In his revealing article called, "Changing Fashions in Finance/* veteran analyst Eldon A. Grimm of Walston & Co. compared the styles and fashions in common stocks with those in women's clothes or hairdos. Just as ladies go from one fashion to another, so stocks go in and out of style. The plunging neckline or the length of skirt is forever rising or falling like the stock market.

While most of the dramatic rises have had some solid substance behind them, such as earnings advance and new product developments, the factors of mass emotion and mass psychology have played an important role in exaggerating the comings and goings of different stock groups. You may make a lot of money by just anticipating these waves of mass enthusiasm ahead of time. Naturally, you should be nimble enough to "get out" before the stock goes "out of style."

If, for instance, you had anticipated in late 1960 the coming popularity of savings and loan shares, as, among other things, an anticlimax to the excesses of no-stock-is-good-with-earnings, you could have bought on November 30,1960, Great Western Financial at 29½; First Charter Financial at 27; Lytton Financial at 13;Wesco Financial at 22. As o£ December 5, 1961, or about a year later, they reached 65¾, 52¾, 33½ and 52½ respectively.

They might advance further in view o£ the industry's long-term growth prospects, but no stock group can go on advancing forever. As a matter of fact, there is already growing talk of the savings and loan group being "adequately" priced at 25 times untaxed earnings. There is also a revival of fears about the possibility of congressional actions to eliminate or at least reduce the tax shelter being enjoyed by this stock group.

In order to keep today's favorites in proper perspective, it's a good idea to review briefly the origins of some of the past favorites as seen by Walston's Mr. Grimm.

Cause: Walter Disney and Davy Crockett. Result: Walt Disney stock rose from about $8 a share to a high of $59 in two years time.

Cause: World War I. Result: "War baby" Bethlehem Steel exploded upward from $10 a share in 1914 to $200 just one year later.

Cause: Talking pictures. Result: Warner Brothers Pictures celebrated its first talkies by skyrocketing from 9¾ in 1927 to 138 the next year.

Cause: The birth of radio. Result: RCA catapulted from the equivalent of 12½ in 1922 to 420 in 1928 and 573 in 1929.

Cause: Lindbergh's flight across the Atlantic. Result: Fetish for airplane shares, with Wright Aeronautical, for example, zooming from 9s in 1924 to 289 in 1928.

Cause: The repeal of Prohibition. Result: National Distillers became a magic word and the stock gyrated from 13 in 1932 to 124d one year later.

Cause: The advent of television. Result: New names such as Motorola became household words and the Motorola stock soared from 8¾ in 1946 to 57 in 1950.

Cause: The growth of the airlines. Result: American Airlines flew from 7½ in 1937 to 94½ eight years later.
 
Cause: The vast expansion in the aluminum industry. Result: Reynolds Metals rose from $19 in 1949 to the equivalent of $300 in 1955.

Cause: The birth of the H-bomb. Result: Boom in the lithium stocks, with Lithium Corporation of America, for example, blasting from 24 in 1949 to 39½ in 1955.

Cause: Growing application of automation. Result: Cross Company, maker of automation equipment for the auto industry, vaulted from only $1 in 1950 to $90 in 1956.

More recently, we had "fashion" in missile and rocket fuel stocks, stocks in the science groups, especially companies engaged in paper-currency changer, dry photographic process, optical scanner, foreign language translator, magnetic memory storage drum and many other exotic items. Meanwhile, we had such groups "in style" as automatic vending, bowling, boating, and swimming pool. Investors have even found "new" growth in the long-neglected publishing business.

Contributing to understanding the comparative appeal of varl- ous stock groups is a recent study made by the Commerce Department of 300 product and service lines which is, in the words of Newsday's Eugene Miller, "a brand new government study which throws a lot of new light on the whole subject of growth industries." The objective of the study is to determine which are the fastest-growing, which are standing still, and which are actually on the downgrade.

Here is a summary by Mr. Miller of the findings by the government survey in terms of the annual growth rate of some major products or services between 1948 and 1960.

Growth rate of 30 per cent a year or higher

Helicopters                               Auto air conditioners
Transistors                                Polyethylene
Heat pumps                              Power brakes
Titanium sponge                        Power steering

Growth rate, 20 to 30 per cent

Dehumidifiers                            Icemaking machines
Room air conditioner                Power lawnmowers
Tufted carpets                          Phonographs
Driers                                       Central air-conditioning
Helium

Growth rate, 10 to 15 per cent

DDT                                        Black and white TV sets
Automatic coffee-makers          Styrene plastics
Picture tubes                             Polyvinyl resins

Growth rate, 7½ to 10 per cent

Synthetic rubber                       Electric power
Chlorine gas                             Natural gas
Vending machines                     Aviation gasoline
Dishwashers

So much for the so-called rapidly growing products and services. The list below gives you some perspective on those showing a declining trend over the past thirteen years.

Down 3 to 5 per cent

Zinc                                          Cooking stoves
Machine tools                           Inner tubes
Bituminous coal                        Wool carpets

Down 5 per cent or more

Power sprayers and dusters      Wire nails and staples
Asphalt board products            Anthracite coal
Railroad freight cars                  Ironers
Milking machines                      Steam locomotives
Feature movies                         Oil space-heaters
Textile bags                              Railroad passenger cars

Among other points of interest in the Department of Commerce study, according to Mr. Miller, are, "First, of the 70 items ¿n the fast-growing group, only 10 per cent showed uninterrupted growth at a high rate in the 1948 to 1960 period. Put another way, it means that even growth products have ups and downs even when their growth rate is fast. Second, a new product can come in like a rocket without the industry's growth gaining significantly. That's because some new products simply replace the old product and there is very little net gain."

Where is growth now? One authoritative voice is, of course, the 671 security analysts who participated in the 1961 Opinion Research Corporation survey. They as a group favored the electronics, office equipment and pharmaceutical industries as the most attractive growth possibilities over the next five years. On the other hand, they found that the railroad, automotive, steel, nonferrous metals, and rubber goods offer the least growth potential.
When compared with a similar O.R.C. study made in 1958, the current survey showed marked shifts of opinion within the financial community. Only 15 per cent of those polled three years ago, for instance, saw the telephone and telegraphic communications industry as a top growth group. In the 1961 study, however, 49 per cent of the analysts interviewed singled out this field for attractive growth possibilities.

Also, favorable reaction to electric utilities grew from 21 to 47 per cent in the past three years while chemicals, steels, oil and papers dropped from 20 to 12 percentage points.

No stock group is sure of a growth rating for any extended period of time in characteristically unsure Wall Street. Investors would do well to seek opportunities in companies and industries which are coping with the eternal newness of a changing world with particular emphasis on creation of new consumers' demand and on important product development in science and technology.

The following four chapters are a survey and estimate of several areas known for their growth.

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