Sarah is applying fundamental analysis because she is evaluating companies' financial condition and their prospective ability to grow.

Fundamental analysis examines the underlying economic characteristics of an issuer. Typical factors include revenue growth, earnings, cash flow, profitability ratios, debt levels, competitive position, management quality, industry conditions, economic outlook, and valuation measures. The purpose is to estimate the company's intrinsic value and compare it with the current market price.

Technical analysis takes a fundamentally different approach. It studies market-generated information such as historical prices, volume, chart formations, momentum, and trading patterns rather than concentrating principally on a company's underlying financial performance.

A passive investment strategy generally seeks to replicate a market index or predetermined asset class rather than select individual companies through detailed security analysis. Tactical asset allocation involves actively changing the portfolio's allocation among broad asset classes based on shorter-term market expectations. Neither describes Sarah's company-by-company investigation.

Because Sarah is explicitly researching companies' financial condition and future growth potential, her analysis concerns the economic fundamentals that support future earnings and valuation.

FPII reference/topic: Investment and Tax Planning — security analysis; fundamental analysis; financial statements; growth prospects and intrinsic value.

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