
Two broad categories of approaches to use for choosing stocks to buy or sell: Fundamental analysis and Technical analysis
Fundamental analysis: looking at aspects of a company to estimate its value and look for the price < value situations.
Technical analysis: Looking for patterns or trends in a stock’s price.
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As an illustration of how hedge funds use CAPM, let’s consider a two stock scenario.

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A company can take raw materials, and process them, and turn them into dollars. and each year, this company can output a dollar bill reliably.
What is this company worth?
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Yes, the value of one dollar would typically reduce over time, and the sum of the individual $1’s generated every year would converge to a finite value.