Fisher Investments on Energy

8

SECURITY ANALYSIS

Now that we’ve covered the top-down method, let’s pick some stocks, shall we? This chapter walks you through analyzing individual Energy firms using the top-down method presented in Chapter 7. Specifically, we’ll demonstrate a five-step process to analyzing firms relative to peers.

Every firm and every stock is different, but viewing them through the right lens is vital. You need a functional, consistent, and reusable framework for analyzing Energy securities and asking the most important questions when researching a stock. While by no means comprehensive, the framework provided and the questions at this chapter’s end should serve as good starting points to help identify strategic attributes and company-specific risks.

While volumes have been written about individual security analysis, a top-down investment approach de-emphasizes the importance of stock selection in a portfolio. As such, we’ll talk about the basics of stock analysis for the beginning to intermediate investor. For a more thorough understanding of financial statement analysis, valuations, modeling, and other tools of security analysis, additional reading is suggested.

Top-Down Recap

As covered in Chapter 7, you can use the top-down method to make your biggest, most important portfolio decisions first. However, the same decision process applies when picking stocks, and those high-level portfolio decisions ultimately filter down to individual securities.

Step one is analyzing the broader global ...