulous work, and a securities analyst spends a great deal of time on such analysis.
However, after extensive software engineering work, by feeding corresponding market data, corpus, and other information to AI, it can generate reports that analysts find highly professional in a very short time. We call this tool AlphaWiseWin, meaning "AI-to-Alpha."
Alpha represents α returns in investment, i.e., excess returns that exceed market expectations. α returns are obtained through excellent stock selection, timing, risk control, and other active management skills. "AI-to-Alpha" means using advanced artificial intelligence to help investors achieve α returns.
If this is your first time hearing about AlphaWiseWin, you can learn more here: How Individual Investors Use AI for Stock Analysis
Next, let's see how AlphaWiseWin executes each step specifically.
02. Fundamental Analysis
Fundamental analysis can be summarized using the following framework.
At first glance, this analytical framework doesn't seem complex, but in practice, the research effort required to obtain each piece of data is substantial. The research targets include:
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Quarterly and annual financial reports published by companies, as well as derivative data based on these reports, such as P/E ratios.
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Research reports and analysis from various sell-side institutions. These reports are written by professional researchers, some public and some private.
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Industry sector-related data. For example, raw material prices in the energy sector can greatly impact related stock prices.
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Insider information.
However, the most important, effective, and authentic data among all materials is still: the quarterly and annual financial reports published by companies. Financial data is publicly available to everyone, but interpreting it requires strong professional expertise. We summarize our interpretation approach as "horizontal and vertical" analysis.
Horizontal analysis refers to comparing a company with industry averages or competitor data to identify the company's advantages within its peer group.
Vertical analysis refers to comparing the company's historical performance. For example, if a company's P/E ratio is at a historical low and there are no major negative events affecting performance, it may be worth considering a purchase.
Here, the horizontal and vertical comparison indicators roughly correspond to several company capabilities, which can be understood through a practical analogy:
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Company Financial Strength: This is like evaluating whether someone has substantial assets (equity), manageable debt levels (liabilities), and sufficient cash reserves (cash flow).
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Company Profitability: This examines the company's revenue generation (operating profit) and profit margins (gross profit), similar to assessing someone's earning capacity.
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Company Growth Potential: This involves understanding the company's industry sector (growth prospects), market position, company stage, and competitive advantages (upward mobility).
When we list the evaluation indicators corresponding to these three capabilities, we form a framework for analyzing company financial reports (think of it as applying the same thorough vetting process you'd use when making an important decision).
In AlphaWiseWin, we can currently perform horizontal and vertical comparisons of key data.
In the future, AlphaWiseWin's fundamental analysis will include more research. For example, in the analysis of "SFD(Smithfield Foods)," AlphaWiseWin suggests that investors should always pay attention to pork wholesale prices. We will automatically search for corresponding reports on pork wholesale prices and summarize them for your reference.
The next analysis is sentiment analysis.
03. Sentiment Analysis
Sentiment analysis is more influenced by news and information. News information is crucial for gaining first-hand insights, allowing investors to make decisions ahead of others.
Of course, simply being aware of events is not enough. We also need to understand the duration of these events' impact on the stock and the magnitude of price fluctuations, to ensure we take appropriate actions within the relevant timeframe. For example, for stocks you currently hold, if you plan to build a position, and if positive impact can last 3-5 days, choosing to sell on days 2-4 may be a good choice; if you want to continue adding positions, you should avoid this hot spot.
Finally, there's technical analysis.
04. Technical Analysis
Technical analysis is purely based on stock trading prices, trading volume, and other information. On one hand, technical analysis is driven by fundamentals and sentiment; on the other hand, it also validates the above two analyses. Therefore, technical analysis serves as auxiliary information in the overall analysis. So how do stock analysts specifically conduct technical analysis?
Technical Analysis Methods
The image below is a screenshot of a stock from Yahoo Finance. Most investors only see the candlestick chart in the middle, understanding the general trend of rises and falls.
However, in the eyes of a professional analyst, the understanding of stock information looks like this.
And what's shown in the diagram is only part of it. If all this knowledge were summarized, it would probably require a book of several hundred pages; to use it flexibly, you'd need to use it like a dictionary.
For most retail investors, and even general analysts, the barrier to interpreting technical analysis is quite high. It takes considerable time and experience to internalize these patterns. However, AI, equipped with relevant knowledge, can lower this barrier (similar to how calculators simplify complex calculations), enabling individual investors to access most of the analytical capabilities of professional analysts.
