100 to1 in the Stock Market by Thomas W. Phelps A distinguished security analyst tells how to make more of your investment opportunities McGraw-Hill Book CompanyCony © 1972 by Thora W. Pet ono mai, ri ya er sr oat he aia, ‘HSCEODPRPOITSD ihn Gong Cag ia aia Book dsp Wy Cine Aisin Contents Prstace fcwaPreR 1 Asky and Te Shall var mSlabady Valley f Diamonds Cunt s Leaening fren Elephants CHAIR 1 Lemmings Follow the Crowd unin VPoreigh ve: Tenaciy cinerea vi Wed Die fr Dear Old Globe & Rutgers Ccuavren vn The Tree Does Not Grow tothe Sky 12 Given You ‘cuseren vat Hw to Argue and Win ‘cunrren x Pigring the Odds ‘cuarren x The Quality of Earings I Strained ‘uae x1 Manipulation Despite the SEC ‘cuavren xa Keep Your Eyes Open on Those Random Walks ‘cuavren xm Espetence Sometimes Poor Teacher se Work exarsen x10 Why Computers Wont Rat cunrten xv Profits Btlcn unten AVE ‘The Almighty Ego ve dhe Almighty Dollar couseres xv No Inflation Control Pa Money Ioltion seaese ua us m ns a8 m 1st 151 17 ogTere : Bons vos Sc egret Pong dhe Right One couavten xix Where 1 Look forthe Big Wie fonarona xx Get Away from It A The Infernal Cay (4 Not Too Late 1 Younger Generation cowarnen xxi) Cheer for waren x3 ow to Avoid Mist dhe Boat Next Time Ccenrutn xxiv “lay Right and Hold On” in Practice cuarsen x36 Do Yourself? ceuseren xivt A Senne of Values ‘eugeri scovit What Makes Stock Grow cexgrven x01 Real Gromth—How to Spot Mand Evaluate -rapLES ‘Tne t 365 Millonsre Maker Stocks “rane Price Lt of Fortune Maker Socks ‘TasLe mt (Appendis) Breeder Reactors ta the Stock Market m m7 a ast 1s Preface “Thi sa story, no fetion of undo of opportu siento make sll dlr inthe sock market by vesting ‘510,00 i jst ome stock and hein on nae not nocesry to ick the one ight sek oF we One righ time to invest. Starting with 1922 w diferent sock could Inve ben ought in each of thir iferen Sous, ad ‘very dollar Ivete sruld have gown (0 S100 oF me by “The ltt milionsiremaker scourity was avulube as ro cently 21967 {percent ols 1971 tnarket value. The book ist more than ferent sours valued va 1971 at more ‘han 10 dee four to forty girs ago. It tel ow they ook bet tire and sagpets how the neat potential hig winners may be ecogzed in advance, 100 1 he Stock Merkerauompis to look w tomorrow anlharta course to help every investor small or large, novice ‘€profesional improve bis sere "Poe anor acknowledges with many thanks the Belp of the Indico ited inthe ok. He i partially graf to Souder, Stevens ind Chi forthe chats reproduced herein find Tor access tothe firms vor rexearh facies, without Ich this bok could not have Been writes. "To the auors wife, Chisine Reed Pheips, this Book is oticted in rosomition of Ret soatnbuion of tho Ue and her patience and laspation while he did the research and Iammered out the txt100 to1 In the Stock MarketCHAPTER 1 Ask, and It Shall Be Given You Out ot it came an ancl Etch of you can have one wish” the angel sal ‘raise be t0 Allah” enultod the fist Arab to sate kis breath. "Give me x dombey>" Tasty a donkey sto a his side. Foal” though We wsond Ara, “He should have asks foe “Give mo ten doakoys." the second Arab hese. Nosoner std than done, had ten dey ‘The td Arab had ard a seem how the fist 0 ad "To Alla hing» are pon." e sid. “Give mea caravan with hundred camels a hundred doakeys, ent obs ood, "They came so fart thatthe died Arab way ashamed 10 be seen it his age before such an entourage” But bls sham did ‘ot lat long Defy his servants deme! hin in robes elt "The fourth Arab was more than ready when his turn came Make mea king” he commanded So quickly dil the crown appear om bis Hen tht he brs his Kouekle seatching where sm natant before there ad been odin But am ick The palace gurden stretched out butore Fim aloe as far asthe eye could se, and the pane frets reached 0 high their pennants were ft Inthe desert ast Having seen his companions i miery ask too ile, the {uly Arab enlved eo make no such mistake, Ps slept. the sand. A righ High wake theme1010 Fin the Stock Market 2 Make me All!” he ordered + Ina flash he found bine naked on the sand, covered wit (Fhe moral, of course, that how of ws who ack fle of ite ge le, Tove who ase much pet mh, Those who sak ag much ge novhing. ‘Bat strange sv Hy seem, homan greed being what 5 moat of ustmake the mise of asking for one dukey. Pow ‘Nowhere i his more tue than in investing. Moat ty to snake a few pots qicly on her toch marke speculations, ‘reontem temelves with or 5 pereent on their saving. Not ‘ne ina towsand sero pans snd ats one rs To make Sorte: Mose do mot Daleve hey have a chance, When they fee others, they sve thelr epor by crying “eal” of side infomation” or "born the righted ited trying to find oot bow i wes done. Even wen fate pots the ples thelr bands they