Industry Growth Outlook

Once you understand a company's line of business, your next step is to research its industry, starting with growth prospects.

Why? If you're a growth investor, you want growing companies, and you'll find them mostly in growing industries. Otherwise, your picks will have to grow earnings by cutting costs, by taking market share from competitors, or by acquiring other industry players. Although many firms have successfully practiced these strategies, they are inherently riskier than participating in a growth industry.

The competition is less intense in a fast-growing market because there is plenty of business for all contenders. As an industry matures, and growth slows, companies change their focus to increasing market share. ...

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