Question

What is the bottom-up approach. How bottom-up analyses stock selection ?(from financial performance & management performance) The disadvantage about the bottom-up approach?

Answer 1

Bottom up refers to the approach where analysis are done from the individual stocks and then goes towards macro-economic cycles.

Bottom up approach of stock selection refers to firstly analysing the stock then the particular sector and then the industry.

For financial performance, in bottom-up approach firstly fund managers evaluate a particular company, evaluates its opportunities and also keep check on macro-economic variables.

Disadvantage of this approach is that it ignores the macro-economic influence that may affect the stock.