Profiting From A Company's History

Profiting From A Company's History

Profiting from a company's history

This webpage deals with the second of four sources of invest-in winch form the basis for judging a security.

The history of a company will reveal what progress it has made, what setbacks it has experienced and its success or otherwise in overcoming them. It will also give some of its present strengths and weaknesses. These and other relevant facts are derived from:

(1) The nature and range of the company's activities up to the present. The words nature and range are stressed to emphasise the importance of knowing whether a company has always confined itself to one particular specialised line of business or whether from its beginnings it has engaged in multiple trades.

(li) Age of the concern: whether very old and past its peak, or long established with proven trustworthiness, or of only a few years' standing with potential yet unproven.

(iii)Evolution: (a) by diversification, either through a com-pany's own expansion into fresh and more profitable fields of activity, or through acquisition of other companies and developing their resources to better effect, leading to greater security; (b) through merger, resulting In pooling of resources and cutting of production and distribution costs, leading eventually to higher profits.

(iv)Management: Efficiency, not personality; not just titular rank or qualifications, but results indicated by the company's profits. This point about efficient management receives due emphasis both in the financial press and in the financial columns of the daily press. The quality of the management can often be a deciding factor in the shrewd investor's selections, and some successful investors are guided mainly by this factor. In management what counts is not 'roots' but 'fruits'.


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