Alma record. (Alma, Mich.) 1878-1928, 1922-06-01
HOW To PURCHASE
/ MINING STOCKS
ROGER w. BABSON POINTS OUT
THE PECULIARITIES OF THIS
GROUP FOR ALMA RECORD.

that should be borne clearly in mind
by any one contemplating the pur-
chase of this group of stocks
THE industries engaged in produc-
ton of raw MATERIAL observed Mr..
Babson, may be divided roughly in
tc three groups; Mineral, Vegetable
and Animal.
"The first group, Mineral, includes
all of tbs various mining projects.
Fundamentally it is the weakest
group because the investors dividends
from mining stock come largely from
his principal. A mining company is
very much like a 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 repre-
sent the return of a portion Of the
principal invested. This means that
if you have a stock, for instance, in a
certain mine that has a life of 33 .
years, and you receive a dividend OF
q percent on that stock, you are really
receiving a dividend Of only 3 per cent
cent is the return of your principal.
you see mining stock TO compare
favCrably with any oth,r kind of
stock, should pay at least 3 per cent
OF 4 per cent more TO cover this re-
turn 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 credit
ed to principal, and the other to in
terest.
There, however, is another reason
why mining stocks are different from
other stocks. 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 it cut. An
admission fee must be paid before one
Knows what there is inside to ses.
As 90 per cent of the mining COM
panes never get ore on a paying bas-
is and ) per cent arg very profitable,
this is gambling u the Nth degree.
Mining securities for these rea-
sons represent the most speculative
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 mental
training if he played poker and in
many instances his percentage of loss
would be less. .
Il do not mean to infer" continued
Mr. Babson, that mining stocks a,
class should not be purchased, only
that they should not be bought on q
hit or miss basis. The copper indus
try, for instancesis absolutely leeit
innate, as far ninG building, or oper-
ating a water power, it is here tC
stay When you buy an interest il
the copper industry, you are getting
into a legitimate business, in a legit
innate way. The distinction between
buying into the industry instead oil
buying stock in a single company
must however be kept clearly in mind
There are several thousand diff
ferent copper mining stocks on tn,
market today and yet IL of thes,
companies produce so per cent Of the
copper. By buying the stocks of thes,
companies, you can have an interes
in so per cent Of the industry. TIL,
point is this If you put say $3.50
into these Is Companies, you are no
betting on any one company. Yol
are buying an interest in the coppe-
of America, and the value of you
stock depends not on whether cope
IS found here or there, but rather OF
the price Of copper as determined
by the law of supply and demand.
This particular group Of stocks
representing the industry, natural,
fiuctuates with it. With a great sur
plus of copper on tho market, as wa
the case last year, the stocks go t,
the low levels. That is the time t
buy your interest in the industry.
you hold these stocks until the sur
plus is absorbed and the price of cop
per goes up, these securities increas
in price and should then be sold out
By following this basic plan you cal
make handsome profit over a perio
of two or three years, and you as
sumo practically no risk As you ar
not planning on them as a perma
nent investment, you need not bottle
with amortization, or the settinI
aside of a portion of dividends t
cover diminishing principal.
This is the safest way to inves
in mining stocks of any kind. Goa
stocks, lumber stocks, oil stocks, fer
tilizer stocks, and pulp stocks, in fac
the stock Of any industry engage
primarily in the production of ra,
materials, the supply of which is con
stantly diminishing, should be place
in the same group.
when asked the names of the /
companies who practically contrc
the copper industry Mr.. Babson nam
ed several nclu ding, Anaconda
Phelps Dodge, Utah, Kennecott, In
spiration, Ray Consolidated, Calume
and Heda, Chino, Nevada Consolidat
ed, Green Cananea, Miami, Calume
and Arizona, Copper Range.
The recent improvement i'm the ger
fral feeling amonV husinnsc mon