Discrimination Required in Selecting "Stocks selling below Liquidating Value"

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There is scarcely any doubt that common stocks selling well below liquidating value represent on the whole a class of undervalued securities. They have declined in price more severely than the actual conditions justify. This must mean that on the whole these stocks afford profitable opportunities for purchase.

Nevertheless, the securities analyst should exercise as much discrimination as possible in the choice of issues falling within this category. He will lean toward those for which he sees a fairly imminent prospect of some one of the favorable developments listed in "previous post."

Or else he will be partial to such as reveal other attractive statistical features besides their liquid-asset position, eg., satisfactory current earnings and dividends or a high average earning power in the past.

The analyst will avoid issues that have been losing their current assets at a rapid rate and show no definite signs of ceasing to do so.