Of these tests the most severe under recent financial conditions are those of financial strength. A considerable number of our large and formerly strongly entrenched enterprises have weakened their current ratio or overexpanded their debt, or both, in recent years.

Our last two criteria are exclusive in the opposite direction, by demanding more earnings and more assets per dollar of price than the popular issues will supply. This is by no means the standard viewpoint of financial analysts; in fact most will insist that even conservative investors should be prepared to pay generous prices for stocks of the choice companies. We have expounded our contrary view above; it rests largely on the absence of an adequate factor of safety when too large a portion of the price must depend on ever increasing earnings in the future. The reader will have to decide this important question for himself-after weighing the arguments on both sides.

We have nonetheless opted for the inclusion of a modest requirement of growth over the past decade. Without it the typical company would show retrogression, at least in terms of profit per Stock Selection for the Defensive Investor 349dollar of invested capital. There is no reason for the defensive investor to include such companies-though if the price is low enough they could qualify as bargain opportunities.

Nearly everyone interested in common stocks wants to be told by someone else what he thinks the market is going to do. The demand being there, it must be supplied.

Their interpretations and forecasts of business conditions, of 260 The Intelligent Investorcourse, are much more authoritative and informing. These are an important part of the great body of economic intelligence which is spread continuously among buyers and sellers of securities and tends to create fairly rational prices for stocks and bonds under most circumstances. Undoubtedly the material published by the financial services adds to the store of information available and fortifies the investment judgment of their clients.

It is difficult to evaluate their recommendations of individual securities. Each service is entitled to be judged separately, and the verdict could properly be based only on an elaborate and inclusive study covering many years. In our own experience we have noted among them a pervasive attitude which we think tends to impair what could otherwise be more useful advisory work. This is their general view that a stock should be bought if the near term prospects of the business are favorable and should be sold if these are unfavorable-regardless of the current price. Such a superficial principle often prevents the services from doing the sound analytical job of which their staffs are capable-namely, to ascertain whether a given stock appears over or undervalued at the current price in the light of its indicated long term future earning power.