Successful Stock Speculation Part 6

_Standard Statistics Company, Inc.

Babson's Statistical Organization.

The Brookmire Economic Service.

Harvard Economic Service.

Poor's Investment Service.

Moody's Investors Service.

Richard D. Wyckoff a.n.a.lytical Staff._

The above are the princ.i.p.al organizations of this kind. Subscriptions to their service cost from $85 to $1000 a year. In addition to these there are a few other organizations besides our own and individuals giving a somewhat similar service, but we know of none that gives such a service at as low a price as ours.

You should not confuse the service given by the above organizations with that given by many organizations and individuals who attempt to tell you what the market is going to do from day to day. In other words, they give 'tips' on the market. There are a number who issue daily market letters of this kind and charge from $10 to $25 a month for their service, but it is a line of service that we do not recommend at all, because we consider that you would be taking a very great risk if you followed advice of that kind. You might make enormously large profits occasionally, but you would also have frequent losses, and when the losses did come they might be greater than all the previous profits. We want you to understand that that kind of advice is entirely different from what we are recommending.

CHAPTER XXVI.

SUCCESSFUL SPECULATION

Success in stock speculation depends upon a few things that are very simple.

If you know what to buy, when to buy, and when to sell, and will act in accordance with that knowledge, your success is a.s.sured. You may think it is impossible to know these things, but it is not so difficult as it is supposed to be.

Many people buy stocks at the wrong time, and most of those who do buy them at the right time, buy the wrong stocks. Right now (early in April, 1922) is buying time in the stock market, and it is possible that this buying time may continue--with some interruptions--for another year or two, or even longer.

It is more difficult, however, to tell you WHAT stocks to buy. First of all, we advise you against buying stocks that are put up to high prices by manipulation. Of course, if you get in one of those stocks right and get out right, your profits are very large, but you take a great risk, and those who win once or twice by this method are almost sure to lose everything sooner or later in an effort to do the same thing again. Your chances are not much better than if you gambled at Monte Carlo. The chances in buying manipulated stocks are invariably against the outsider.

There always is so much publicity about these very active speculative stocks that the public is attracted towards them. Newspapers and brokers' market letters give altogether too much s.p.a.ce to them. Such stocks sell far too high, and when the break comes, it brings ruinous losses to many people.

On the other hand, by following a conservative course, you really have a chance to make large profits with a minimum risk. We are giving below sixteen stocks that we recommended in our Advisory Letter of February 14th, 1922, with the approximate prices of them then and the approximate prices on March 31st.[2] In arriving at these prices, we took the closing prices on February 13th and on March 31st, and omitted the fractions. We recommended only sixteen stocks on that date, and you will see that every one of them made substantial gains.

Approximate Approximate Price Price Stock Feb. 14, 1922 Mar. 31, 1922 Profit

C. R. I. & P. pfd (6) 75 79 4 C. R. I. & P. pfd (7) 88 93 5 New York Central 76 88 12 Pacific Gas & Electric 64 68 4 Consolidated Gas 90 109 19 American Telephone & Telegraph 118 121 3 General Motors Deb. (6) 70 78 8 General Motors Deb. (7) 81 91 10 U. S. Steel 87 95 8 Dome Mines 23 26 3 Laclede Gas 50 63 13 Missouri Pacific Pfd 48 54 6 C. R. I. & P. Common 33 40 7 Am. Smel. & Refining 45 53 8 Anaconda 47 51 4 Erie Common 10 11 1 ---- ---- --- Total 1005 1120 115

Let us suppose you bought ten shares of each of these stocks on February 14th. They would have cost you $10,050. We recommended 30% margin on the first ten, all of which were dividend payers; and 50% margin on the last six, because they were more speculative and would have been more affected by a reaction in the market. To buy ten shares of each on that margin basis would have required a little less than $3,500, but let us suppose you put up $3,500. After allowing for buying and selling commissions and interest on the balance of $6,550, but crediting you with dividends paid, your profit would be about 32% or at the rate of about 250% per annum.

Of course, we do not claim that by following the conservative course we advise, you always will make such large profits, although you might do just as well as that if you took advantage of some of the opportunities so frequently to be found in the market; but keen discrimination in what you buy always is necessary. However, let us suppose you made annual profits of one-fifth the above amount, or 50%, which is easily possible without taking the risks that are usually taken in stock speculating. If you invested $1000 and made 50% profit per annum, reinvesting your profit at the same rate each year for twenty years, you would have more than THREE MILLION DOLLARS.

When there is a possibility of making such enormous profits as that by following careful methods, surely there is no argument in favor of taking the extreme risks that people do take in buying the highly speculative stocks, the prices of which are put up for the purpose of unloading them on the public. Ten of the stocks we selected in the above list were dividend payers, and while the other six were not, they were considered worth much more than their market prices, and the list as a whole was conceded by conservative people as a safe one to buy.

Very frequently we are able to recommend a list of stocks that we believe will yield equally large profits, but the stocks you should buy are not the ones that are the most active nor the ones that are mentioned most frequently in the financial news and brokers' market letters. The stocks that most people buy are usually the very stocks that should be left alone. The stocks you should buy are usually the ones you hear very little about.

There is only one SAFE way to speculate, and that is to be guided by a knowledge of the fundamental conditions of each stock and also of the industries they represent. There are several large organizations giving information of this kind, and those who have been guided by the fundamental statistics issued by them, almost invariably have made money in stock speculating. The value of that kind of service has been thoroughly demonstrated beyond any question. However, a subscription for the service of most of these organizations costs more than the average person can afford to pay. Usually it is anywhere from $100 to $1,000 a year.

We are giving a service for the purpose of guiding our clients to successful speculation for a fee of only $25 a year, $15 for six months, or $10 for three months. For this fee we tell you what stocks to buy, when to buy, and when to sell. We send you our recommendations at least twice a month, but send you additional Advisory Letters and lists oftener if conditions make it necessary. You also have the privilege of unlimited personal correspondence regarding your market problems. The cost of our Service is very small, compared with what other reliable organizations charge.

Our Service is based on the principles expounded in this book. We try to select stocks having the greatest possibilities of profit with minimum risk, and the sample of our Service given in this chapter is proof of our success.

NATIONAL BUREAU OF FINANCIAL INFORMATION

395 Broadway, New York City

FOOTNOTES:

[2] We did not advise the sale of these stocks on March 31st, but the author figured profits to that date because this book was written shortly after that. If these stocks had been bought on or about February 14th, on the margin basis suggested by us, and sold six months later, the profit would have been more than 60%, or 120% yearly.