The Washington herald., 1914-05-23
Swartzen, Rheem &
, Hensey Co.,
TT Fifteenth. Street Narthwest

class. IL becomes Immediately a stock that
is difficult to handle. that Is. to buy or
to sell. Its price Is apt to be quoted
at a very wide range between the bid
and asked price at any time. In addi-
ton to that anyone who wants to sell
such a stock in bad times finds practi-
cally no bid for il at all. and -fuctua-
tons at such times are frequently mors
than 500 a share in stocks worth 500 or
500 or upward. The average investor
would. if he knew the facts, avoid
security that shows such tremendous
variations in the market place. OF course.
this very fact also makes the stocks. as
a rule, not particularly good for use in
a bank or in any other way, for the pur-
pose of borrowing money, for bank
naturally does not want to lend very
much on securities that can swing 50
widely in their prices
In ALL this comment throws. of course.
no reflection on the intrinsic value or
stocks selling at high figures, and II a
stock is paying 40 per cent dividends.
is has a right to sell at four times the
price of a similar stock paying 70 per
cent dividends. As a matter of fact. II
is not often that il does sell that high.
and IL one takes the dividend as a basis,
frequently the very best returns can be
obtained on the high-priced stocks The
point is, however, that the big payment
of 20 per cent Is more likely to fiuctua.e
than is 10 per cent dividend. and when
one gets up in this high altitude in the
stock market. one has to be prepared
for yicissitudes and changes As rue.
American stocks, whether industrial CT
railroad. have not made a habit of rum
ming up to these very high prices. for the
directors and managers of the corpora
tons have recognized such high prices
as unusual. and nave usually taken
pains to adjust their capitalization by
means of stock dividends. If. for in
stance. a company is in a position to pay
10 per cent on its stock. its management
will generally decide to declare stock
dividend of 100 per cent. and so give every
stakeholder two shares instead of one.
each share paying SO of dividends in
stead of having one share which pays 40
per cent
Stocks of this class are rarely invest
ment securities. Occasionally one finds
investments in bank stocks and in In
surance company stocks. selling at very
high prices, which deserve to be classed
as investment securities, but. as rule.
when the high prices are recorded for
security. a good part of the price repre-
sents a business chance which man
might take il he is qualified to assume
business chance. but which he would
not take as a matter of investment IL
is, therefore. not usually desirable for
the investor to pay much attention to TINS
class of securities.
An exception may be made in the case
of the very wealthy investor. A man
who has large funds well split up ana
diversified. and handled scientifically. Is
a natural buyer. of such hish-priced
stocks. He generally knows exactly what
he is doing Either he or somebody act
ing for him can take report. consisting
of balance sheets and income accounts.
for years back. and figure out exactly
why the price is as high as 1t Is He
can reckon with some degree OF certainty
the amount of actual property added TO
the companys assets for years past ana
he can also figure upon tarin changes,
changes in business method. and shifts
of supply and demand. not only to ac-
count for all the changes that have taken
Mace. but to make a fair basis for guess
ing at what changes will take place. Such
a man, equipped in that way. Is fully
competent to buy not only these high
priced stocks. but stocks or bonds OF
almost any character. There Is an old
saving that there Is legitimate buyer
for every class of legitimate security. and
no one can say that the high-priced spe-
cialty stock is not legitimate security.