In terms of specific operations, the above technical analysis can generally be summarized as the following process:
Step 1: Based on stock price and trading volume data over the past several days, derive numerous indicators.
Step 2: Display the changes of these indicators over time graphically, forming hundreds of various "phenomena," such as three consecutive positive days, dark cloud cover, golden cross, death cross. There are hundreds of these phenomena—too many to memorize manually—but AI can track and identify them all.
Step 3: Based on extensive historical data and patterns, interpret these phenomena to assess future trends.
Step 4: Finally, make decisions to buy, sell, or hold.
Below is a technical analysis report provided by AlphaWiseWin. It should be noted that the quality of analysis can rival that of professional securities analysts.
The above is only 25% of the content in AlphaWiseWin's individual stock analysis report. If you want to get more technical analysis for individual stocks, click the button below and enter the stock code to get it.
Of course, technical analysis has its advantages and disadvantages.
Controversy Over Technical Analysis
Technical analysis has long been controversial.
Supporters say:
As long as human nature and group effects don't disappear, technical analysis will always be effective.
This is because the essence of technical analysis is the embodiment of investor group effects. For example, a stock without major news stimulation generally tends to fall back on the second day after exceeding normal gains, because most early investors have already benefited from the previous day's big rise and tend to sell on the second day.
Therefore, we've also heard some fund managers and veteran investors recommend a book called "The Crowd" (Le Bon's "Psychologie des Foules"). This book has nothing to do with stocks or investment, but it's recommended by investment enthusiasts for good reason.
Opponents say:
Technical analysis is superficial, focusing on the symptoms rather than the root cause.
Because technical analysis only looks at stock price movements and trading volume, technical analysis has two limitations:
First: For estimating long-term intrinsic value of stocks, technical analysis has relatively little reference value. Technical analysis is more suitable for medium and short-term operational decisions, which is completely different from fundamental analysis.
Second: Technical analysis is based on judgments from past experience, suitable for analysis when there are no external strong stimuli (such as news hotspots).
Therefore, technical analysis must be combined with the above two analyses.
After stock analysts review these three analyses, they can proceed to the next step of rise/fall analysis and comprehensive investment recommendations.
05. Investment Plan
At this step, the core value of AI tools lies in transforming complex analysis into executable investment plans. We summarize this as a "four-step" method, using a stock analysis from a certain day in August 2025 as an example.
Step 1: Bull vs. Bear Debate, Determine Whether to Buy
AlphaWiseWin will simultaneously list reasons for being bullish and bearish, avoiding bias from a single perspective. This is like reading product reviews, giving investors more independent thinking angles, avoiding being misled by one side, and making more rational judgments.
Step 2: Provide Buy, Sell, Hold Recommendations for Different Investment Objectives
Step 3: Provide Specific Investment Timing
This section contains three parts:
- Provide operational guidance for different investment objectives.
- Phased target prices for calculating maximum losses and profits after purchase. AlphaWiseWin will provide future stock price ranges for short-term, medium-term, and long-term periods, as well as the conditions that promote reaching these two range extremes. Investors can observe whether the current price is closer to the predicted highest or lowest price in the period, and consider: if it reaches the lowest price, whether they can accept such losses; if it reaches the highest price, whether it meets their expectations.
- Provide medium and short-term price targets.
In this way, investors can make informed investment decisions based on their investment horizon (short-term, medium-term, long-term) and risk tolerance.
Step 4: Risk Control
Finally, AlphaWiseWin will provide risk warnings, typically highlighting key metrics that require continuous monitoring. We recommend conducting further research based on these alerts to enhance risk awareness.
Of course, in the future, AlphaWiseWin will conduct independent research, saving you more time.
We will notify everyone of related features on our website as soon as they become available.
06. Summary
The above is the current report framework provided by AlphaWiseWin.
We have presented such reports to top fund managers, and here are some evaluations:
"I've looked at it several times and think the analysis is quite comprehensive. The technical analysis part is quite interesting."
Of course, they also gave very constructive suggestions, such as:
"For the fundamental analysis section, you can add several years of time series data, such as net profit attributable to the parent company, and forecasts for the next two years."
"You can do a 12-month rolling dynamic P/E to see the comparison with history."
"You can expand data for micro-cap stocks."
These suggestions have also been included in our development roadmap. We hope that in the near future, we can bring these reports to more investors.
We also remind everyone: the stock market has risks, and investment requires caution. Every investment decision should be made based on your own situation.
Finally, I wish everyone successful investments!
Market Analysis