drow Kay tine ater tine. Some nn rei the ue to Cs in their wining, however small Stern sil’ goo sock to got int something That seems eters parhapt Beene Hs moving. Ther he fate ofthe ogin Acai fable. You remember, the dog lost the piece of fat in his mouth by snapping a seemingly Lager pce ew busiench a more cused by halftruts od specious ‘manne than Wall Sire But eve there, where tbe compet thon in wch matters Keen would be ard finda wore skgan tha “You never go broke takings profi.” Fortunes are made by buying right and boing on. Now snr Wal Sct te afcted by having more Baines than it ‘cam handle, even brokers mipht preach ths gonpel wid much tenefit to thei customers and na hart thee own Tong range ‘owt interest, Few do ‘Since 1992 more than 3 efferent securities have increase ‘one hundredfold in market value inthe United States not 1 ome interim price peak butt ted value i 19. Many have ‘been much higher in prior year "What nonsense fo ny the Oppoctuity knocks but once. Ask, and Ue Shalt Be Given You 3 ihn ran bg cts Serle tee gatee center Teeth eects satan lin it etaley mecten «unre te oon a a serpy fh me in acm sate Se Al gh i ar pctebesan tue aes We at ae os Ge cat val eatin males ugh aes at =e Ect Daa ser ptr inthe gat a em ofS font Goma el Gael etl ome livaie Cains ones nes oc ote sal ate bee ace fee peo Be Sonepat fell siveonle ere wiooe ea icchncees Maelo ue waa Sou aero s “ate eel withthe oie i te i TiS legge trator Sn Tite nb toh ree olan et gee oer ae ae aa Pci ocas mestee aera og oes Tiana yoo ta heen um cae Zane rk pn a pn a ib ce cordesaa ing Gere te otese aroms/f lett be snl Sheer sve mllate agaist rest gow 10 to Fin the Stock Market 4 prinarly the value of bis secuky portoli T white and lama Me. Blak how id you So To which he reid T never sell anything” Me Blank igh sve aed that Be had ba he good jo) tment of god forte not to bey what should have been Tien Blan, Poel Gare san wo eter waked one donkey. Finacial editor ofthe old New York Evening Port" wa wooed aay by Aled . Sloan, het become ¢ General Motors ce prcsdent in charee of pubic relations. De Garett wa theft man Yo ain that i nee com Posie Industy The story of his plonering work there mers took oft own, bt here we ae dele with investing. In 195t, atthe agro sixtsfour,Teing mandatory retirement fn the end of the year, Mr. Garrett deermied to make is Tat years his Dest years ater than sit ow the testo his ie 2 9 many petsones do, is tol was 10 eres Rs capitan order to increase bis power to hep oters Having to hilren he was ot hee ‘le. He decided the way to rea i suing fst enous | toccunt at his age was o vest na fat rowing company He hepa hs sere for oe ha et these frente i en mee are ee es ioe ea intent ariel Race comrasrces a Siclin outed hanes met erst ‘Sodan a any ck exw ome pans Cie eae cea ee ete] fies oie ie ae eee eros ‘wasn wl pop a ca gone ot Se mut te song pope, romain Ia a in i yn ip oti ince war ie Ss iy ned ts ah | Ts odton fig vase ns hack eb sto ee aa erat reese Tic Sac bt oma bat he i have eno Wal Ask nd iat Be Ginn You Sasi Cage” ‘Sweet adn business Some of them were advising or managing peoson funds. Widout seeking any confidential information Ni- Garrett asked for the names of any teller tha sual Investments of innittional money. He ws loohite far alacks yy profeional buyer liked but we-auLsus-ok Before he ‘as rouge had ity stocks rom whch to choowe Since is goal war 6 make big money he didnot make the common misake of buying a Hele of each ofthe ity. People who tet ‘nl ofthe homer ina aon always have & winger but never take soy money. ‘Me. Garett winnowed out al ut thse by suing Financia reporis and analyses. Then he mae what security alt eal eld trips to those three. vstng with thir chit executive flict. Pally he settled om one, Haldd, ow Xeroa, and Invested $180,000 fs stock between 1955 an 1959 He bas ‘ore than S000 shares which cst SL sire for stock ‘hich in 971 sol above S25 sore ‘Sounds easy but Mr. Garcet fit had to find the stock he wanted. Then be hd to uy tn the face of recommendations ‘ants by poop who ether knew noting about yor ad es they liked beter, oF beloved in diversion no mater What. And finaly hed Yo okt on, am uy moe, ayant Fepeated "sell ecommendations bo boyan {© receive. ven lore the sock fd doubted fn price Te would be mislendlas to otber investors thowsh and untae to Me Garret 1 let the impresion that hy fortune fall ‘owed to sage icky tock selection. He algo owns 80800 Shares of Telepromper at an average cost of 73e share (i sold ove $30 last your) and har x stantial bck of MCalloct (it stock. Te vel bss of is Waal ig "hay right and hold ‘on formula he ae follow nil for many year es itwork? Bven after lai isuttiaalhensfastons nee 199, be security holdings the etd of 1971 had @ market value of move than SIAN Hs bod fo aegue wi 314 00 0 What docs a'man of ety want wih so much money? Does he know be ent take with hin? Mr Garrett hasan answer to tose questions (0. His wie 4 of cancer, One millon doles fas gone into a cancery oth en 410010 1 nthe Stock Markst reseofeh fund with an ysl peousion for the invasion of Principal i'n the opinion of the trustees 3 "breakthrough ‘Een near enough wo warrant acecerating the program. “Asecond mili dolas tas gone his lim mater, Whitman Clisge, at Walla Walls, Washington, oat of eppeeciation of and indie ‘he education! harain he got mor as a young hope that boca gis other men a beter beak °R third milion fae been vem to. Columbia University's Graduate School of Busine fra cat on "The Public Prob- Tems and Responses of Business” Me. Garet's purpose tind bope are to prepare buses sewens to be corporate ‘het exccutves even though most of them never ean be. TRE txcoutive sie not big enough. What matters is that dose Soho dot there Anow the ul dimension of hej, od are {ale o handle. Me Garretts Reenly ware thi special ined taining in lnanes, wahotng, manufactring oF even ‘esearch, that mont succes exceutives receive 08 thet WHY to the top docs mot propare them forthe sosal and poical ‘hllenges that confront the ciel executive. AL George V. Holton; retired chairman of wal x now Mek! Oi Corporation, Conducta ells that the people of that country are beter ves, that company ir Hving on borrowed time” Mr. Holton foreign county but must se 0 that te people of that ‘county know itis doig 5. And even then, Mt Holion com ‘hadedy 2 sompany operating arom ima find inl fa bot Sener unless ite representatives can wn for tenselves pet onal the expect nd triendaip of the naonals where they Mi. Garrett poes oven ferthe- He chinks In our apialy changing wold, Helton’ wads app #0 domestic corpors ‘ious x wal "When the chips are down. mo man’s tle 1 any property tis Hone, his atonal, his sacks a honda worth a6) ‘more than the ability snd wilimgaes of his fellowmen 10 Gotond ic Me Garret hopes that higher proportion of the Dot ite “Unllws a company opersting in a foreign country fs ‘off net. after the company fis realized Is prof, than they | (would be M they natonalined the company and eon 1 them: | tha such a company bot only must operate to benelt | (Wageen OS sk? ONY Vor enon PIN goa nly 9° soa ee ay Pitncton eeu. Hea sold some acreage f¢ 100 tes what ric paid mc sme andeered compliment and Usa "Kal tue dig ek Me Pt opie Tn 19251 personaly (Seer cseres aetna [nese dys Todey they wos be worth two ilion dlls oonia berm gente foie eros eapetetied ‘Ak, end Ii Shalt Be Giver You ty opp to your ow are tyiag to persuade yu to ct every Sofie hermes mein P| eEXicnnty poole shove intrest correspond with yours ‘Setned Shen sn Tere news cto of The Wall ae100101 the Sock Maker 4 a i ee Sere rsa Boece ee eee | cenea ee eee ees eee res ee ee ees ee er ee ecaUie Mngt opie oor ee ea ee ge eeu fe wna WhO YoU ®t DD ween d ge want Keay Ov stcoaneg Ten MENS. Agen oA YR toe. Sinbad’s Valley of Diamonds marked to me, "Anyone who can puis haods on 10400 to invert inthe stock market a thas pices Ie a fit man” Atte ime coed his comment to ee quip tht ite hal sone aim wo have sce har an egg we bad fomecegs That was boca aid not have 31000 or anything Te infact the market was wheres was Bouse Vey Tew people did have 810000 wo invest ‘Brezyene knows now thatthe sock market in 1932 was Iteraly studded wih soaks which a vestnent of $10.000 ‘would te worth 31 silion oe more tay. Ie wat not even Tecemary to go cutside the DowJosesInduseal Avera to {lad then Easan Kodak was one. In July 1932 1.000 thores changed hands at prices ranging from 3.1/4 to 45:58. Bren at ihe mons hgh, SIQOI0 woul! have bought 219 aves of Eastman Kodak. ody to buyer of those 219 shares ‘would have 1191 shrge without ever ving invested another {alan or peda penny of taxon hs gins The 1971 vale ‘exceeded $1100.000, ‘Mont the incite eho bought Eastman Koda stock in Joly 1982 probably ave dead by now ue thee eis are ale, nd so are most ofthe ations which were inthe market a 1902 I wonder f anyone, sodvdoal oF istitaton. sl hs Easnan Kodak stock bout at | peocnt of is arent macket ales doubt but would be ial to be peoved rong. And Jet ktow of po netton that has increase the value of ts investment portoln by anything hike 100 tnes wince 1902 without adding capital, and witout paving any brokerage ‘Commision or capital gains es. E& i the summer of 1952 an later In Wall Stree °¥. dom, EVs 1010 ¥ nthe Stok Mere 0 ‘ewes not even necessary to buy Easman Kodak in 1932 19 sake 100 for one on sour money. Exxtan Kodak stock could Mil ve been bowgt on the New York Stock Exchange In 1932 a prices es than 1 percent of 971 market