One Up on Wall Street

Sterling’s aspirin sales were 6.5 percent of its total revenues, but close to 15 percent of the company’s profits—aspirin was Sterling’s most profitable product.

The fund manager most likely is looking for reasons not to buy exciting stocks, so that he can offer the proper excuses if those exciting stocks happen to go up.

The same couple that spends the weekend searching for the best deal on airfares to London buys 500 shares of KLM without having spent five minutes learning about the company.

With the stalwarts you have to consider taking profits more readily than you would with a Shoney’s, or a Service Corporation International. Stalwarts are stocks that I generally buy for a 30 to 50 percent gain, then sell and repeat the process with similar issues that haven’t yet appreciated.

Why did Melville succeed while Genesco failed? The answer has a lot to do with a concept called synergy. “Synergy” is a fancy name for the two-plus-two-equals-five theory of putting together related businesses and making the whole thing work.

you find a stock with little or no institutional ownership, you’ve found a potential winner. Find a company that no analyst has ever visited, or that no analyst would admit to knowing about, and you’ve got a double winner.

Large parent companies do not want to spin off divisions and then see those spinoffs get into trouble, because that would bring embarrassing publicity that would reflect back on the parents. Therefore, the spinoffs normally have strong balance sheets and are well-prepared to succeed as independent entities.

If you can follow only one bit of data, follow the earnings—assuming the company in question has earnings. As you’ll see in this text, I subscribe to the crusty notion that sooner or later earnings make or break an investment in equities. What the stock price does today, tomorrow, or next week is only a distraction.

If you own a retail company, another key factor in the analysis is figuring out whether the company is nearing the end of its expansion phase—what I call the “late innings” in its ball game. When a Radio Shack or a Toys “R” Us has established itself in 10 percent of the country, it’s a far different prospect than having stores in 90 percent of the