Fisher Investments on Industrials

7

THE TOP-DOWN METHOD

 

 

If you’re bullish on Industrials, how much of your portfolio should you put in Industrials stocks? Twenty-five percent? Fifty? One hundred percent? This question concerns portfolio management. Most investors concern themselves only with individual companies (“I like Caterpillar, so I’ll buy some”) without considering how they fit into their overall portfolio. But this is no way to manage your money.

In this part of the book, we show you how to analyze Industrials companies like a top-down portfolio manager. This includes a full description of the top-down method, how to use benchmarks, and how the top-down method applies to the Industrials sector. We then delve into security analysis in Chapter 8, where we provide a framework for analyzing any company, and then discuss many of the important questions to ask when analyzing Industrials companies. Finally, in Chapter 9, we conclude by giving a few examples of specific investing strategies for the Industrials sector.

INVESTING IS A SCIENCE

Too many investors today think investing has “rules”—that all one must do to succeed in investing for the long run is find the right set of investing rules. But that simply doesn’t work. Why? All well-known and widely discussed information is already reflected in stock prices. This is a basic tenet of market theory and commonly referred to as market efficiency . So if you see a headline about a stock you follow, there’s no use trading on that information—it’s already priced ...