Connecticut western news., 1922-05-11
SUGGESTIONS TO BUYERS OF MINING STOCKS
Roger W. Babson Points Out
 Peculiarities of This N.& Group

S@ah HIAhIhB sVocks, Roger w, Bah-
 son, advisor to over 10000 investors,
 today pointed out three basic lrin- eiples that should be borne clearly
 in mind by any one contemplating
 the purchase of this group of stocks. | "The Industries engaged in pro-
 duction of raw materials" observAd
 MT. Babson, "may be divided roughly
 into three groups; Mineral, Vege-
 table, and Animal.
 ''The first group, Minefal, includes all of the various mining projects.
 Fundamentally it is the weakest group because the investors divi-
 dends from mining stocks come
 largely from his principal A mining
 company is-very much like barrel
 of apples, when you take, one apple
 from the barrel there is one less
 apple in the barrel. Every dividend
 one gets from the stock of mining
 company represents the return of
 portion of the principal invested.
 This means that if you have stock,
 for instance, in a certain mine that
 has life of 33 1-3 years, and you
 receive dividend of 69o on that stock, you are really receiving a dividend of only ago on your invest ment, the other 3SS is the return of your principal. ,a
 "You see mining stock, to com pare favorably with any other kind of stock, should pay at least 3eo or 40 more to cover this return of principal. The only proper way for the investor to keep his books Is to divide the dividends he receives on mining stocks into two portions. One portion is to be credited to princi- kpal, and the other to interest.
 There, however, Is another req son why mining stocks are different from other stocksDs When buying a mining stock one bets on what is in the. ground. Yet one never knows what there is in the ground until after he has spent his money to get 1t out. 2 An admission fee must be paid before one knows what there is inside to see. As 95qo of the mining companies never get ore on paying basis and 5q6 are very profitable. this is gambling to the nth degree.
 Mining securities for these rea-
 
 class of stocks, altho most people do not appreciate this fact A Metho- dist who does not believe in playing cards, may buy mining stocks, and it is considered perfectly all right. He would, however, get far better men, tai training if he played poker and in many instances his percentage of loss would be less.
 CT do not mean to infer", con tinued Mir. Babson, "that mining stocks as a class should not be pur- chased, only that they should not be bought on hit or miss basis. The copper industry for instance, is as db- solutely legitimate, as farming, build ing or operating a water power, it is here to stay. When you buy an in- terest in the copper industry, you are !. getting into legitimate business, in legitimate way. The distinction between buying into the industry instead of buying stock in single company must however be kept clearly in mind. ...a
 "There are several thousand diff erent copper mining stocks on the market today and yet IS of these companies produce 809o of the industry. The point is this. If you put say $500 into these 18 compan- ies, you are not betting on any one Company, You are buying an inter- est in the copper of America, and the value of your stock depends not on whether copper is found here or there, but rather on the price of cop- per as determined by the law of supply and demand. a#
 ''This particular group of stocks, representing the industry, naturally fuctuates with it. With a great sur plus of copper on the market, as was the case last year, the stocks go to the low levels. That is the time to buy your interest in tke industry. If you hold these stocks until the surplus is absorbed and the price of copper goes up, these securities in- crease in price and should then be sold out. By following this basic plan you can make very handsome profit over a period of two or three years, and you assume practically no risk. As you are not planning on thenf as a permanent investment, you need not bother with amortiza- ton, or the setting aside of portion of dividends to cover diminishing principal.
 "This is the safest way to invest in mining stocks of any kind. Coal stocks, lumber stocks, \oil stocks, fer tilizer stocks, and pulp stocks, in fact the stock of any industry en- gagged primarily in the production of raw materials, the supply of which is constantly diminishing, should be placed in the same group"
 "When asked the names If the IS companies who practically control the copper industry MT. Babson named several including, Auaconda,