Top-Down Analysis

The big picture. From 37,000 feet. Looking at the whole forest.

That's where top-down analysis starts. You're on top of the world, lookin' down on Creation. And the only stocks you want to zero in on are waaaay far away. So...you're flying along. Then you see the markets as a whole. Where are we in the cycle? Seven years in to a lonnng bull market...or just recovering from 2 1/2 really bad years? Totally different thought process based on where we are in the market cycle.

So then we cruise more narrowly down to 12,000 feet...looking at sectors and tailwind areas, headwind areas, union penetration, politics, debt levels, The Fed. Then we start thinking about specific sub-sets of industries. We like the telecom space, for example, but there are like 300 public companies that live there. What aspect do we like? Well, the common theme seems to be that propogating cell phone signals is hard, and necessary, and there are just a handful of companies that live in that space. So now we're narrowing and narrowing our purview into that zone. Until, eventually, we find a single company that looks oh so ready to buy.

That's analysis...top-down.

See: Fundamental Analysis.