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Fisher Investments on Telecom by Andrew S. Teufel, Dan Sinton, Fisher Investments

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Chapter 7

THE TOP-DOWN METHOD

If you’re bullish on Telecommunications, how much of your portfolio should you put in Telecommunications stocks? Twenty-five percent? Fifty? One hundred percent? This question concerns portfolio management. Most investors concern themselves only with individual companies (“I like AT&T, so I’ll buy some”) without considering how they fit into their overall portfolio. But this is no way to manage your money.

In Part III of this book, we show you how to analyze Telecommunications companies like a top-down portfolio manager. This includes a full description of the top-down method, how to use benchmarks, and how the top-down method applies to the Telecommunications sector. We then explore security analysis in Chapter 8, where we provide a framework for analyzing any company and discuss many of the important questions to ask when analyzing Telecommunications companies. Finally, in Chapter 9, we conclude by giving a few examples of specific investing strategies for the Telecommunications sector.

INVESTING IS A SCIENCE

Too many investors today think investing has “rules”—that all one must do to succeed in investing for the long run is find the right set of investing rules. But that simply doesn’t work. Why? All well-known and widely discussed information is already reflected in stock prices. This is a basic tenet of market theory and commonly referred to as “market efficiency.” So if you see a headline about a stock you follow, there’s no use trading on that ...

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