The Washington times., 1930-10-16
SLUMP BUYING
| IS MATTER Of
| JUDGMENT
Expert Points to Operations In
Recession Period As Those
In Which Care Is Needed
BY LEWIS HANEY

BY LEWIS hANEx
Director New York University Bureau
Of Business Research and Former Econ.
omist Of Federal Trade Commission
One Of the questions which now
confronts the investor is whether
to buy on recessions or to await
the time when the market will
show that the bottom has been
seen.
One can select good stocks that
now look cheap and pick them UP
during weak spells. Or one can
wait till the market has settled
down and quit having violent
sinking spells. Which is the better
course?
The former method of opera
ton involves a careful appraisal
Of individual issues. It's essence
| lies in a study of the particular
situations Of industries and com
panieS. This is true because you
would be buying certain stocks be-
fore you could be sure that the
market as a whole is thoroughly
liquidated.
The second method is essen
TALLY different, because according
to 1t you would be attempting to
follow the trend of the general
market, you would buy leading
stocks as soon as the action of
the market shows that the board
trend is upward. Meanwhile, you
would leave all stocks alone.
First Plan Methods
The method of operating under
the first plan is somewhat as
follows: First, you select a small
group of stocks whose values are
fair. You must have a good idea
as to what each one Is really
!. worth, regardless Of the price at
the moment and regardless Of
whether there is any public inter
est in the stock or not.
This value you decide upon by
figuring the yield on the stock
and ascertaining whether the
company's earnings and financial
position are such as to make the
dividend reasonably safe.
Then you put in a buying or
der for a part of the amount you
want. IF the price is fair, you
get some at once. But you recog-
nize that any valuation is more
or less uncertain, and you know
that in a weak market you may
get it cheaper.
Therefore you lay your plans
to buy on the scale down. You
may put in an open order with
your broker to buy say 10 shares
more at one or two points below
the market, and 10 shares more
at one or two points below that.
Or, you may simply wait for a
recession and buy more when the
market looks weakest.
In this way, you may pick UP
all you want at a fairly low av-
erage cost.
Playing Second Method
According to the second method,
however, you would watch the
trend Of the averages" untii you
feel sure that the market as a
whole has seen bottom. Then you
would buy all you wanted. You
would select the leading stocks.
It would not be so important to
make q careful investment ap-
praisal, because you would really
be playing the market as q whole.
and you would merely select the
stock which is active and shows
leadership.
OF course, you would not expect
to catch the exact bottom Of the
market; you would probably wait
until stocks had shown ability to
make a sustained advance.
Most people follow the latter
method. I myself find the former
gives best results. It largely de-
pends upon the care and judg-
nent you use In selecting the
stock to buy. But If your infor-
nation is sound and you buy
cautiously you can avoid getting
wait for a general speculative
aboard too soon. While, If you
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