Common Stock- Industry Choice Continued

The stability of an industry is of considerable importance, since wide fluctuations in earnings and dividends will not make for a genial investment atmosphere. This is particularly true of the so-called "heavy industries," sometimes called "feast and famine" industries, whose sales and profits may at times be spectacular and at other times shrink to zero. Great care is needed here since the investor may well be blinded by current successes and become over-optimistic; studies of past behavior may prove instructive.

Geography plays a large part in selection; for example, it is important to realize that a single plant in one location will bring heavy shipping charges, while a number of plants, strategically located, will permit considerable savings in such charges. The chain food stores are a good example of this, since they serve a national market. Another important aspect o£ geography is the determination of population shifts, since the actual growth in population of one section of the country at a faster rate than elsewhere indicates a new and expanding market.

Government intervention is an important item. Certain food items, such as sugar and milk, are enveloped in government regulations; in some cases, as with some of the power companies, stiff competition has been met from nearby government or cooperative power projects. Any change in government attitude, with an accompanying change in government action, could be quite important to certain industries.