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