Fundamental Strategies in Active Equity Investing

ABC Asset Management is a mid-sized firm that specializes in fundamental equity analysis. Recently, the firm launched a new equity strategy focused on undervalued companies with strong fundamentals. As a research analyst, you are tasked with drafting a proposal under this strategy. In your essay, discuss the key tenets of a fundamental strategy in active equity investing, explaining how identifying undervalued companies can potentially lead to superior long-term investment returns.

In your response, address the following:

• Define the fundamental analysis approach and its significance.
• Outline the key metrics and indicators that can help in identifying undervalued stocks.
• Discuss the potential risks associated with this strategy and how they can be mitigated.

Include real-world examples or case studies where possible to substantiate your points.