Common Stocks and Uncommon Profits and Other Writings

2 9 2
 
T 
Taxes 
capital gains, 108, 111, 277 
income, 39, 118–119 
Technical effort, 183–184. See also Research and development 
Technology, competition in, 203–204, 254–255 
Texas Instruments, Inc., 149–152, 193–195, 245, 246, 261–262, 263 
Third dimension, of a conservative investment, 198–206 
Three-year rule, 244–247 
exceptions to, 247–248 
Timing 
of appraisals, 209, 243 
of buying, 89–104, 153–155 
market, 248–249 
of selling, 105–113 
Trade associations, and data, 45–46 
Trade names, 202–203 
U 
Union Carbide, 50 
Unions, 65–67 
V 
Vintage years, 257–259 
Vivid spirit, 187, 189 
W 
War scare, buying on, 144–147 
What to buy, 47–78, 79–88 
When to buy, 89–104 
When to sell, 105–113 
World, changing, 191–192 
World War I, 146, 156, 223, 244, 256 
World War II, 96, 146, 233, 244, 252, 256, 264, 266 
Y 
Young companies, 84–85, 86, 123, 142–144 
Z 
Zigging and zagging, 242–243, 244, 248. See also Appraisals

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Document Outline

• Common Stocks and Uncommon Profits and Other Writings
• Contents
• Preface: What I Learned from My Father’s Writings
  • THE FIFTEEN POINTS
  • GOALS VERSUS SCUTTLEBUTT
  • MUCH MORE AVAILABLE
• Introduction
  • BEGINNINGS
  • MIDDLE LIFE
  • WHAT KIND OF MAN?
  • THE THREE W’s
  • SIGNIFICANCE—THE MIRROR IMAGE
• PART ONE COMMON STOCKS AND UNCOMMON PROFITS
  • Preface
  • 1. Clues from the Past
  • 2. What “Scuttlebutt” Can Do
  • 3. What to Buy: The Fifteen Points to Look for in a Common Stock
    • POINT 1. Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?
    • POINT 2. Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited?
    • POINT 3. How effective are the company’s research and development efforts in relation to its size?
    • POINT 4. Does the company have an above-average sales organization?
    • POINT 5. Does the company have a worthwhile profit margin?
    • POINT 6. What is the company doing to maintain or improve profit margins?
    • POINT 7. Does the company have outstanding labor and personnel relations?
    • POINT 8. Does the company have outstanding executive relations?
    • POINT 9. Does the company have depth to its management?
    • POINT 10. How good are the company’s cost analysis and accounting controls?
    • POINT 11. Are there other aspects of the business, somewhat peculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competition?
    • POINT 12. Does the company have a short-range or long-range outlook in regard to profits?
    • POINT 13. In the foreseeable future will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing stockholders’ benefit from this anticipated growth?
    • POINT 14. Does the management talk freely to investors about its affairs when things are going well but “clam up” when troubles and disappointments occur?
    • POINT 15. Does the company have a management of unquestionable integrity?
  • 4. What to Buy: Applying This to Your Own Needs
  • 5. When to Buy
  • 6. When to Sell: And When Not To
  • 7. The Hullabaloo about Dividends
  • 8. Five Don’ts for Investors
    • 1. Don’t buy into promotional companies.
    • 2. Don’t ignore a good stock just because it is traded “over the counter.”
    • 3. Don’t buy a stock just because you like the “tone” of its annual report.
    • 4. Don’t assume that the high price at which a stock may be selling in relation to earnings is necessarily an indication that further growth in those earnings has largely been already discounted in the price.
    • 5. Don’t quibble over eighths and quarters.
  • 9. Five More Don’ts for Investors
    • 1. Don’t overstress diversification.
    • 2. Don’t be afraid of buying on a war scare.
    • 3. Don’t forget your Gilbert and Sullivan.
    • 4. Don’t fail to consider time as well as price in buying a true growth stock.
    • 5. Don’t follow the crowd.
  • 10. How I Go about Finding a Growth Stock
  • 11. Summary and Conclusion
• PART TWO CONSERVATIVE INVESTORS SLEEP WELL
  • Epigraph
  • Introduction
  • 1. The First Dimension of a Conservative Investment
    • LOW-COST PRODUCTION
    • STRONG MARKETING ORGANIZATION
    • OUTSTANDING RESEARCH AND TECHNICAL EFFORT
    • FINANCIAL SKILL
  • 2. The Second Dimension
    • 1. The company must recognize that the world in which it is operating is changing at an ever-increasing rate.
    • 2. There must always be a conscious and continuous effort, based on fact, not propaganda, to have employees at every level, from the most newly hired blue-collar or white-collar worker to the highest levels of management, feel that their company is a good place to work.
    • 3. Management must be willing to submit itself to the disciplines required for sound growth.
  • 3. The Third Dimension
  • 4. The Fourth Dimension
  • 5. More about the Fourth Dimension
  • 6. Still More about the Fourth Dimension
• PART THREE DEVELOPING AN INVESTMENT PHILOSOPHY
  • Dedication to Frank E. Block
  • 1. Origins of a Philosophy
    • The Birth of Interest
    • Formative Experiences
    • First Lessons in the School of Experience
    • Building the Basics
    • The Great Bear Market
    • A Chance to Do My Thing
    • From Disaster, Opportunity Springs
    • A Foundation Is Formed
  • 2. Learning from Experience
    • Food Machinery as an Investment Opportunity
    • Zigging and Zagging
    • Contrary, but Correct
    • Patience and Performance
    • To Every Rule, There Are Exceptions . . . But Not Many
    • An Experiment with Market Timing
    • Reaching for Price, Foregoing Opportunity
  • 3. The Philosophy Matures
    • E Pluribus Unum
    • History versus Opportunity
    • Lessons from the Vintage Years
    • Do Few Things Well
    • Stay or Sell in Anticipation of Possible Market Downturns?
    • In and Out May Be Out of the Money
    • The Long Shadow of Dividends
  • 4. Is the Market Efficient?
    • The Fallacy of the Efficient Market
    • The Raychem Corporation
    • Raychem, Dashed Expectations, and the Crash
    • Raychem and the Efficient Market
    • Conclusion
• Appendix: Key Factors in Evaluating Promising Firms
  • Functional Factors
  • People Factors
  • Business Characteristics
• Index
• EULA