Financial Education

Bottom up investing describes investors who focus on company-specific fundamentals to build a portfolio rather than on macroeconomic indicators or themes. Bottom-up investors look at a company’s revenue, earnings, cash flow and product development to determine the best opportunities for investment. The focus is on the individual company’s prospects rather than an overall outlook for the stock market or economy.  Typically bottom-up investors will start by screening the investment universe for a desirable trait (such as a low P/E multiple) to identify candidates for further analysis. Finally, the best companies will be chosen from that list.

Many bottom-up investors will combine their research with a top-down approach. For example, they may focus on the best stocks in the sectors most likely to benefit from global trends or conform to certain sector weights to balance risks.

For more information, see all articles on: Active Management, Fundamental Analysis, Investing in Stocks, Portfolio Management, Security Selection

See also:

Compound Annual Growth Rate (CAGR)

Analyzing Sales

How a Company Treats Reimbursable Expenses

How and when do companies recognize revenues?

Market Movements and the Business Cycle