Chapter 3 My first crisis. From my reading I knew that stocks- like herds, indeed- form groups according to the industry they represent and that stock belonging to the same industry have the tendency to move together in the market | CHAPTER THREE My First Crisis rom my reading I knew that stocks like herds indeed form groups according to the industry they represent and that stocks belonging to the same industry have the tendency to move together in the market either up or down. It seemed only logical to me that I should try to find through fundamental analysis a the strongest industry group b the strongest company within that industry group. Then I should buy the stock of that company and hold on to it for such an ideal stock must rise. I started studying the personality of a stock in relation to its industry group. When I read the quotations of general motors I automatically looked at those of Chrysler studebaker and 38 THE fundamentalist My First Crisis American motors. If I looked at kaiser aluminum my eye automatically glanced afterwards at Reynolds metals alcoa and aluminium ltd. Instead of reading the stock tables in A . . B . . C . . order I always read them in industry groups. Whenever a stock started to behave better than the market generally I immediately looked at the behavior of its brothers stocks of the same industry group. If I found that its brothers also behaved well I looked for the head of the family the stock that was acting best the leader. I figured if I could not make money with the leader would certainly not make money with the others. How delighted and important I felt doing all this This serious scientific approach made me feel like a soon-graduating expert in finance. Besides I felt this was more than mere theory. I was going to put all this into practice and make a lot of money. I started by compiling earnings of whole industry groups like oils motors aircraft steel. I compared their past earnings with their present earnings. Then I compared these earnings with the earnings of other industry groups. I carefully evaluated their profit margins their price-earnings ratios their capitalizations. Finally after a tremendous amount of sifting and concentrating I decided .
