Common Stocks and Uncommon Profits and Other Writings

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is also not an entirely unrealistic expectation of results. In that case, the 
$10,000 investment would have shrunk to $4,270. On the basis of this 
comparison, there might be, in less than five years, a difference of
$48,000 between a wise and an unwise investment program. 
A year and a half later, when I also taught this same course, I repeat- 
ed the exact same exercise, with the exception that instead of using the
letters A and T, I selected two different letters in the alphabet from
which to form the sample of stocks. Again, over a five-year time frame, 
but with a different starting and a different closing date, the degree of 
variation was almost exactly the same. 
Looking back on most markets of five-year duration, I believe that 
one can find stock performance results that are about as disparate. Some 
of this dispersion may come as the result of surprises—important new 
information about a stock’s prospects that could not be reasonably fore-
seen at the outset of the period. Most of the differences, however, can 
be anticipated at least roughly both in terms of direction and general 
magnitude of gains and losses relative to the market. 
THE RAYCHEM CORPORATION
In view of this kind of evidence, it is hard for me to see how anyone can 
consider the stock market efficient, again using the word “efficient” as it is 
used by the proponents of this theory. But to belabor the point further, let 
me take a stock market situation of just a very few years ago. In the early 
years of the 1970’s, the shares of the Raychem Corporation had consider- 
able prestige in the market place and were accordingly selling at a relative- 
ly high price-earnings ratio. Some of the reasons warranting this prestige 
may be perceived by some comments made by the company’s Executive 
Vice President, Robert M. Halperin. In outlining what he called the four 
cardinal points to Raychem’s operating philosophy, he stated: 
1. Raychem will not do anything technically simple (i. e., some-
thing that would be easy for potential competitors to copy). 
2. Raychem won’t do anything unless it can be vertically integrat- 
ed; that is, Raychem must conceive the product, manufacture it, 
and sell it to the customer. 
3. Raychem won’t do anything unless there is a substantial oppor- 
tunity for real proprietary protection, which generally means 

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