values ‘Bat this is bindghe How hd Eastin Kodak ok i 1982 and 1933" er share earnings in 1932 were $2.82, down from 39.7 in 1020, But the pice of the stock was 31/4 athe 192 lo and eat the 1998 tow, compared wih is 1929 high of 2040/8, Eamings weee down 74 percent fom thee hgh, wile the price twas down 87 percent in 1932 nd #8 percent in T5X)from he, 120 peak. ‘The peice camings rao hid dropped trom about 28 times record high eamings to (1 Unie depression 1oW farnge, O89 5937 — SIT. 14 X 32.52 = 535), ‘Compared withthe DowJones Industral Averaxe, Bas Ka stock did very wel the 1929-32 bear market. As the telotive price ehart® show, Easton Kodsk stocks prise Sinbat’s Voy of Diamonds " Improve sharply computed wih the Dowones average, fom 19291 192. The company had oneal nthe photograph {ioe some reton one dno ike Eastnan Kodak in 192, ‘he could hve bought the sock af the leading te and rer Company Conger The sk wld tow of 519 in May, ‘tow of 1/8 in he, anda Tow 0 61/4 i uly 582. Even at Basar, $10.00 ould Rave bows 11 sare of Goodyear Mock. Today the buyer of thee IDL shires won have S25 shares asin atu evr bing pt up notes cle ‘Thoneshares uno mere worth nore than wallow i 97 Like Entman Kodak, Goodyear an in the Dow Jones Indust ‘Average. So was Sonne Roshusk At 1502 Tow, $000, ‘ould have bought 1,000 share, now 24400 shes "Thee ‘Suen 1971 some cloe to 8200800 Unite Easiman Kodak, Goodyear reported deficit of 588000 for 1932. While Gonsyear cared i fted. changes 106 times tht yea, Before minority Interests ed by 4 ‘wide margin to cover i int prefered stock vides ‘Azan whe Eastnan Kodak, Goodyear seh lost ground fro 192901982 a the aesoanying bat shows. Yo oth Esiman Rodek tnd Gonigear have tien one hundreds Since 1982. Goodyear In fast sold in 1971 at ore ta 100 mes fi 1982 low Seas, Rocbuck lo reported def for 1982, bt its rele use pice went noamer thant fd in 190. By dei twos slot a eay 0 iy SODA wn ners 13 Botors the hank olin 1202 Ja oie {few exarpie a random, SIDODD could have been invested in Metile Shoe, Newmont Mining. Philp: Mores or abey Bowes in 1983 oe worth more tin 1 milion i171 I he fit thes months of 1933, ome 2.00 shares of Mette Shoe Sook changod hands onthe New York Stock Exchange Prices ranging fom 834 eo 10/8: ATS, approsinately he {verge price S000 mol hav bgt 1 shares Ty without Ever having pot wp anymore money tbe eyer would have IRS shares salve a 1871 at more than lon “The Newnnt Minn try ach the ste excep that herer EEE ET) And Sinbad’ Vatey of Diamonds 2 buyer ofthe sock atthe 1932 ow would have had moe chan ‘Shining so for this $1000 invests! wie the bayer {tthe 1939 Tow would bate ad only $1,228000, The 1933 low ‘Wee 1112, Attia price $1000 would have bog 868 stares By 197 he buyer of those B® shares had 31248 Newmont slats, wlibout puting up another cent ow did Melle Shoe and Newmont Mining lok a 1982 and Melle Show armed S.St common share fn 1992. Ae its 1982 ow of 7.8 he sock wa sling 5.2 times its earnings for hat year. Newmont Mining carn 22 cons comunon she i 1852. Att 182 lw 5/8 Newinont was selling 211 Relative to Tie Dowlones Industral Average, Melville ‘Shoes preety 1952 wus about wbers i had bown atthe se of 1029, Newmont elative prise 81982 wis down precipitously trom 1929.When you compare the five tative price chur as they looked in 1932 and 1543, eatin ind that adjoting for toch dividends and stock splits, each of the five tues Eston Kovlak, Goodyear Tite, Mevile Shoe, Nenmont Mising and Sears ocbuck has zen to more than 10 times ts 1 and 1909 fos, Yet woof the ive Eastan Kova asa Mee Shoe—were in pronounced relative prise vpttends by 1932 ‘Two others—Goodyear and. Newmont could hardy have looked wore by mid1832, Seas, Rocback while down sharply {rom ts 1929 high was finding support at te 1990 rlatve price bw Their priceamings ratios computed trom thei 132 tows and their subsequently reported 1982 earings were these Sinbad’ Valley of Diamonds 18 Price Earnings Ratio Goodyear Tnealelable Seas, Roebuck Ieee Rewnont 21x Esstman Kodak ux Mele Shoe 52x, icant use ona one ma ac gine ta hea ne tae eae | Deora oe ce teem as mae ios pore i'ten ai sskeoer teeta | Mo Sa coe bea tae To oa sckauaes setter ieee toe tea Gaussian Whew ccyteetrmsme cast! | Sig inci tngead Site iowaraerssy | a a Tee people won av ght Pip Yor 03 a noo docs ny ene se Fay mor ol ted aes raft oho fibers ei EE Ae ag Sete where aes wits Some nerd settee nea ietane nec idlacwr ane et Test ton bres a ba a te coe aan Bete ae ooe prom ee Bt ie Heol ce oat ge Or a ewe oi neg aceite acter ora ace Pu see cg Pony ewe ale tl toned ass namaste nastiest ean, St mkt ete ee 2 en Fem detent inthe Sten cl ace Tin eae td Senet saa poke at fond cbse Mate ceases aaa Pounce ibs thon 0a at st Salo san in epi hae ane