Common Stocks and Uncommon Profits and Other Writings

FOOD MACHINERY AS AN
INVESTMENT OPPORTUNITY 
As 1931 unfolded and I cast about seeking an opportunity for my infant busi- 
ness, I looked upon Food Machinery’s situation with increasing excitement. 

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Recognizing the costliness of my not having taken the trouble to meet 
with and judge the managements of the two local companies in which 
I had lost such a large percentage of my investment a few years before,
I determined never to make this mistake again. The more I got to know 
the Food Machinery people, the greater my respect for them grew. 
Because in many ways this company, as it existed in the depths of the 
Great Depression, was a microcosm of the type of opportunity I was to 
seek in the years ahead. It may be helpful to explain just what it was that 
caused me nearly a half century ago to see such a future in this partic- 
ular corporation. 
Parenthetically and unfortunately, I did not carry my policy of in- 
depth field analysis through to its logical conclusion in the immediate 
years. I was less diligent in getting to know and to judge managements 
that were located in more distant areas. 
In the first place, even though Food Machinery was relatively small, 
it was a world leader in size and, I believe, in quality of the product line 
in each of the three activities in which it was engaged. This gave the
firm the advantage of scale; that is, as a large and efficient manufacturer 
the firm could also be a low-cost producer. 
Next, its marketing position was, from a competitive standpoint, 
extremely strong. Its products were highly regarded by its customers. It 
controlled its own sales organization. Furthermore, its canning machin-
ery lines, with a large number of installations already in the field, had a 
“locked up” market of some proportions. This consisted of spare and 
replacement parts for the equipment already in the field. 
Added to this sound base was the most exciting part of the business. 
For a company of its size, the firm enjoyed a superbly creative engi- 
neering or research department. The company was perfecting equip-
ment in promising new product areas. Among these were the first 
mechanical pear peeler ever to be offered to the industry, the first 
mechanical peach pitter, and a process for synthetically coloring 
oranges. Oranges from areas which produced fruit with the most juice 
was at a competitive disadvantage because the product looked less 
attractive to the housewife than other types in which intrinsic quality 
was no better. At only one other time in my business life have I seen a 
company which, in my judgment, had on the horizon as big a dollar 
volume of potentially successful new products in relation to the then
existing size of business as was the case with the Food Machinery 
Corporation in the period from 1932 through 1934. 

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