Common Stocks and Uncommon Profits and Other Writings

 
Is the Market Efficient? 
2 7 5 
problems, and the current status of Raychem matters under their juris-
diction. 
In the year or two following this meeting, Raychem’s earnings 
growth developed exactly as might have been inferred from what was 
said there. During that period, the stock was to much more than dou- 
ble from the price of $23¼ at which it was selling that day. Yet in the 
weeks immediately following this meeting, there was no particular 
effect on the stock whatsoever. Some of those present were obviously 
impressed by the picture being presented. Too many, however, were still 
under the influence of the double shock that they had experienced a 
year or two before. They obviously mistrusted what was being told them 
then. So much for the theory of an efficient market. 
What kind of conclusion does the investor or the investment pro- 
fessional reach from experiences like Raychem? By and large, those 
who have accepted and been influenced by this theory of the “efficient 
market” fall into two groups. One is students, who have had a minimum 
of practical experience. The other, strangely enough, seems to be many 
managers of large institutional funds. The individual private investor, by 
and large, has paid relatively little attention to this theory. 
From this experience gained in applying my personal investment phi- 
losophy, I would conclude that in my field of technological stocks, as the 
decade of the 1970’s comes to an end, there would therefore be more 
attractive opportunities among the larger companies, the market for 
which is dominated by the institutions, than among the small technolog- 
ical companies where the individual private investor plays a considerably 
bigger role. Just as some ten years earlier those who recognized the folly 
of the then prevailing concept of the two-tier market benefited from rec- 
ognizing that particular nonsense for what it was, so in each decade false 
ideas arise creating opportunities for those with investment discernment. 
CONCLUSION
This then is my investment philosophy as it has emerged over a half cen-
tury of business experience. Perhaps the heart of it may be summarized 
in the following eight points: 
1. Buy into companies that have disciplined plans for achieving 
dramatic long-range growth in profits and that have inherent 

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