Growing Rich - Arabictrader.com

KIRK KAZANJIAN
small-cap issues, the truly good businesses are almost always blue
chip, established corporations. That’s because start-ups often sell
based on promising stories and hype, as opposed to good earnings
and a strong balance sheet. Yacktman normally won’t consider a
company unless it has at least $100 million in reported earnings,
since a business of that size is hard to kill, even if a major recession
comes along. “If a company has six cylinders, or six divisions, and
one of those divisions is currently in trouble, it’s not going to impact
the earnings or cash flow nearly as much as if it has just one product
segment or business,” he reasons. “If a company doesn’t have multiple
businesses and experiences a shortfall for some reason, the stock will
likely go down because people on Wall Street are so short-term oriented
and focused on what’s happening with earnings right now.”
Roy Papp is convinced that after a decade of restructuring and
downsizing, the world’s largest conglomerates are not only safer investments,
but are also potentially more rewarding. “The large-capitalization
companies have seen their stocks go up more than the smallcapitalization
companies during the 1990s, so many people think the
reverse will be true in the future,” he notes. “I strongly disagree, because
people aren’t buying large-cap companies. They’re buying
companies with the best global growth prospects.”
Elizabeth Bramwell is perhaps the only investor I interviewed for
this book willing to use initial public offerings on an ongoing basis,
although she puts them through greater scrutiny than their larger-cap
brethren.
WHICH PRICE IS RIGHT?
Now that you have an idea about what to look for in evaluating
whether a stock is even worth considering for purchase, you must
determine whether it is selling for an attractive price. Figuring out
how much to pay is an age-old dilemma for investors. It’s what keeps
the market moving. Someone must be willing to buy in order for another
to sell. In raging bull markets, traders are often so anxious to
jump in, they’ll pay almost anything for the fad of the moment. That’s
what happened in the early 1970s, when a concept called “One Decision
Investing” was born.
“It grew and became popularly known as the ‘Nifty 50,’” Papp recalls.
“The idea was to buy the best companies in the world and just
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