ae ssa HS1 10 Fn the toh Market 6 Recitation of hate big winners bocomes resome nt only ‘ees mot of u fale fo fake advantage of them Dut also Because this ll ancient history. Wast do we care if Peter Minuit boaght Manhattan land fr $24 worth of tinket? You And I muat operate i today el extate market "Anvepaing the fie bjectom, Ihave shen in Table That opportunites to vest $1000 for one hundeedold preci thon have heen pres a 320 the fast years~and as tecent- Ips 1! The secures ited ef Table It (ee appends) are {he same ain able tut thy are ted alphabetically tates ‘of being grouped by years of purchase Many stocks othe an thore om my Its have risen more than 10 for aoe in pee in the lst forty years or tess To Initire hindsight fet out any that Were not quoted in Publications valle tu al tthe ie the socutos would Fave had to be bought to show one hundvedfald upprecttion Uy TWIT Every ome {have tod mas quoted inthe all Sicet Gournal Moody’ wane, the. Commercial and. Financial ‘Chromite or the Hank end Quotation Recont mien 1 ws Selig atoms perce oles of IST market value Because 043 and 1989 were omg ago, ith ie chance that we sll ever seo thee lke aga. prides and pose ‘Shy annoying wo spend see te on what could have De ‘Sone with 310,00 those years, Suffice that te stocks Ib fmendonod are merely Musrations of the opportunities that ound in thowe days Ae you ein se i Tate bere were frany more. Remember too, Table not allinlsive even fof nes that would mcee my standards. T merely noted those {ht occurred to me. You may think of many that ave mised But every one you a strengthens my base thesis that the say fo wealth ito buy ight and Rol on “Gpporunides to ura a S10000 investment m0 & milion olla sil wre plenifl fn 1934, Stocks which eome co mind Iiclide Ex CeO and Texas Paste Coat & Ol ‘Sometimes oo eam make frtane I liquidation. Texas Pace Cool & Oil sok in large volume on the New Yor Stock Exchange in Joly 1934 3¢ pices ranging from How of 2U/Asoa hkghotd As nteas Decemlce 19341 soldat alow of 2ais bn 1948 the ck paid a Rock drdond of 100 vercen, Sinbad Voley of Diemonds ” nd a 1958 second sock dvidend of 100 percent. The result tres thatthe buyer at 21/2 1934 found bimeel ooming four {ines as many share as be stared with AU21/2, S100 twould have Bought 4000 shares. Molipled by four those ‘Tn sare became 16000 sbares In 98S and 1964 Texas Pacite Coal & Ol made Iigesating dstibutions totaling ‘S083 ashare. Again the pin more than 10 for one—wi ‘ot allowing for any rere on the guiding distin ‘Shes INH Adsing interest at there oS percent omapounded “annually would tise the toalrtuea from 86859 a shate 8622, less eso che heres Please don't ibe about my Faure o allow for beokerage charges om the purchase, The margin by which the sock Ste execoded $1 milhon in 1971 makes HW unnecesary (0 fnlit financial aes ever commsions EscCalO soldat tow of 34 om Famusry 11, 1904, foe towing slow of 1/4 om Febery 2%, 1938, AC tbe 19M price SHOQ00 would fave bought 2400 aharex Today the bayer ‘would have simost 16 s&s any sates, or something over "22.00 afresh 1971 their market value pase the milion Soils mark The post oppotuniy in buying Ex-Cel-O in 1938 was thie ts te peat, of cours “Taming to 1935, Skil Os cook stil have beam bought on the New York Stock Etchings at ess thant perent of ts 1971 tarke ales The same opportunity or even greater, bad ben provided by Skelly sock 1994 and 1908 [ts 1935 low wat r7zinJanuary. Achat price $10000 wos have bought more than 130 ares Talay the buyee would have 22400 shares ‘ald in 1971 3¢ more than $1 mule "Wat is now koown se Sobeam Corporation was called Chicago Flexible Shaft Corspany un 1985. The best market for the uock then war the Chicgo. Stock Exchange where i {ended in Janay 1935, tr low of 1-1/2 0-8 high of 18 ‘At 5, tho sons high, 310000 would have paid for 665 ‘Mars Hath buyer Hell them ani ow, sitbout ever ying ‘cent of capital guns tates or making @ Jllar of ional fveuunen, he would have 34299 shires agin valve ia 1971 ft more than $1 mi. Except by hndlght these 0040-1 opporteiis im the stock10011 in he Sock Maree 8 market are ard 1 spt. Tes even mote difiut to spot thom. ‘when they come via mergers: Por example another sock that {oul have bee bought for $10,000 ia 1958 to be woe SE ‘lion in 1971 wae Wilcox Ox Company. Wilcox OM © Ga, at Has then called old ata low of Sta share iw March 1938 ‘The bigh that month was 82. Subsequedt sock dividends and a ‘erter wih Tentemes Gan Tranamisdon Company (oo ‘Tennceo) in 1964 gave the buyer of one shar of Wisox in 1085 more thaw 38 shares of Teoneco ia 1971. Thole 1971 rmorket value exceeded 100 tines the 1 purse price ‘Those who bought Tennessee Car Transmission Company Iikewise have made money but not pearly a much ay the