Andrew Lanyi is a Rarity: A Long-Term Broker
NEW YORK (AP) _ A short time ago a friend phoned Andrew Lanyi with what he thought was exciting news. A large brokerage house, he said, had recommended one of Lanyi’s favorite stocks.
″I don’t care,″ he responded flatly, unemotionally. And after a pause: ″Not at all.″
The caller should have known. A week or so before, a sharp drop in the market had shaved big percentages from the value of some Lanyi recommendations, but he wasn’t concerned then either. Not at all.
″Why should I be?″ he asked. With world peace, he said, the Dow Jones industrial average may reach 25,000 points 20 years from now. ″I don’t worry about 300 points down,″ he said. ″I fear missing 20,000 points up.″
In many ways Lanyi is very different. Apart from being successful, he is original, independent-minded, smart, self-deprecating, amusing, all of which he reveals in his ″Confessions of a Stockbroker.″ (Prentice Hall, $19.95.)
Many investors find such a combination a rarity for any individual working within the institutionalized strictures of a stock brokerage, but it is that very combination that makes Lanyi’s book entertaining and valuable.
A refugee from the Hungarian uprising of 1956, Lanyi ″read every ad in The New York Times and they all said previous experience necessary. The only ad that said ‘no experience necessary’ was selling mutual funds part-time.″
There were only three problems, he relates. ″I never sold anything in my life, I didn’t know what a mutual fund was and I didn’t speak any English. At least not any that someone could understand.″
He learned the business and the language, and learned also to do things his own way, especially in regard to prospecting and research. Though Lanyi works for Laidenburg, Thalmann & Co., he does his own research.
Lanyi and his associates, he says, review more than 27,000 quarterly sales and earnings reports annually, follow up with analyses and calls to 400 companies, and find seven or eight to recommend.
This is what he looks for:
- Fast Growth. Lanyi checks a company’s suppliers, including printers who provide cartons, labels and brochures. If a company is buying more supplies, it’s a sign incoming orders are growing, he says. He believes the technique gives clients an opportunity to buy early, before actual sales reports push prices up. He seeks long-term growth possibilities. H&R Block, recommended in 1962, has grown 105,000 percent.
- Market dominance. ″We look for companies that, because of patents and knowhow, totally dominate their industry, niche or geographic area, such as ADP in payroll preparation.″ It has 120 straight quarters of double-digit growth.
- Recession proof. Lanyi says he seeks companies that grow independently of the economy by offering indispensible products or services, or because they help customers save money. That’s why he likes some health-care stocks.
- Repeat orders. A built-in demand for repeat orders is almost a guarantee of long-term growth, he says. Examples: Tax preparation, photographic film, a well-run health-care facility which cuts everyone’s costs, a software firm that constantly improves its product and provides increased efficiency.
- Cookie-cutter factor. The ultimate in repeat orders is achieved when a company develops the cookie-cutter factor. Ray Kroc of McDonald’s took a cookie cutter and stamped out 30, then 300, then 30,000 restaurants.
″What the investor needs to know about is the next generation of winners,″ says Lanyi. They’re out there, he says, waiting to be discovered, because the spirit of genius and entrepreneurship is still alive in America.
Pick them, monitor them, hold them while orders increase, ignore the gurus and don’t worry about temporary price flipflops if business remains good. But don’t get locked into stocks when the evidence turns against them.
His recommendation: ″The wise investor will do his or her homework and look for the qualities I have outlined above.″ They too, he says, might find stocks that will grow no matter what happens politically or economically.
End Adv for PMs Wednesday, Oct. 21