Less Stable Stock Groups

by David Jenyns on November 6, 2009

In a boom such as the present one, which has shot many stocks to all-time highs, it is difficult — and possibly misleading — to stigmatize any particular stock category. Railroads, most machine-tool and agricultural-equipment manufacturers, autos, aircraft, building-trades suppliers, many metals — all these would have to be graded as unstable stock groups.

Machine tools — the great cutting, drilling, stamping, and rolling rigs that shape and form Alcoa’s aluminum sheets, Ford’s fenders, and Inland’s I-beams, as well as every other patterned metal part in industry — are, for all their importance, cyclical items. Copper, aluminum, steel, and the rest all are stockpile items, subject to the ebb and flow of business.

Steel companies historically are among the first to feel the pinch of recession. Steel, of course, is a prime material. Automobiles are a necessity subject to cyclical swings.

The weakness of a generalization, of course, is that it is so general. It is quite conceivable that many investors would prefer to have a piece of a well-managed, steadily productive railroad such as Atchison, Union Pacific, or Chesapeake & Ohio than of a B-rated unstable stock.

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