1) Does the industry deal in necessities or "postponables"? Does it produce things people have to have in good times or bad?food, drugs, power, or heating supplies? Or can people put off buying its products to another year? There is one investor who holds meat-packing and distillery stocks, not notably high-grade issues, because of his conviction that, come hell or high water, beef and bourbon will be staples of the American diet.



The same question on a different level: Is the industry involved in durable or capital goods, such as locomotives, trucks, freight cars, ships, large buildings? These are expensive items with a long life, and are usually financed with long-term, fixed obligations. In a pinch, they are among the first things customers are prepared to do without.

2)Is the industry depression-resistant? Retail stores, tobacco, metal containers, and, again, food products have a reputation for stability, not only in terms of continuing consumer demand, but in terms of production costs and price structures which make them attractive as so-called defensive issues.

3)Is it an extractive industry? Does it deal in natural raw materials, such as oil, lumber, asbestos, metals? Stocks of these companies are considered good hedges against inflation because they represent a primary material, an asset already owned. The acquisition cost of oil underground, for instance, may already have been rationalized; henceforth all that can be inflated are the extraction and distribution costs.

4)How keen is competition within the industry? Usually competition is keenest where the differences are least. Automobiles, soaps and detergents, drugs, tobaccos, gasolines and motor oils?within these categories the companies all offer the consumer pretty much the same thing. The local power and light company, the telephone company, and the natural gas companies (except for the scramble to run pipelines here or there) are virtually without competition.

Cross-competition between industries is also a factor. This is not the struggle of Coke vs. Pepsi, or Tide vs. All, but whether new office buildings are going to have a skin of brick and mortar, aluminum sheets, or glass panels.

The container and packaging people are a lovely example of round-robin competition, as is perfectly evident from five minutes' inspection of your supermarket's shelves. Plastic squeeze-bottles of one sort or another have cut into glass as far as the packaging of cosmetics is concerned.

On the other hand, the appearance of liquid soaps has given glass an opportunity in a field that was exclusively the paper-carton supplier's. The paper-carton manufacturer, meanwhile, has benefited from frozen foods at the expense of the tin-can producer. But the tin-can man has a new area in the pressure containers now used to dispense shaving cream, toothpaste, hair lotions, and anything else that can be squirted or sprayed?and that isn't already in a plastic squeeze-bottle.

5) Are wages a big item in the industry? How large a percentage of total sales are they? This, of course, can bear heavily on net earnings and, consequently, dividends. In the chemical industry, the ratio of wages to sales is quite small.

In steel and railroading, which have vast numbers of employees and huge payrolls, it is quite large.

6) Do raw materials come from domestic sources or from abroad? Are their prices traditionally stable or volatile? This, of course, applies to the oil, rubber, and sugar companies, to some of the mining and metals companies, and to a few of the chemicals. This is, possibly, not so important as it once was, considering that few industries are totally dependent on foreign resources, and that political upheavals or wars are so far-reaching these days that almost everyone is affected to some degree, at home and abroad.

The question should also be broadened to include foreign markets: What percentage of income derives from sales abroad? This would affect air and shipping lines, distributors like W. R. Grace and U. S. Industries, and the export trade of the auto, machinery, movie, and electrical-equipment industries.

The investor will have to decide, too, whether he considers foreign trade a positive or negative item. Overseas markets may be uncertain or undependable, but they are also frontier areas of tremendous potentiality for an economy like that of the United States, which has lived so largely off its own people.

With Forex trading economic indicators will have to be studied as well.

Good Forex software can greatly help you with this task.

Forex software has become so good that it has artificial intelligence and can predict future currency movements with some accuracy.

You still need to be aware of the risks involved in any financial investing and only invest what you can afford to lose.