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

Related Articles
  1. Investing

    Who Benefits From Bottom-Up Investing?

    Bottom-up investing analyzes individual stocks from a specific company rather than the economy and market cycles.
  2. Investing

    Steel Cycle Looks Good

    Buying cyclical stocks at the right time can be a great investment strategy, but it requires more than just trying to time a cycle to benefit.
  3. Investing

    What is a Cyclical Stock?

    A cyclical stock is an equity security whose price is affected by ups and downs in the overall economy.
  4. Insights

    Consumer Discretionary Sector: Industries Snapshot

    Discover the consumer discretionary sector, industries within this sector and companies producing goods that fall under the consumer discretionary definition.
  5. Insights

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  6. Investing

    How China Impacts the Global Steel Industry

    The Chinese economy is having a significant impact on the performance and profitability of steel and mining stocks.
  7. Investing

    Global Steel Industry Faces “Severe Winter”

    The global steel industry is in deep crisis due to overcapacity, falling prices and rising competition that has threatened the survival of many companies.
  8. Trading

    Market Cycles: The Key To Maximum Returns

    You need to understand the various phases of the market cycle to avoid bubbles and make the best investments.
  9. Investing

    Explaining Industry

    The term industry refers to a classification of companies that share similar business activities.
Frequently Asked Questions
  1. What are Some Examples of Free Market Economies?

    Learn which of the world's economies best resemble free market economies, marked by free trade, low government involvement, ...
  2. Who Decides When to Print money in India?

    Find out the role of the Reserve Bank of India, or RBI, and the amount of authority given to the government. Learn who is ...
  3. What is the Difference Between a Forward Rate and a Spot Rate?

    Learn about spot and forward contracts, how spot and forward rates are used for spot and forward contracts, and the difference ...
  4. What are Some Examples of Stratified Random Sampling?

    Learn what simple random sampling and stratified random sampling are, some examples of stratified random samples, and how ...
Trading Center