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4504c14 - Industry Analysis Chapter 14 Industry Analysis o...

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Industry Analysis Chapter 14 Industry Analysis o Second step in the fundamental analysis of common stocks Industries promising the most opportunity in the future should be considered o Concepts of industry analysis related to valuation principles o Continual analysis due to inconsistent industry performance over time Industry Performance Over Time o Potential value of industry analysis seen by assessing the performance of different industries over time S&P’s monthly stock price index over a long time period shows industries perform differently over time Stock performance affected by industry o Industries in decline should be avoided Industry Performance Over Time o Consistency of industry performance Maintaining positions in growth industries leads to better returns than otherwise o Can industry performance be predicted reliably on the basis past success? Rankings inconsistent over time Industries with recent poor performance should not be ignored What is an Industry? o Are industry classifications clear-cut? o Industries cannot be casually identified and classified Diversified lines of business cause classification problems Industries continue to become more mixed in their activities and less identifiable with on product or service Classifying Industries o Standard Industrial Classification (SIC)
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