I just realise I have posted twice on "Laws of Malaysia".
(Wonder what is wrong with the system)
So I edit one of the two posts to this post. :-)
You may see that I have posted more on economy recently.
It is just my personal preference to explore more on economy during this period of turbulence (or financial tsunami). During this period of time, many of the market/business/investment participants are in a "jittery" mode. Many stimulus/rescue packages, businesses asking for rescue, retrenchment, downsizing, debate of economic ideas/policies, volatile reactions, more fear, more greed…. the list goes on.
It is a good time to brush up on economy and economic theories.
However, for investment analysis, it is not only economic analysis.
For investment analysis,
company analysis, industry analysis, economic analysis are all important.
However, their relative importances are debatable.
If we proceed in sequence of company -> industry -> economy, it is called "bottom-up" approach.
If we proceed in sequence of economy ->industry -> company, it is called "top-down" approach.
My personal preference:
I place more importance on company analysis and industry analysis; but I didn’t ignore economic analysis. Need to know effects of economic situation/policies (exchange rate, interest rate change, credit situation, fiscal/monetary policy, state of economy etc..) to the company’s financial position, competitive position, etc. and effects on customers.
I didn’t strictly follow either "bottom-up" or "top-down" approach.
I proactively pick up bits and pieces of information on company, relevant industries (supplier, current industry, customer’s "industry") and relevant economic data;
add on to the "database";
decide based on the "database"..
More like when the three (company, industry, economy) clicks, then I buy or sell.
Company analysis is a must (but is quite a routine task, though may have pitfalls here and there);
I like industry analysis the most :-)
