Its about analysis from the industrial prospective

1. INDUSTRY ANALYSIS
BY
AMLIN DAVID

2. What is an Industry?
Webster’s dictionary defines industry as “ a department
or branch of a craft, art business, or manufacture.” And
more specifically
A group of productive or profit making enterprises or
organizations that have a similar technological structure
of production and that produce or supply technically
substitutable goods, services, or sources of income

3. Usefulness of Industry Analysis
1. Provides insight into the key sectors or subdivisions of
overall economic activity that influence particular
industries, and
2. To know the relative strength or weakness of
particular industry or other groupings under specific
sets of assumptions about that economic activity. The
analyst with an economic forecast that he has
developed from scratch, or a set of figures that he has
developed from forecasts prepared by others is now
ready to apply this information in an appropriate
industry.

4. Industry classification by product
Industry classification by product does not present a
terribly acute problem for the astute analyst when he is
classifying firms with the basically one product or a
homogeneous group of products. The problem worsens
considerably, however, when he deals with a firm that
has diversified its product line. Unfortunately, today the
latter case is the rule rather than exception.

5. Standard industrial classification
In order to provide an organized reporting framework
for the vast amount of data collected by the federal
government, the SIC was developed. The SIC is the
statistical classification standard underlying all
establishment based federal economic status classified
by industry

6. Industrial division Major groups
A Agriculture, forestry 01-09
and fishing
B Mining 10-14
C Construction 15-17
D Manufacturing 20-39
E Transportation, 40-49
communication,
electric gas and
sanitary services
F Wholesale trade- 50-51
Durable goods
G Retail trade 52-59
H Finance, insurance and 60-67
real estate
I Services 70-89
J Public administration 91-97
K Nonclassifiable 99
establishments

7. The major groups detailed in the table and identified by two digit
codes are further subdivided into three- digit industry groups and,
finally, into four digit industries

8. Parameters of Industry Analysis
Growth of the industry
Profitability
Nature of the product
Nature of competition
Government policies
Availability of labor
Research and development
Index

9. Industry classification according to business
cycle
Another way of classifying industries is in a cyclical framework,
that is how they react to upswings and downswings in the
economy. The general classifications in the framework are growth,
cyclical, defensive and cyclical growth.
Growth industries are generally characterized by expectations of
abnormally high rates of expansion in earnings, often independent
of the business cycle. Frequently this type of situation is associated
with a major change in the state of technology or an innovative
way of doing or selling something
Cyclical industries are considered to be those most likely to
benefit from a period of economic prosperity and most likely to
suffer from a period of economic recession.

10. Defensive industries are those, such as the food processing
industry, hurt least in periods f economic downswing. Defensive
industries often contains firms whose securities an investor might
hold for income. Defensive stocks might even be considered
countercyclical , because their earnings might very well expand
while earnings of cyclical stocks are declining.
The investment press and brokerage firms have coined yet another
classification, that of cyclical growth industries. Obviously, these
possess characteristics of both a cyclical industry and growth
industry

11. Key characteristics in an Industry Analysis
Past sales and earnings performance
Permanence of the industry
Attitude of government towards the industry
Labor conditions within the industry
Competitive conditions as reflected in any barriers to entry that
might exist
Stock prices of firms in the industry relative to their earnings

12. Industry life cycle
The life of an industry can be separated into
1. Pioneering stage
2. Expansion stage
3. Stagnation stage
4. Decay stage

13. External sources of information for industry
analysis
1. Federal government
2. Investment services
3. Standard & Poor’s
4. The value line
5. Forbes
6. Trade Publications
7. Funk and Scott Index

14. References
Securities analysis and portfolio management-
Jonathan and Fisher

15. THANK U