Diversify to Grow — An Historical Look at SBICs

by David Jenyns on March 23, 2009

This piece from the 1960s demonstrates how Small Business Investment Companies (SBICs) and mutual fund management companies are a good way to build and diversify your growth stock portfolio.

SBICs give investors a safe way to participate in the glamour issues of the day while reducing risk through diversification and professional management.

Generally speaking, SBICs should give investors a diversified portfolio of possible rapidly growing situations.

Similar in certain aspects to SBICs are mutual fund management companies. These should not be confused with mutual funds. The basic growth prospects of management companies is, of course, based on the continuously excellent growth potentials of the mutual fund industry which is expected to keep outgrowing its competitors for savings because of its basic advantages of diversification and professional management. In examining mutual fund management companies, expert analysts utilize five “salient yardsticks” which they consider essential to the evaluation of an equity investment: (1) quantitative earnings growth; (2) qualitative earnings growth; (3) management; (4) sociology of stock ownership; and (5) timing and value.

Of special importance is, of course, the earnings growth pattern. Management company earnings are made more attractive by the fact that there may never be a need for new equity money, or even retained earnings.

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