fortunate purchasers of Wieox in 1935, By 1538 the Dowlones Industral Average had advanced ‘more than fou ines ts 1932 low. Many of us ele that we had ‘vakened too late wo the opportunites (0 make a Tocane in the stock markst. Bat while we mere bemoaning ex insity fctallure to buy more heavily a 19%, the year I9M6 was pee enting other wee that wou tm $100 nto SI milion oF ‘more by 171, One thom was Lot, now Pepsico, Lat sald on the New York Stock Exchange ata low of 20m Api 28, 1336, ‘and ranged all your botwooa that ow anda hgh of 33/8. For 510,01 one could have tought 3A75 hares of Lett at 27/8, out midway between the your's high od tow Bach of those hares would now be 60 shares of Pepsico. Thx the 1936 Investor of $10.00 in Lalt could have had 21,040 shares ef Pepsico in 1971, worth neal $1.5 nllon, without ever puting sp another cent or tho benefit of thote of us who were asleep in 1935 and 1936, Loft sola 1957 ata low of I aod igh of 37%. Them, ‘ths opportnity, Loft sold in 1938 at a Yow of 75 come wshare ‘ech sea for seven comecitve yours rom 1952 through 1938 to avoid the opportunity 10 tart $10,000 into more thon $1 milion. The stubborness with which we morals somes feet the Bandshinens of Dare Fortune has to be sen to be beloved. Later on we sal eamine more of these isstently persistent opportunity stocks. ‘Hubs Vally of Diamonds » “The sock market broke sharply Inthe fll of 1987. AC the ting the deste was atouted tothe Goveramen?s texting at {tr inflsdybrakes. Gold imports were storied, tha ‘prevented rom incresing the money roppy. ‘The Federal FRescne cated roerve requirements of the member banks ‘And President Rowevsle "Jaw boned agains commodity Drive advances. Inthe sock market there are olten two explanations for a severe deli. Th fist one-—ihat which Ive fut ciled ‘Sstenile and states the ballwise. The second one ithe ‘el reaon which sly seldom Becomes apparent unl oo late todo most nf sx any pood. In th ease the fea fason burst. ‘on the wodkd with the beginning of the Second Werld Wat near the end ofthe summer of 1838. “Te hea aket of 1587 dd not catch me by serps. In 8 “sity in the Pree Movement” pubis on (he Hist page of the Weil Sweet Jownal on September 8, 1933. 1 zepared, | "There seems no dou dh the major wend of tbe market “dbuntware" De DowJonesIndotnal Average cae the next ‘day 165, Ie war moro than seven end a ball yours May 9sbefove he market sold thot high again Yee would hve been much etter of i staat of eorredy forecasting a ther market had focused my attention throughout the detine fon finding socks that would tues $10,000 Ino a illon dak lar. Sach opportunites wore cet in 1937, 1938, in 1833, in ISOM n,n Td 9 a Tae Had | “Tapl Ilabow wien o me, pantalla. "Thote is anor fsson why professional investors, excep | moze managing dsereonary account, should deempasie ‘arket ming. Tha is because even i the market forecaster | Era, he selzom can persue others to at on bis opinion. ‘No-one intends 19 buy toske atthe top of the market 0 fell them a the lows. On the contrary. ball market highs oe ‘ade when the ouok for sill gor press fs most broadly ‘convincing, Conversely bese market lows are made when the | ikeinocd of sit lower pices seems overwhelming 10 the | preponderance of reasnable, weFinlrmed moneyed met ince bull and bear mnikets ae to. conaderabe extent ‘manifestation of hinges i sn pychology ii facts fo100 1 F'n tho Stock Markor y » anyone o belle that he can persade a episentative roup ‘inventovt sl teks when that tae poycclogy balla ‘Srto boy stocks when ir beat Thawce profesional sndestnds this, concentrates on sock selection. Most ves {ors ae far less emotionally involv! in deciding which sock {2 boy orc than they meio deiog whether oe mace sing up or down. To clinch the arguments real emo ae tnt formate money canbe ade by gd ack sles “ot Ie ote 1 the EO abee Spporailes i 193. Skorp & Dohme was actively tae om the New York Stock Exchange in ht joa soldat ow of 614 la Septnbar 33/4 in October 47/8 tm November, a 4 in December “Thus 1 should vo boon easy to invest $10000 in Sharp & Dohme at 86. share. The buyer would have 1.56 shares In exchange for them he wotld have received in 3983 some PH shares of Merk & Company. Those sates Were pt ‘Sort in 1964 ringing the present tla holdings Yo 11313 Merck shes, sated at neat $13 lin In TL AB ae {perc of the 197 value ofthe Marck stock ase a cxthange. Infact we cold have boughe Sharp & Dohme it Sach of 12 consecutive years om 1982 though 10 st tse {hn I percent of ts pak 1071 valve. Wo cold bave bought Scat he highs of io hose twee years or oa oso inane fo So Seen oer Tn Isi8 Tcl ave Ivete 10,00 in eseh Aca, o ia Bmech Bae. Coendaro 8 Corman de oak orth wel above milion doi a 971 Aa sveiment $1000 fn Lot eh 538 how of 73 