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Industry study

When you make an investment you must track the industry of focus carefully. You do not want to be investing in a real estate company when the property prices are falling and you do not want to miss out investing in the technology boom.

Classification of the Industry

Industries are classified by product, for example food, metal, plastic and construction. Another way to classify industry is by business cycle as growth, cyclical and defensive. The growth industries see a rapid increase in volumes like technology goods. Cyclical industries are products like fruits. Defensive industries are immune to the environment and involve catering to basic needs. The economy of the nation is linked to the economy of the industry.

Key Factors of Analysis

1. Historical Performance: We track the sales and earnings of the industry and see if there is an increasing trend.
2. Permanence: We see if the industry will survive in the long term.
3. Government Attitude: We evaluate if the policy of the government will provide support to the industry. This includes legislation, taxation and trade barriers.
4. Labor: We see if the industry is labor intensive, in which case we have to evaluate the union power and conditions in that industry.
5. Competition: We compare the performance of different firms in the industry and the average performance across different companies.

Information Availability

Information about the industry is available from the government, investment services, trade publications and indexes.

The industry study enables us to narrow down the investment decision before the individual company is selected.

Investment

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