Common Stock - Choosing Industries

How permanent is the industry? Is it one which will shortly go the way of the carriage-makers and the traction companies? It is certainly true that all kinds of industry do not continue indefinitely. The fact that our mode of living is in a state of continuous change is seldom recognized except, perhaps, by those older inhabitants who still talk about the "good old days." There are children today who have never seen a streetcar or ridden in a horse-drawn vehicle.

Advances in technology, change in public living habits, change in law, change in foods and clothing-all these and many others simply draw attention to the fact that change is a basic feature of economic life. Protection for the investor lies in the careful selection of industries that are growing and not declining, dynamic and not static, coupled with the realization that a trend which will make certain products and services obsolete must be continually born in mind.

A growing industry has numerous advantages because the very newness of it means that opportunities to develop new products and processes are large, that the opportunities for future gains are large, that the time of destructive competition has not yet arrived.

Such examples as chemicals (including plastics and petrochemicals) , aviation, rubber, glass, and electronics are well known. In some instances, the discussion of such growth industries has resulted in an unusual demand for these securities, with accompanying higher prices; caution is indicated and implies that such purchases should be made with both present and future developments carefully weighed.