cet a sare woul have Hala market value of more han $85 mon lo ye in 1909 Columbia River Pacers or ack Equipent would tape done the ek In 100 Mek Hs would Have given 1 rome had we bbe andl ntl ow. Actual the 1971 igh Merck was selling 16 tines 40 ow) In {Sar 190) one coud hve esd hs mond orton ns 310090 investment in Gite oe Losin Land In Sinbad’ Vat of Diamonds 2 1942, or as late af 1945, Plough (now Schering Plough) woukl hve done the ob. In 1943 one might have chosen Mang oF Plzr. In 1944 Back & Decker and Norcema Chemie wore ‘oll at pies less than 1 percent of 1971 maker salues {In 1945 Minnesota Mining and National Homes fered Snir 1Woeoone portunities And atthe top of the machete 1946 and as teas 108, Gala (now Motoros) provided vehicle for ing a small ake to 4g fortune [AS you can se ln Table 1 pages S175 thine were by 20 scans the only 10btocne stoke valle a tho Yur. Fey ‘re merely istrative ofthe goodies anyone could have had. A one had 49 war recognize them, and say wa then,Yroews, wrorkic Devry Learning from Elephants eee aia ere oe Hee ieee coe ote TEER biased eto Sep ae ee aed ee ce he acaetana acpi ana [amaeemntge ake vantaa en So ue [eee peels eaters es ae ‘rears toron bee sam Se Soa eee nl ee ee iihpnialicien nie even ae Pane ison mene fecaeer en ieninor antiga ng ot Tce Tae ooo eee oe eee % Om OH HENNE Haqgea {gneye emt OE WEGL OPEN GK, Saha HA Coayien ol Reyer i Learning from Elephants 2 ofthe grea paradoxes inthe btory of business. Lean ftooier insane in Indy or finance in wich ume Fw: choked wo death prosperity The explanation vas that thay ind overcoat gett busines (sling) and under Empbseed keeping tock fH TbooRReepng). The inan-out trading thc fist enched sad then inpoverhed 0 many brokers was all tthe god Tor the te calletrs tera, ates a i inany ccs city aswell What it maa! for the Jnvesor i something else in or the indo nition realy ou to make fortune ‘nthe sock matet can be argued that ever sale a conf ‘Shon of eso. wet ths fly telizing tat torr shaman. T oc rca cris anyone for making few etre of te in T have been making for forty tive years Bot 9 peat twa detncd ie half solved. st T garnered no Wory by ‘Seige ha ys tern ran inthe tock maret by counting int opportunites az ting. Pris The her ene a Wk Ta Tecate ofnestit Ei the tore palpi The ctor bing, t= go-go fund Imenasers othe contrary nowitsandine Mcrae be construed as avocating hanging 00 (0 every ‘hing willy: The only thing worse than making a vest tment mistake efting Yo adi i and correct t stall the Faster at etorisrctie the ls cone Butt sl aero, fon opportunity, compare wih eying ght and bolding i a tll market correcting mistakes often means taking profi, ut wien me do 0 lt tr mot Eid ourcves we aro Faking money. The ith it we ace scksowleding missing ‘ally bigger opportanises, and Iacuring expt ing ak "Te big ak in correcting errors inthe stock market that cls lock test tos many of we whoa tol paces are bigest, find worst when thelr pices ae owest. Almost fret we fre tempted fo shoot where the rabbi Was 10 0 nos” What indie shows woul have bee the eight thing to do yeser- ‘ay ist yer oe even five fom years 40. Tine aby to foresze te sure ue, the ability to rational100 Tn the Stock Market a Ine the present lt common, Hence wien astck we bough ster careful inveripaom declines in price wo ote find less atactive than before : "That same housewife who buys thre roasts of beet for her Aeoean Uecaus they are ofered at a Spotl tow price Wil ker Comsolated Dooriob stack bocsuse ts fangs ball Atha she pa oe Profesional investors somtines do the same thing, They reason often corel that wmeone knows more tha hey Jo. Rather than wait for the "bad news" to become publ, they Sel tus aceleratig the doin athe pice ot the ck and Posshyunmering tl ther investors ers face it A great deal of investing ison 9 par with the insiet shat makes a fish tea an neil spinner because is moving The fish eeasons: "The lst ting Tate was moving. It was ona Thi thing imoving mt be ge “The investor reasons The last stock T bought was eng. leas good Ths tock i ng. H mun be goo” ‘Tables Vand I, there ‘ee enough of them to Keep ave notion tat any ck that rises must be seeds Penodcaly. 