In short, the company into which the investor should be buying is the company which is doing things under the guidance of exceptionally able management.
A few of these things are bound to fail.
Others will from time to time produce unexpected troubles before they succeed.
The investor should be thoroughly sure in his own mind that these troubles are temporary rather than permanent.
# Then if these troubles have produced a significant decline in the price of the affected stock and give promise of being solved in a matter of months rather than years, he will probably be on a pretty safe ground in considering that this is a time when the stock may be bought.
2. Buying the right sort of company with a worthwhile improving in earnings that has not yet produced an upward move in its price.
All buying points do not arise out of corporate troubles.
Another type of opportunity sometimes occurs.
What is the common denominator?
# It is that a worthwhile improvement in earnings coming in the right sort of company, but that this particular increase in earnings has not yet produced an upward move in the price of that company's shares.
Whenever this situation occurs the right sort of investment may be considered to be in a buying range.
Conversely, when it does not occur, an investor will still in the long run make money if he buys into outstanding companies.
However, he had then better have a somewhat greater degree of patience for it will take him longer to make this money and percentage-wise it will be a considerably smaller profit on his original investment.
Does this mean that if a person has some money to invest he should completely ignore what the future trend of the business cycle may be and invest 100% of this fund the moment he has found the right stocks and located a good buying point, as indicated above?
A depression might strike right after he has made his investment.
Since a decline of 40 to 50% from its peak is not at all uncommon for even the best stock in a normal business depression, is not completely ignoring the business cycle rather a risky policy?