In deciding what stocks to buy, it is well to consider first the classes of stocks, and then what particular stocks you should buy in the classes you select. We would first of all divide all stocks into two classes, those listed on the New York Stock Exchange and those not listed on the New York Stock Exchange. As a rule, it is better to buy stocks listed on the New York Stock Exchange, although there are frequent exceptions to this rule.

Then, the stocks listed on the New York Stock Exchange may be divided into classes, such as railroad stocks, public utility stocks, motor stocks, tire stocks, oil stocks, copper stocks, gold stocks, and so forth. At certain times certain stocks are in a much more favorable condition than at other times. In 1919, when the industrial stocks were selling at a very high price, the public utility stocks and gold stocks were selling low, because it was impossible to increase incomes in proportion to the increase in operating costs. But since the beginning of 1921, the condition of these two classes of stocks has been improving and the market has reflected that improvement.

At the time of this writing (early in April, 1922) we are recommending the stocks of only a very few manufacturing companies; but we are recommending a number (not all) of the railroad and public utility stocks, and a few specially selected stocks among the other classes.

In every instance, when you make a selection, you should consider the company's assets, present earnings, and prospective future earnings, and then take into consideration all the influences that affect price movements, as explained in subsequent chapters.