Bottom-Up Investing

AAA

DEFINITION of 'Bottom-Up Investing'

An investment approach that de-emphasizes the significance of economic and market cycles. This approach focuses on the analysis of individual stocks. In bottom-up investing, therefore, the investor focuses his or her attention on a specific company rather than on the industry in which that company operates or on the economy as a whole.

INVESTOPEDIA EXPLAINS 'Bottom-Up Investing'

The bottom-up approach assumes that individual companies can do well even in an industry that is not performing very well. This is the opposite of "top-down investing". Making sound decisions based on a bottom-up investing strategy entails a thorough review of the company in question. This includes becoming familiar with the company's products and services, its financial stability and its research reports.

RELATED TERMS
  1. Business Cycle

    The fluctuations in economic activity that an economy experiences ...
  2. Capital Markets

    Markets for buying and selling equity and debt instruments. . ...
  3. Benjamin Method

    The investment approach that aims to follow the strategies implemented ...
  4. Top-Down Analysis

    A method of analysis that involves looking at the "big picture" ...
  5. Industry

    A classification that refers to a group of companies that are ...
  6. Economy

    The large set of inter-related economic production and consumption ...
RELATED FAQS
  1. What's the difference between "top-down" and "bottom-up" investing?

    Before we look at the differences between top-down and bottom-up investing, we should make it clear that both of these approaches ... Read Full Answer >>
  2. What debt/equity ratio is typical for companies in the utilities sector?

    In the utilities sector, for companies providing general utilities such as gas and electricity, the average debt/equity ratio, ... Read Full Answer >>
  3. What price-to-earnings ratio is average in the utilities sector?

    As of December, 2014, the average price-to-earnings (P/E) ratio for the utilities sector is approximately 23, which is considerably ... Read Full Answer >>
  4. What can I learn about a company by studying its earnings report?

    Fundamental analysts often pore over quarterly earnings reports when the reports arrive, hoping to gain an inside track on ... Read Full Answer >>
  5. What metrics can be used to analyze a telecommunications company if they have very ...

    Telecommunications companies play a very crucial role in the economy by providing access to voice, text, video and other ... Read Full Answer >>
  6. What is the average annual growth rate of the utilities sector?

    Utilities companies are popular among investors for their stable cash flows and dividend yields. The utilities sector includes ... Read Full Answer >>
Related Articles
  1. Markets

    Great Company Or Growing Industry?

    Look at the big picture when choosing a company - what you see may really be a stage in its industry's growth.
  2. Mutual Funds & ETFs

    A Top-Down Approach To Investing

    Use a global view to determine which stocks belong in your portfolio.
  3. Fundamental Analysis

    Become Your Own Stock Analyst

    Learn how to do your own stock analysis and become a wiser investor.
  4. Bonds & Fixed Income

    Is Your Investing Style Hot, Or Not?

    Don't let your portfolio construction fall out of fashion.
  5. Entrepreneurship

    Five Investing Pitfalls To Avoid, According to Investor's Business Daily

    Common sense or common folly? Discover some approaches to circumventing typical stumbling blocks on the road to profitable investing.
  6. Retirement

    Where Top Down Meets Bottoms Up

    Find the investing "sweet spot" by combining these two styles.
  7. Fundamental Analysis

    Is Gillette's Market Edge Becoming Razor-Thin?

    Despite Gillette's success with the razor-and-blades strategy, the increasing popularity of beards and new competition may slow the brand's growth.
  8. Professionals

    How To Make Money Using Tobin's Q Ratio

    Although it seems simple, Tobin's Q Ratio is more complex than it appears. We explore some of its main strengths and weaknesses.
  9. Investing Basics

    Know When To Buy & Hold It, Know When To Fold It

    A passive buy-and-hold strategy using ETFs is one of the most efficient ways of building a portfolio.
  10. Charts & Patterns

    Pros & Cons Of A Passive Buy And Hold Strategy

    Forget market timing: we look at the pros and cons of the tried, tested, and true strategy of buying and holding stocks for the long-term.

You May Also Like

Hot Definitions
  1. Radner Equilibrium

    A theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then ...
  2. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  3. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  4. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  5. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  6. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!