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Investments: Principles of Portfolio and Equity Analysis by Gerhard Van de Venter, CFA, Wendy L. Pirie, CFA, Jerald E. Pinto, CFA, Michael G. McMillan, CFA

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CHAPTER 9

INTRODUCTION TO INDUSTRY AND COMPANY ANALYSIS

Patrick W. Dorsey, CFA

Chicago, IL, U.S.A.

Anthony M. Fiore, CFA

New York City, NY, U.S.A.

Ian Rossa O’Reilly, CFA

Toronto, Canada

LEARNING OUTCOMES

After completing this chapter, you will be able to do the following:

  • Explain the uses of industry analysis and the relation of industry analysis to company analysis.
  • Compare and contrast the methods by which companies can be grouped, current industry classification systems, and classify a company, given a description of its activities and the classification system.
  • Explain the factors that affect the sensitivity of a company to the business cycle and the uses and limitations of industry and company descriptors such as “growth,” “defensive,” and “cyclical.”
  • Explain the relation of “peer group,” as used in equity valuation, to a company’s industry classification.
  • Discuss the elements that need to be covered in a thorough industry analysis.
  • Illustrate demographic, governmental, social, and technological influences on industry growth, profitability, and risk.
  • Describe product and industry life-cycle models, classify an industry as to life-cycle phase (e.g., embryonic, growth, shakeout, maturity, or decline) based on a description of it, and discuss the limitations of the life-cycle concept in forecasting industry performance.
  • Explain the effects of industry concentration, ease of entry, and capacity on return on invested capital and pricing power.
  • Discuss the principles of strategic ...

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