sesdaqfan wrote:Hi Sanny,
I read your post differently. I interpret it to mean when playing with blue chips, one should do the top-down version whereas the opposite apply for penny stock.

below paragraphs are taken from investopedia:
Bottom-up investment (our mangosteen): an approach that de-emphasizes the significance of economic and market cycles. This approach focuses on the analysis of individual stocks. In bottom-up investing, therefore, the investor focuses his or her attention on a specific company rather than on the industry in which that company operates or on the economy as a whole. This approach assumes that individual companies can do well even in an industry that is not performing very well. Making sound decisions based on a bottom-up investing strategy entails a thorough review of the company in question. This includes becoming familiar with the company's products and services, its financial stability and its research reports.
>>> Sanny (this is a nice name indeed) is still reading the New Wizard book, page 221, the example is in Driehaus's trader casestudy, whereby he believes in greater profit opportunities in high growth stock, usually stocks with high P/E ratios ...
Thus, let us look at
top-down investment (our durian): an approach that involves looking at the "big picture" in the economy and financial world and then breaking those components down into finer details. After looking at the big picture conditions around the world, the different industrial sectors are analyzed in order to select those that are forecasted to outperform the market. From this point, the stocks of specific companies are further analyzed and those that are believed to be successful are chosen as investments. An investor may use different criteria when deciding to employ the top-down approach. For example, an investor may consider such factors as geography, sector and size. What is important with this approach is that a big picture perspective is taken first before looking at the details. Although there is some debate as to whether the top-down approach is better than the bottom-up approach, many investors have found the top-down approach useful in determining what sectors are superior.
>>> yes, stanley druckenmiller was quoted with his mentor George Soros for tasting "the durians" ...