| Topic Name: |
Lets get a discussion on... |
| Message Name: |
top-down has never impressed me |
| Date Posted: |
11/22/2001 |
| In Reply To: |
I am interesting in hearing everyones opinion on this topic. Which method do you think better achieves return in up markets and down markets factoring in time/duration of investment and any other factors.
I have interviewed with IM shops that do both styles. My personal opinion is that bottoms up is the way to go. |
| Message: |
1. I just find too much of top-down is done using almost stereotyped caricatures of industries, companies and the economy: you guys know the drill - "Now that we're in a recession, buy [x] industry."
Phooey. First, show me that you KNOW exactly where the economy is and will be going [and good luck in that]. Then, show me that you have done extensive work on how the economy will effect THAT industry [and again, good luck]. And THEN, show me that the particular firms you're recommending will benefit from the economic trends [and good luck] and don't have their own particular issues to screw me up with. Just because [x] industry will do well, doesn't mean that even the (percieved) best company in that industry will always do well - remember Enron?
2. If you're telling me to buy a relatively small list of companies, then you'd better have very good explanations as to why THESE companies and not their competitors. Yeah, yeah, yeah, you told me all about how great the widget industry is (and you did your little economy song and dance, which didn't impress me either). Why are you recommending Widgets Inc vs. Acme Widget vs. First American Widget?
3. Focusing on the wrong thing. I don't care in the end about the economy if I'm selecting a relatively small number of stocks in a portfolio. I care whether THESE stocks perform as I want them to. In fact, I look better if I can pick the one firm that did well in a sector where most others did poorly. And that's all about knowing the companies and industries well and very little on the economy.
4. Just most top-down analysis I've seen are mediocre. It's apparently very hard to do and you STILL have to tell me why I should buy Widgets Inc, instead of First American Widget. Which is all about the most micro-details of Widgets Inc and First American Widget. Does a macro-economic analysis add to my knowledge of Widgets Inc and FA Widget? No.
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