1900470, we redcover tha al knot gl that liter More suble flats likewise inpode the investors progress onthe way to wealth: One the motion that cash sate wile Al investments ae more oles sky. Yet In every successive {09-year period since 1820—that i 820 t0 1920 1821 1921, 182 10 1922, 1970 (p 1970—our dollar hat lost something ke 59 percent 1070 poteent of buying power. Over successive Totryetr periode the tte of fii has ben ‘alent Stab. shall have more C6 sxy about that in the Secon ot Taation (page 150, ‘Atother often uovecognized investment fallacy is tac yoda of rk more important thin sire of oppor {Consider ist the arkdhmeie eyou had vested ual amounts ‘ot money in 100 stocks in anyone of the years shown in Table Ih and 9 of your 100 stocks had become worth, You sould Rave your ciginal emia ncet you Red Bought jst Seaton Cath SY Say inBake othy mote AON UL Gay Leaning from Elaphe a ‘one ofthe 10B1oome socks avaliable inthe year you chose, ‘Admittedly picking a 1004orne sock in advance i wo say But it would also Ge aifieate to pick 99 stsks in one yea, al of which would become worthless. Anyone who cou do that ‘ould be Worth his weight in gold im Wal Stoct a 8 guide 10 profitable short sling” Tefolows fom this second sae fallacy that investor end to overemphasze the aks of ting in socks, and underveish the cost of not busing, oF of sling too soon. One of Wall Strats most hackneyed relerences isto the beaming. ber tthiskered, complacent old gnileman whose face ty pltured ‘ver the words, "Ts 60 soon" T wonder how any milion bfsharesof unwarranted beokerage barnes tht old cogs hat benerated. Selling too Soon can be frighiflly expensive. Some poos ME ae de pa mnometen mane rat cis oe SRECSEEE Ree met eecceeeee an#) Resseen Not 49 seet:— Ss 100 Tn the Stok Manket = souls sold 700 shares of. Computing Tabulting Recording Sock in Dly of 1921 for $270. In 1972, sow selling under the mame IBM dose saros were worth mote thn 3150 mil Hom To g0 from one to 100 in owentydve years the price of aoc) ust ncvente ata compownd annual ate of more than Bo percent, not including dividends. The seller of sveh a sock fice twenty sears gts se tban 40 for one before tues and brerage commissions The remaining 6 Tor one comes in the [Gs five yearn if the rato of pee ners cons “There a ean, of cour 10 well a any ime jst Doeause ‘one his a big profit oven 1004 one pol Ta fat one of the Ise roles of inventing i ‘Nevor if you am belp take an investment action for nom invert! reason, ‘Whar are some of the now investment reasons for which ‘of thoand of investors 20 wiong? Letine ete jst few Io My sock "too high” 2 Teed the realized capil gin to offic resized capital leases fora purposes 3, My stock I not moving, Otbers ae Leonor or wll nat pat up more money to meet 1y ‘nara al, ‘5. Tanos vl be higher nex year, © Now management,” 75 7, New competion. ‘Tae poy that one oral ofthese reasons may warrant ‘slo or witch should be welbed etsy ofcourse. Hut the Aiterence between a posilty sad realty 6 roughly the Ullerence between tatksoup and moose steak. Trackoup {phat hunters have Toe supe when they come home empty Handa, fh Bilings once sid of & man be admired with arcat restate trouble with him ai that he ignorant, but that he koows so much that ain 0." ‘Mach hasbeen sid since 12 aout Keeping investor uly Informed T sumetines wonder we ae mo tok more than 3 wes orgy Learning from Elephants <*> N° ‘7 MEARS SNR: SRLS oot for we teach pasaoger on a 47 had a clear cw of Every instrument im ont of tbe posh words would lag {he corteutve acta taken bythe pls Such ite relation Ship between stockoldes anda competent company manage 7 vesor should beware of confusing eyicm with sophia cation, Sometimes wnt the salesman offes you im the Hock durket ia goo or beter than anything yu could have found for youre Take the Schering Conporation tock offering of 1952, for example. Investor paid S3080,000 for 1.760000 Schering sharon Hf they sll have I dei paper prof as of fhe 197 high was more shan $1200 0000, While Schering Hock has ot yet made Yr haers 100 fr one, those Who bousht on the cipal offering lest han twenty Yours go EMfeny hve seen thelr olin inreae to 41 tes thr pu hase prise, (Tse who bousht Poug, pow pat of Scheie Pugh, at 10174 in 145 have gained ope hundeol. Seo ‘Tatler and 1) Schering was seized as enemy property at the outst of ‘World War I le was old at competitive bidding In 1952 bythe [Atiomey General of the United States The wining bit $25,131.96, was entered by a eroup composed ot Meri Lynch, Pree, Fenner & Beane: Kier Penboay & Company. fant Drexel & Company. The second highest bid was S269, 544. The lowes id mas $1400.00. DDityourelt investors ay be interested inthe fact hat the winning bid most to $4620 a share for Seeing stock Iwi bad took value of $32.85 share. "The wining bidders promply spit the stock or, then sold the now shares st S17-50 share. AU that poe thei? gross receipe were $90,500,000 compared with thee purchase price ff 529431960, a gain of $1,068090, Their gros profi dus Sas aboutSLADom each $100 thatthe buyers thelr Schering ‘fering have made im the lst inet years~assuming ure that the buyers have held on Some ofthe tay ave seit nt something ttn) 1 have often done that mys ‘By the way, you dl not ned a rend 2 brokerage house FE) Eows mew on wm an = Baar debs UNM. Vaal mara