| Here are questions which should be asked about any | | | | supermarket's shelves. Plastic squeeze-bottles of one |
| stock group you are studying. Some of the answers | | | | sort or another have cut into glass as far as the |
| will be contradictory; the significance of all of them | | | | packaging of cosmetics is concerned. |
| will be relative. But each will contribute a plus or minus | | | | On the other hand, the appearance of liquid soaps |
| factor to your thinking about the industry you may | | | | has given glass an opportunity in a field that was |
| wish to invest in. | | | | exclusively the paper-carton supplier's. The |
| 1) Does the industry deal in necessities or | | | | paper-carton manufacturer, meanwhile, has benefited |
| "postponables"? Does it produce things people have | | | | from frozen foods at the expense of the tin-can |
| to have in good times or bad-food, drugs, power, or | | | | producer. But the tin-can man has a new area in the |
| heating supplies? Or can people put off buying its | | | | pressure containers now used to dispense shaving |
| products to another year? There is one investor who | | | | cream, toothpaste, hair lotions, and anything else that |
| holds meat-packing and distillery stocks, not notably | | | | can be squirted or sprayed-and that isn't already in a |
| high-grade issues, because of his conviction that, | | | | plastic squeeze-bottle. |
| come hell or high water, beef and bourbon will be | | | | 5) Are wages a big item in the industry? How large a |
| staples of the American diet. | | | | percentage of total sales are they? This, of course, |
| The same question on a different level: Is the | | | | can bear heavily on net earnings and, consequently, |
| industry involved in durable or capital goods, such as | | | | dividends. In the chemical industry, the ratio of wages |
| locomotives, trucks, freight cars, ships, large buildings? | | | | to sales is quite small. |
| These are expensive items with a long life, and are | | | | In steel and railroading, which have vast numbers of |
| usually financed with long-term, fixed obligations. In a | | | | employees and huge payrolls, it is quite large. |
| pinch, they are among the first things customers are | | | | 6) Do raw materials come from domestic sources or |
| prepared to do without. | | | | from abroad? Are their prices traditionally stable or |
| 2)Is the industry depression-resistant? Retail stores, | | | | volatile? This, of course, applies to the oil, rubber, and |
| tobacco, metal containers, and, again, food products | | | | sugar companies, to some of the mining and metals |
| have a reputation for stability, not only in terms of | | | | companies, and to a few of the chemicals. This is, |
| continuing consumer demand, but in terms of | | | | possibly, not so important as it once was, considering |
| production costs and price structures which make | | | | that few industries are totally dependent on foreign |
| them attractive as so-called defensive issues. | | | | resources, and that political upheavals or wars are so |
| 3)Is it an extractive industry? Does it deal in natural | | | | far-reaching these days that almost everyone is |
| raw materials, such as oil, lumber, asbestos, metals? | | | | affected to some degree, at home and abroad. |
| Stocks of these companies are considered good | | | | The question should also be broadened to include |
| hedges against inflation because they represent a | | | | foreign markets: What percentage of income derives |
| primary material, an asset already owned. The | | | | from sales abroad? This would affect air and shipping |
| acquisition cost of oil underground, for instance, may | | | | lines, distributors like W. R. Grace and U. S. Industries, |
| already have been rationalized; henceforth all that can | | | | and the export trade of the auto, machinery, movie, |
| be inflated are the extraction and distribution costs. | | | | and electrical-equipment industries. |
| 4)How keen is competition within the industry? | | | | The investor will have to decide, too, whether he |
| Usually competition is keenest where the differences | | | | considers foreign trade a positive or negative item. |
| are least. Automobiles, soaps and detergents, drugs, | | | | Overseas markets may be uncertain or |
| tobaccos, gasolines and motor oils-within these | | | | undependable, but they are also frontier areas of |
| categories the companies all offer the consumer | | | | tremendous potentiality for an economy like that of |
| pretty much the same thing. The local power and | | | | the United States, which has lived so largely off its |
| light company, the telephone company, and the | | | | own people. |
| natural gas companies (except for the scramble to | | | | With Forex trading economic indicators will have to |
| run pipelines here or there) are virtually without | | | | be studied as well. |
| competition. | | | | Good Forex software can greatly help you with this |
| Cross-competition between industries is also a factor. | | | | task. |
| This is not the struggle of Coke vs. Pepsi, or Tide vs. | | | | Forex software has become so good that it has |
| All, but whether new office buildings are going to | | | | artificial intelligence and can predict future currency |
| have a skin of brick and mortar, aluminum sheets, or | | | | movements with some accuracy. |
| glass panels. | | | | You still need to be aware of the risks involved in |
| The container and packaging people are a lovely | | | | any financial investing and only invest what you can |
| example of round-robin competition, as is perfectly | | | | afford to lose. |
| evident from five minutes' inspection of your | | | | |