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Fifteen Points to Look Out for in a Common Stock
Some of the learning points I took from the first of fifteen points:
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?
a. Economies of scale as a
result of better cost controls can at times create enough improvements in net
income to produce a one-time increase in market price.
b. A changed condition occurs
and opens up a large increase in sales for a period of very few years, after
which sales stop growing.
c. Both the above points do
not offer the opportunity that should interest those desiring to make the
greatest possible gains from their investment funds.
d. Companies which have
consistently shown spectacular growth decade by decade might be divided into
two groups:
i.
Fortunate and able ? e.g. ALCOA where the management had great vision
and found itself in a better industry that the one envisioned by its earlier
management.
ii.
Fortunate because they are able ? e.g. Du Pont where the company?s
brilliant business and finance judgment teamed up with superb technical skills
to achieve high sales volume. Motorola
is another example.
Are there any recent examples of companies which have been able to do this? And how do you spot these companies?