STOCKS AND THEIR NATURE

 

Today we continue previous post further, thank for your patience. Let’s start

 


6. THE RUMORS ABOUND: IT’S INVOLVED WITH TOXIC WASTE AND/ OR THE MAFIA

 

It’s hard to thinks of more perfect industry than waste management. If there is anything that disturbs people more than animal casing, grease and dirty oil, it is sewage and toxic waste dumps.

If you were fortunate enough to have bought some, Waste Management, Inc. Is up about a hundredfold.

Waste Management is better prospect than Safety-Kleen because it has two unthinkable going for it, toxic waste itself, and also the mafia. Everyone who fantasizes that the Mafia runs all the Italian restaurants, the newsstands, the dry cleaners, the construction sites, and the olive press also probably thinks that the Mafia controls the garbage business. This fantastic assertion was a great advantage to the earliest buyer of share in waste Management, which as usual were underpriced relative to the actual opportunity.

 

7. THERE IS SOMETHING DEPRESSING ABOUT IT

 

For several years this Houstan-based enterprise has been going around the country buying up local funeral homes from the mom-and-pop owner, just as Gannett did with the small-town newspapers. Service Corporation International (SCI) has become a sort of McBurial. It has picked up the active funeral parlors that buy a dozen or more people a week, ignoring the smaller-one-one two-burial parlors.

At last count the company owned 461 funeral parlors, 121 cemeteries, 76 flower shops, 21 funeral product and supply manufacturing centers, and 3 casket distribution centers, so they have vertically integrated. They broke into the big time when they buried Howard Huges.

 

8. IT’S A NO GROWTH INDUSTRY

 

Many people prefer to invest in a high growth industry, where there is a lot of sound and fury. Not me. I prefer in low growth industry like plastic knives and forks, but only if I can’t find a no-growth industry like funerals. That’s where the biggest winners are developed.

There is nothing thrilling high growth industry, except watching the stocks go down. That’s because for every single product in a hot industry, there are a thousand MIT graduates trying to figure out how to make it cheaper in Taiwan. As soon as a computer company designs the best word processor in the world, ten other competitors are spending $100 million to design a better one, and it will be on the market in eight months. This doesn’t happen with bottle caps, coupon-clipping service, oil-drum retrieval, or motel chains.

9. IT’S GOT A NICHE

 

I’d much rather own a local rock pit than own Twentieth Century Fox, because a movie company competes with other movie companies and the rock pit has a niche. Twentieth Century Fox understood that when it bought up Pebble Beach, and the rock pit with it.

Certainly, owning a rock pit is safer than owning a jewellery business. If you’re in the jewellery business, you’re competing with other jewellers from across town, across the state, and even abroad, since vacationers can buy jewellery anywhere and bring it home. But if you have got the only gravel pit in Brooklyn, you have got a virtual monopoly, plus the added protection of the unpopularity of rock pits. I always look for niches. The perfect company would have to have one. Drug companies and chemical companies have niches- products that no one else is allowed to make.

 

10. PEOPLE HAVE TO KEEP BUYING IT

 

I’d rather invest in a company that make drugs, soft drinks, razor blades, or cigarettes than in a company that makes toys. In the toy industry somebody can make a wonderful doll that every child has to have, but every child get only one each.

Why take chance on fickle purchases when there’s so much steady business around?

 

11. IT’S A USER OF TECHNOLOGY

Instead of investing in computer companies that struggle to survive in an endless price war, why not invest in company that benefit from the price war- such as Automatic Data Processing? Or instead of investing in a company that makes automatic scanners, why not invest in the supermarkets that install the scanners? If a scanner helps a supermarket company cut costs just three percent, that lane night double the company’s earnings.

 

12. THE INSIDERS ARE BUYERS

There is no better tip off to the probable success of stock than that people in the company are putting their money into it. At least they hadn’t lost their faith.



When insiders are buying like crazy, you can be certain that, at a minimum, the company will not go bankrupt in the next six months. If you see someone with a $45,000 annual salary buying $10,000 worth of stock, you can be sure it’s a meaningful vote of confidence. If the stock price drops after the insiders have bought, so that you have a chance to buy it cheaper than they did, so much the better for you. But in normal situation insider selling is not an automatic sign of trouble within a company. There are many reasons that officers might sell. They may need money for some reason.

 

13. THE COMPANY IS BUYING BACK SHARE

Buying back share is the simplest and best way a company can reward its investors. If a company has faith in its own future, then why shouldn’t it invest in itself, just as the shareholders do? You should invest in these types of companies after doing your analysis.

 

Don’t let go these opportunities, get benefits from it.

 

In the next Post we learn about which stock we should avoid.

 

Congratulation you take one more step towards your financial freedom.

This summary from Book-“One Up On Wall Street”

 

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