Understanding the entire inductry, not just the business you wish to invest, is important before you begin your investment.
For instance, you might only be interested in the stocks of American Express and Discover (DFS), not MasterCard (MA) and Visa (V), the other two credit card firms. Some investors might only decide to learn more about it. However, I will advise you to look into American Express, Discover, MasterCard, Visa, and any other competitors rather than focusing solely on American Express. You will gain a better understanding of your organization by conducting the industry research. Here is a step-by-step explanation of how to conduct inductry research.
Step 1: Find an industry-representative index.
You can select relatively significant corporations first with the aid of the index. You can of course begin your investigation from this group of organizations after you choose them because the significant corporations they selected are representative, which is the equivalent of giving you a direction first.
For instance, utilize the Philadelphia Semiconductor Index as a benchmark if you wish to research semiconductors.
Read more: Top secrets about the semiconductor industry → Know99
Step 2: Examine the complete industry chain’s upstream, midstream, and downstream components.
We’ll discuss it today from the standpoint of demand transmission, just like the semiconductor industry supply chain.
Downstream
Downstream is typically the IC design companies. There are numerous well-known firms, and there are undoubtedly included in Philadelphia Semiconductor Index as well, including NVIDIA, AMD, and Qualcomm. As a result, the index in the first Philadelphia Semiconductor includes all of the large, well-known star companies and covers the majority of downstream IC design firms in semiconductors.
Midstream
Then, for the midstream, there might be semiconductor package companies such as Ankor. However, Philadelphia Semiconductor Index seems to have recently eliminated Ankor. This rationale does not imply that all companies must be included in the index; rather, it is based on a weight and contains a screening procedure that selects companies whose market value and weight value meet certain criteria. Despite the fact that Ankor recently experienced a significant decline and was thus dropped from our index, it was still exploitable when the economy was booming. Thus, Ankor can represent the semiconductor’s packaging, and occasionally the Philadelphia Semiconductor Index will include it as well.
Then, another part of the semiconductor industry is manufacturing, like GlobalFoundries. The Philadelphia Semiconductor Index that we just discussed will also cover this. TSMC’s ADR TSM was also included. Despite not being a US-based company, TSMC was a top global IC manufacturer. You can therefore see that it is the same as before; it covers the midstream’s manufacturing link as well as industry titans like TSMC and GlobalFoundries.
The major manufacturers of semiconductor equipment that we frequently discuss, such as Esmore, Applied Materials, Kelin R&D, and Kelei, are all included in the Philadelphia Semiconductor Index if it is considered farther upstream. Once you’ve read it, you’ll realize that the Philadelphia Semiconductor Index covers almost exclusively semiconductor industry behemoths while also covering the upstream, midstream, and downstream.
So, if you’re interested in learning more about semiconductors today but aren’t sure where to begin, I’d recommend starting with these Philadelphia Semiconductor Index businesses.
Take home messages
The simplest way to get yourself to conduct thorough industry research is to convince yourself that you will eventually buy these stocks. Consider industry research as a collection of distinct businesses that you can analyze rather than as a huge, ambiguous field. You can understand the entire industry without being restricted to any particular stocks by studying businesses . You’ll remain engaged and motivated as a result. By doing so, you can keep your attention on a particular industry as well as a stock that you might buy in the future if the price is right.