(10 of 10)
Perils of the Future. But all that has glamour may not always grow. What is the tomorrow of today's growth stocks? Sherman Fairchild, like many experts, believes that the indiscriminate buying of growth stocks "has gone too far." Though brokers are wary of saying flatly that a stock is selling too high, they realize that it is perilous to project earnings five or ten years into the future. Particularly in the growth sector, technology is changing so fast that a new product, a competing process, a better method hit upon by a competitor can collapse a stock in a hurry.
What alarms many analysts is that investors neither carefully investigate what a company really has planned for the future nor realize that in many cases, even if a company succeeds in bringing a new product to market, it may not have the facilities to sell it, or a market big enough to make money. The big talk in the electronics industry is of the coming "shake-out" that will spell doom for many of the 5,000 firms now in the industry. Even in the glamorous transistor field, only the strongest and most inventive companies can hope to prosper in the increasingly tough competition.
The best among the growth companies are convinced that older growth industries lost out because they did not keep abreast of—or sufficiently ahead of—the needs and desires of industry, Government and the consumer. To keep ahead, the growth companies are spending large amounts on research (an average 6%-9% for the electronics industry v. 3% for all industry).
U.S. politicians are now engaged in an argument about whether the U.S. rate of growth is big enough; along with Democrats, Rockefeller talks of favoring a forced annual growth rate of 5% or 6%, while Republicans contend that anything beyond the average annual rate for the past 50 years (3%) is manipulation, and could lead to inflation and a bad crash.
The argument seems remote and insubstantial to the growth industry men, who in their own companies are not satisfied with growing less than 25% a year. They set high goals for themselves because they have immense confidence not only in the future of the U.S. economy but in their own ability to influence its course, to fulfill needs before they are fully recognized, to change the times rather than merely keep up with them.