The Ypsilanti daily press. (Ypsilanti, Mich.) 1928-1962, 1943-07-09
BY Roger W. Babson


10 minor corrections, we have had a
bull market for some IA months.
IL Is not yet time to forecast how
high the stock market will eVentu-
ally 20. II is clear, however, that
considerably higher averages will
ultimately be attained. Further
favorable prices are assured by
powerful underlying forces. Among
these is the fact that one way To
compensate increased living costs.
occasioned by imitation, is through
buying good stocks. How to do
this is the basis OF my article to-
day.
War Bonds Vs. Stocks
Small investors with only a few
thousand dollars should now stick
TO War Savings Bonds and now
steer clear of the stock market.
Many wise investors or profession
al stock spectators would be sat
isfied with a sure 33 1-3 per cent
increase in their capital over a
period of ten years. which gain the
Series E bonds will give not con-
sidering interest. To obtain such
gain otherwise now more than
the usual businessman's risk may
be incurred.
Through the medium OF both
Series L and + War Savings Bonds,
all investors, large and small, can
automatically increase their capital,
There is no risk to these spprecis.
ton bonds which, bought at a dis
count, will. upon maturity, return
33 1-3 per cent more than they
cost. get provoked at some New
Deal measures, but ! certainly be.
lieye these short War Bonds TO
be both a safe investment and a
good speculation. | say the latter
because there may be some great
panic bargains before the time
these ten-year bonds mature. Peo-
pie with very little money should
buy stocks only during panics.
What TO Buy?
Usually II is better for the small
investor to confDe his purchases
10 stocks listed on the New York
Stock Exchange. Generally speak
ing, nearly all stocks will rise to
some extent In a bull market. For
the purpose OF this article, there
fore. let us assume that the trend
OF the market Is definitely up and
consider certain basic rules that
govern successful investing.
% Depressed Stocks. These
come first in order. They should
represent well-established COM
panies selling for less than the
amount OF their working capital per
share. In such situations, the IN
weston Is buying net current as
sets at discount and paying no.
thing for the equipment, earning
power, or for the experience and
ability OF the management. Mack
Truck and certain auto accessory
companies illustrate this test.
(2) Divided Stocks. No we'll
balanced portfolio is complete with
out backlog OF dividend-paying
stocks. To be really safe. earnings
should-over normal term of
yesrs-amount to nearly twice the
established dividend rate in the
company selected. Yield and sta
bility are the factors most sought
for in this group. But at the same
time one can he assured that such
stocks will not lag behind In an,
bull market. Gulf Oil. Monsanto /.
and certain chemicals illustrate this |
test.
(3) Low Labor Cost Stocks. A /
large number OF labor union en-
ployes, II headed by unwise labor
leaders, make many otherwise at
tractiye companies poor invest .
ments- One reason why have not /
liked the rail stocks, as a group.
is because OF the enormous amount
Of organized labor It takes TO run
the railroads. As direct opposite
OF these stocks, fire insurance
stocks appeal to me. They are not
much involved with labor unions.
and. in proportion TO the volume of
their business, employ very little
help.
4 Diversified Stocks. Inves-
tors should. moreover, pay atten-
ton to long growth companies.
Good management cannot be EN-
phasized too much One hundred
per cent equity is also always wise
TO consider In other words. Sc
lect companies without bonds or
cumulative preferred stocks ahead
of the common. Do not be misled
by technical and lengthy write
ups of individual companies. Di-
yersifcation Is good guide to
good stocks. Lehman Corporation
appears to qualify under this classi-
fcation.
When TO Buy?
There Is a factor OF timing in