What Stocks Not To Buy
A great deal more can be said about stocks you should not buy than about
stocks you should buy, because the list is very much larger.
Stocks not listed on the New York Stock Exchange, as a rule, should not
be bought by a careful speculator, but as stated in the previous
chapter, there are exceptions to that rule. Billions of dollars have
been lost in the past by buying stocks that have become worthless. A few
large volumes in which to enumerate them. New ones have been added to
them every year. Therefore, it is very important that you should give
careful thought to the subject of what stocks +not+ to buy.
Nearly all promotion stocks (stocks in new companies) are a failure. An
extremely small percentage of them are very successful, and the
successful ones are referred to in the advertising of the new ones; but,
on the basis of average, the chances are you will lose your money
entirely in promotion stocks. We believe that most of the promotion
companies are started in perfectly good faith, although some of them are
swindles from the beginning; but no matter how honest and well meaning
the organizers are, the chances of success are against them. Therefore,
we say that promotion stocks should not be bought by the ordinary man
who is looking for a good speculation, because his chances of making a
large profit with a minimum risk are very much better when he buys
stocks listed on the New York Stock Exchange and uses good judgment in
doing so.
Among the listed stocks there are many you should not buy. First of all,
eliminate them by classes. Do not buy the classes of stocks that are
selling too high now. You may say that there are some exceptions in all
classes. That may or may not be so, but in any event, you have a better
chance of profiting by confining most of your purchases to the classes
of stocks that are in the most favorable position.
As a rule, when stocks are first listed, they sell much higher than they
do a short time afterwards. Of course, that is not always true. It is
more likely to be true when a stock is listed during a very active
market, when prices are more easily influenced by publicity. The high
price of it is usually due to the fact that publicity is given to it,
and as soon as the effect of this publicity wears off, the market price
of the stock declines.
It is a good rule never to buy stocks that brokers urge you to buy. Your
own common sense ought to tell you that a stock that is advertised
extensively by brokers is likely to sell up in price while the
advertising is going on and will drop in price just as soon as the
advertising stops.
Many people notice that and they think they can profit by buying when
the advertising starts and sell out when they get a good profit, but the
majority of them lose money. The stock may not respond to the
advertising, or if it does go up, they may wait too long before selling.
Those who do sell and make 200% or 300% profit in a very short time are
almost sure to lose it all in an effort to repeat the transaction. Many
of those who read this know it is true from their own experience.
You should leave such stocks strictly alone. You may win once or twice,
but you are sure to lose if you keep it up. As a rule stocks of this
kind have very little value and the brokers who boost them make their
own money from the losses of their foolish followers.
More
-
A Correct Basis For Speculating
We maintain that there is only one basis upon which successful speculation can be carried on continually; that is, never to buy a security unless it is selling at a price below that which is warranted by assets, earning power, and prospective futu... Bucket Shops
There has been so much publicity given to bucket shops, nearly everybody is familiar with the term. A broker runs a bucket shop when he sells stock to his clients on margin and either never buys the stock for their accounts, or else sells it immed... Choosing A Broker
It is very important that you choose a good broker. No matter how careful you are, it is possible to make a mistake. However, if you choose a broker who is a member of the New York Stock Exchange, you have eliminated a very large percentage of you... Major Movements In Prices
Stock prices move up and down in cycles. These are the major movements in prices, but there may be many minor movements up and down within the major movements. These stock price movements nearly always precede a change in business conditions; that... Manipulations
Stock prices are influenced largely by manipulation. Years ago when the volume of trading on the New York Stock Exchange was small compared with what it is today, it was possible to influence the entire market by manipulation, but it would be very... Marginal Trading
Most people who trade in stocks buy on margin. The ordinary minimum margin is about 20% of the purchase price, because banks usually lend about 80% of the market value of stocks. If you put up 20% of the purchase price of your stocks with your b... Market Information
Where do you get your market information? Perhaps most people get it from the daily papers. When you look over the financial news of one of the leading metropolitan papers and see how much there is of it, you can get some idea of the enormous volu... Minor Movements In Prices
Within the major movements of stock prices, there always are several minor movements, which are caused by various influences. One of the important causes is the technical condition of the market. Another cause might be called a psychological one. ... Movements In Stock Prices
It is due to the fact that stock prices constantly move up or down that speculation is possible. Sometimes certain stocks remain almost at a standstill for a long period of time, but at least a part of the stocks listed on the Exchanges move eithe... Possibilities Of Profit
What are the possibilities of profit in stock speculation? That question is frequently asked but it is difficult to answer. James R. Keene is quoted as having said: "Many men come to Wall Street to get rich; they always go broke. Others come to Wa... Puts And Calls
A "put" is a negotiable contract giving the holder the privilege to sell a specified number of shares of a certain stock to the maker at a fixed price, within a specified time. A "call" is the exact reverse. It is a negotiable contract giving the ... Short Selling
By short selling, we mean selling a stock that you do not possess, with the intention of buying it later. Short selling in general business is very common, and we think nothing of it. Manufacturers frequently sell goods that are not yet made, to b... Stock Some Terms Explained
There are certain terms used in connection with stock speculation that are very familiar to those who come in contact with stock brokers, and yet are not always familiar to those who do business by mail. Undoubtedly the majority of our readers are... Stop Loss Orders
A "stop-loss" is an order to your broker to sell you out if the market sells down a certain number of points. Many speculators place stop loss orders only two points from the market price. The idea is that when the market starts to go down it is l... 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 assured. You may think it is impossible to know... Technical Conditions
Technical conditions refer to the conditions that usually affect the supply and demand, such as short interests, floating supply, and stop loss orders. It is sometimes said that supply and demand must be equal or else there could not be any sal... The Desire To Speculate
It is said that the desire to speculate is very strong in the American people. That is why our country has made greater progress than any other country in the world, because progress is the result of speculation. We are not referring merely to sto... The Money Market And Stock Prices
Perhaps no other one thing influences the movement of stock prices so much, in a large way, as money conditions. It is impossible to have a big bull market without plenty of money. During a bull market nearly all stocks are bought on margin, which... Two Kinds Of Traders
There are two kinds of stock traders. One kind nearly always makes a profit, and the other wins sometimes and loses other times, but eventually loses all if he does not change his methods. The first kind buys stocks on liberal margin or outright a... What Is Speculation?
To speculate is to theorize about something that is uncertain. We can speculate about anything that is uncertain, but we use the word "speculation" in this book with particular reference to the buying and selling of stocks and bonds for the purpos... What Stocks Not To Buy
A great deal more can be said about stocks you should not buy than about stocks you should buy, because the list is very much larger. Stocks not listed on the New York Stock Exchange, as a rule, should not be bought by a careful speculator, but ... What Stocks To Buy
In deciding what stocks to buy, it is well to consider first the classes of stocks, and then what particular stocks you should buy in the classes you select. We would first of all divide all stocks into two classes, those listed on the New York St... When Not To Buy Stocks
There are times when stocks should not be bought, and that is when nearly all stocks have advanced beyond their real values. It is doubtful if there ever is a time when all stocks have advanced beyond their real values, but when the great majority... When To Buy Stocks
Stocks should be bought when they are cheap. By being cheap, we mean that the market price is much less than the intrinsic value. In Chapters X. to XV. we talk about influences that affect the price movements of stocks. By studying these carefully... When To Sell Stocks
You should sell stocks when the market price is too high. That is a general rule, but it is necessary for you to study all the influences affecting stock prices to be able to decide more accurately when you should sell your stocks. We give you, in...