1. Bottom-up analysis
    This branch of fundamental analysis, by contrast, considers the fundamentals of a company from numerous perspectives including its financial statements, quality of management, product or service, where it is situated in its respective industry, who its suppliers and competitors are, etc. Such analysis seeks out industries and companies that represent promising opportunities in the context of the business cycle. Different industries react differently in various phases of the economic cycle.
    • Defensive Industries - companies in such industries are least susceptible to the vagaries of the business cycle. Nondurable consumer goods such as food and tobacco are examples of industries that would tend to weather a downturn in the economy better than cyclical or growth industries, but similarly offer somewhat less upside in rising markets.
    • Cyclical Industries - are highly sensitive to business cycles and inflation trends. Steel, durable goods and autos are examples. Recessions tend to dampen demand for autos and building, which would affect steel production.
    • Growth Industries - grow faster than the economy, owing to new opportunities. Biotechnology and various sub branches of the computer industry are examples. Such companies tend to have high plowback ratios and pay little in the way of dividends.


Financial Statement Analysis

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