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Common Stocks and Uncommon Profits

The Second Dimension Of A Conservative Investment

To summarise, the first dimension of a conservative investment consists of outstanding competence in the areas of production, marketing, research, and financial controls. 

 

The second dimension consists of what can produce these results.  

 

1. A company must recognise that the world in which it is operating is changing at an ever-increasing rate: Every company’s accepted way of doing things should be examined on a regular basis to determine whether it is still the best way or not. A way that worked in the past isn’t necessarily the best way today. A company that isn’t challenging itself consistently, will see a downturn.

 

2. There must be a conscious and continuous effort: When the top management of a company can instill a belief among its employees that it is doing everything in its power to create a good working environment and taking care of its employee’s interests, the productivity of employees in these companies will be way higher. Every employee must be treated with reasonable dignity and consideration. The Pension Plans of a company play an important role in generating employee loyalty.

 

3. Management must be willing to submit itself to the disciplines required for sound growth: The true investment objective of a growth company should be to avoid losses, not to make gains. A company which reports its profits aggressively may not be able to sustain its profits in the long run.

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Units 14/18