To arrive at Fair Valuation of a company what we require is lots of data, so that we are better equipped while forecasting its future income and hence paying and adequate price for it today!!! These data needs to be not only gathered but sorted and adjusted to level of your estimation too.
The sources to these data’s are endless; what’s more important is to set a pattern for our research activity based on which we can get data and analyze them one by one.
There are two different ways in which analyst may start their research activity.
1. Top –Down Research approach
2. Bottom-up Research approach
Top-Down Research approach: In this approach analyst doesn’t have any particular company at first to analyze but rather take a Countries Economy. Typically it starts with analyzing Economies across the comparable country, then analyzing Industries within the Economy, and then companies within the sector, finding an undervalued growth opportunity and then Investing. (please note I have used Analyzing the economy/industries/company with reference to a comparable, which simply put refers to one of the basic rule of analysis that when we analyze a company it cannot be done on a standalone basis and has to be relative, & compared with other economies/companies but of the same size, We cannot compare a developing or underdeveloped economy with a developed one, neither can we compare a multinational with a local business group irrespective of their presence in the same business.
Bottom-up Research approach: Against Top down in Bottom-up Research Analyst has a company or a script which is analyzed beforehand with comparable, moving then to the industrial performance and its growth prospective and then moving on to the Economy as a whole.
The sources to these data’s are endless; what’s more important is to set a pattern for our research activity based on which we can get data and analyze them one by one.
There are two different ways in which analyst may start their research activity.
1. Top –Down Research approach
2. Bottom-up Research approach
Top-Down Research approach: In this approach analyst doesn’t have any particular company at first to analyze but rather take a Countries Economy. Typically it starts with analyzing Economies across the comparable country, then analyzing Industries within the Economy, and then companies within the sector, finding an undervalued growth opportunity and then Investing. (please note I have used Analyzing the economy/industries/company with reference to a comparable, which simply put refers to one of the basic rule of analysis that when we analyze a company it cannot be done on a standalone basis and has to be relative, & compared with other economies/companies but of the same size, We cannot compare a developing or underdeveloped economy with a developed one, neither can we compare a multinational with a local business group irrespective of their presence in the same business.
Bottom-up Research approach: Against Top down in Bottom-up Research Analyst has a company or a script which is analyzed beforehand with comparable, moving then to the industrial performance and its growth prospective and then moving on to the Economy as a whole.
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