日期:2014/05/19
Wealth Creation by Bartley Madden provides a systematic way of looking at the performance of individual stocks. He believes that values are determined by 4 things. The return on past capital, the growth of assets, the rate of drift from innovation versus competiton, and the stock price itself. He gives examples of how to apply these measures to Apple, Bethlehem Steel, Digital Equipment, Eastman Kodak, IBM, Kmart, Nucor, Medtronic, Walgreen, Donaldson Company. He believes that lean management is one of the keys to success and contrasts Toyota with Bethlehem as examples of the best in lean versus the worst. In 1950, 7 of the top 10 highest paid executives in America worked for Bethlehem. The vice presidents had office windows in two directions. Union rules made them uncompetitive.
He applied these methods at a Hold affiliate which was bought by Credit Suisse. His methods are apparently widely used by many institutions as well as by Credit Suisse. All his ratios which he suggests be considered I n a feedback look must be tested. The Schumpeterian drift from competition is hard to measure. As is the return on future assets. However, the ideas make a lot of sense and provide a good template for analyzing a company.
He is a champion of free enterprise and the benefits that competition and innovation can bring to stockholders and consumers. There are interesting references to behavioral biases and shortcoming in the capital asset model. He recommends for example a visit to the San Francisco Museum of Science to see all the Ames exhibits on lapes in visual perception. I have followed his career for some 47 years when I first noticed him as a star at Berkeley.
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