Super Stocks

PART ONE

THE ANATOMY OF A SUPER STOCK

Chapter 1

Get Rich with the “Glitch” 3

Analyzing Super Stocks—In Search of “The Perfect Glitch”

Chapter 2

What Makes the Glitch Twitch? 17

Tough Times Separate the Men from the Boys: AWarning First. They’ll

Bitch at the Glitch. “Success Has a Thousand Fathers, but Failure Is a

Bastard.” Some Companies Make It—Some Don’t.

PART TWO

VALUATION ANALYSIS

Chapter 3

Conventional Approaches to Stock Valuation—The Riddle:

Ten Times Earning’s Is too High and a Thousand Times Is

Too Low 31

The Problem: If Left Field and Right Field Don’t Work, Get Out of the

Stadium. Earnings-Based Methods: The “Underpriced, Low P/E” School.

The Growth Stock School of Thought. The Ben Graham Approach—

”Remarkable but Not Enough.” The Solution.

Chapter 4

Pricing Is Everything—Use Price Sales Ratios 39

Bulls, Bears, and Turkeys. Understanding Price Sales Ratios (PSRs). What

Does the Relationship between Price and Sales Mean? A Case in Point:

The Datapoint. A Super Stock Is a Super Company Bought at a Low PSR

Relative to the Company’s Size. What Is a Low PSR, What Is a High PSR,

and Why? Studying the Solution. Getting the Right Slant on Stocks.

Swimming Upstream as You Grow. A Fear of Heights. The Threshold of

Never-Never Land. The Economics of Going Public.

Chapter 5

Price Research Ratios—The Cost of a Good Set of Brains 61

The Problem—Landing a Whale. What is the Price Research Ratio?

Research Is Just a Commodity. Market Research Wags Technical

Research: The Solution. Rules for Using PRRs. Problems with PRRs.

Chapter 6

Applying Price Sales Ratios to Nonsuper Stocks 75

PSRs, the Broader Concept. Lessons of the Past—PSRs in the Bull Market of

the 1960s and Early 1970s. PSRs and the Great American Smokestack Stock.

Use PSRs as THE Stock Market Timing Device. Fisher’s Rules for Timing

the Stock Market. PSRs in the “Garbage Dump” of the Stock Market.

Chapter 7

Fortunes from Failures—The Myth of the 1930s 95

Through the Time Warp. IBM Not a Growth Stock? Spectacular Profits

with Low-PSR Stocks. What about All Those Great Companies?

PART THREE

FUNDAMENTAL ANALYSIS

Chapter 8

Super Companies: The Business Aspects—

Stalking Excellence 109

Basic Business Traits. Growth Orientation. Marketing Excellence:

Quanta-Ray: “Underpromise; Overperform”—Customers Are the Best

Salesmen. Is Management in Control of Marketing? How Are Sales and Service

Handled? Find the Unfair Advantage: Does the Customer Get the “Best Bang

for the Buck”? Labor Relations Are Critical. Financial Controls—Question

the Answers.

Chapter 9

Avoid Risk—Avoid Competition 127

David and the Anteaters. Avoid the Places Anteaters Hang Out. The

Japanese Zap Large Markets—Sometimes. Small (and Different) Is Beautiful.

Remember Your Teddy Roosevelt—Walk Softly but Carry a Strong Balance

Sheet. Who Stands behind the Financials? Who Has Controlling Interest?

Chapter 10

Margin Analysis—All I Really Want in Life Is an

Unfair Advantage 135

The Problem. Some Definitions. Look for Clues from the Past: Who

Kicked the Sleeping Dog? When in Doubt, Ask! From Rags to Riches.

Something Rather Unique Must Be Done. All I Really Want in Life Is

an Unfair Advantage: High Market Share Can Be an Unfair Advantage.

Relative Market Share Is More Powerful Still.

Chapter 11

Margin Analysis Continued—Formulas and Rules 149

A Forecasting Formula for Margin Analysis: Some Examples. Rules for

Margin Analysis. No One Is Perfect—You Don’t Have to Be.

PART FOUR

DYNAMICS

Chapter 12

Into Action—There’s Method to the Madness 159

Where Is the Magic Key? Opportunities Are Seldom Labeled: Scan

for Low PSRs. Scan for Money-Losing Companies. Scan for Qualitative

Assessments of Superior Companies. The Best Research Facilities Cost

Nothing to Use. Take an Important Side Step in Time. The Key to

Esoteric and Little-Known Publications. Avoid Competition from

Wall Street. Visit the Company: Getting Your Foot in the Door. Contact

Customers, Competitors, Suppliers, and Investment Professionals. It’s

Time to Reach a Conclusion.