Fifteen Points to Look Out for in a Common Stock

Some of the learning points I took from the first of fifteen points:

1.       Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?

a.       Economies of scale as a result of better cost controls can at times create enough improvements in net income to produce a one-time increase in market price.

b.      A changed condition occurs and opens up a large increase in sales for a period of very few years, after which sales stop growing.

c.       Both the above points do not offer the opportunity that should interest those desiring to make the greatest possible gains from their investment funds.

d.      Companies which have consistently shown spectacular growth decade by decade might be divided into two groups:

                                                   i.      Fortunate and able ? e.g. ALCOA where the management had great vision and found itself in a better industry that the one envisioned by its earlier management.

                                                 ii.      Fortunate because they are able ? e.g. Du Pont where the company?s brilliant business and finance judgment teamed up with superb technical skills to achieve high sales volume.  Motorola is another example.

 

Are there any recent examples of companies which have been able to do this? And how do you spot these companies?