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Heady Nonsense. With the newcomers, some of the heady nonsense of the '205 was back. A few stocks once more soared on nothing more substantial than rumor. When word went around the street recently that a little-known company named Claude Neon (which controls an airline and owns an insurance company among other things) was buying a company that "had something to do with television," the stock shot from 3⅞ to 7⅛ in a few days. In Kansas City, an oil operator got a contract to sink a well in Canada for National Petroleum—and National went from 30¢ to $1.95 in a few weeks. In Atlanta, feverish talk that Rexall Drug had invented a new wonder drug sent speculators rushing to grab 30,000 shares of the stock from one brokerage firm alone.
But, in general, cheap stocks (see table: SHOOT THE WORKS) and cats & dogs that usually looked like bargains to the public simply because they were low-priced were not getting much of a play. Even though some were paying as much as 17% in dividends, buyers were wary; they wanted to be more certain that the stocks, many in feast or famine industries, would keep on paying dividends before they plunged. What some of the newcomers hoped to find were companies that had been overlooked in the general rush, usually because they had been poorly managed and had been losing money. Such stocks were selling far below their book value (the proportionate equity of each share of common stock in the net assets of a company). While book value is often only a hazy indication of a stock's intrinsic worth, many of these laggard companies were giving other indications of value. With better business and better management, many companies were in the black in 1950-5 first quarter and were catching the eye of those who wanted to take a chance (see table).
Fool's Gold? The biggest speculative spree in the last six months centered around the incredible television stocks. Although television was splitting its production britches as long as two years ago, no one had seemed much interested in investing in what TV makers loudly called "the most dynamic industry in the U.S." Even Television Fund, Inc., a mutual fund specifically organized to deal only in TV stocks, finally got cold feet: it began buying stock in magazines, business machines and many companies that had nothing to do with TV. Then, as one broker simply put it: "A lot of people decided they liked TV stocks."
Admiral Corp., which had been selling for 7⅛in 1948, shot up to 30, and even after a 100% stock dividend climbed back up to 39¼. Thus, anyone who had spent $712 to buy 100 shares at the low point, would have ended up with $7,850 if he had sold out at the top. The stock of Los Angeles' smaller Hoffman Radio Corp. went from a 1949 2⅝ to 23¾ Motorola went from 14 to 52 and anyone who had invested $1,400 at the 1949 low would have had $4,260 at last week's price for the stock.
But even some of the TV makers acted as if this glitter might be fool's gold. When the stock of Emerson Radio was priced at 15½, Emerson President Benjamin Abrams sold 235,000 shares of his family's holdings—and missed out on more than $6,500,000 in profits when a 10% stock dividend was declared and the price eventually rose to 39¾.