Try to buy the industry leader or, at the very least, a company that has an important position in its industry.
Look for an industry with a limited amount of competition.
Avoid an industry that is an essential part of the Gross National Product or the Consumer Price Index, such as autos or steel. Reason: Highly visible companies are east targets for government pressure.
Stick to stocks that have price/earnings ratios lower than that of the Standard & Poor's 500 index.
The stock should yield at least 4.5 % to 5%.
The company should have a record of significant dividend increases.
The market price of the stock should be close to book value per share.
Both the industry and the company should have growth rates higher than the median of American business. One rule of thumb: Sales and earnings ought to have doubled over the past decade. If they haven't, you probably won't be able to keep ahead of inflation in the years ahead.
Stay away from companies that are too heavily in debt, especially in relation to industry-wide standards.
Look for companies where managers are owners, too. Nepotism can be a danfer in suc situations. More often, though, owner-management is a big plus. Owner-managers have a real incentive to keep the company growing, as well as to boost the stock's value.
While you may not find a stock with all these characteristics, insist on at least these two: It should be in a growth industry with owner-management.
*Source: Roy Papp, incesment counselor, 5631 Echo Canyon Circle, Phoenix, AZ 85018
