The NYSE member firm, Arthur Lipper Corporation, provided institutional client investors with Perspective, a quarterly published chart book, showing 4 lines of 10-year data; EPS, Price/Earnings Ratio, Price, and Yield, all relative to the DJIA. The intent was to display and assess either divergence or compounding of trends, leading to judgments of over or under valuation.

It now occurs to me that adding a top line showing the history of Relative Revenues (RR) for the stock would have also been constructive.

Revenues indicate both the company’s customer satisfaction with that which is being sold by a company, as well as the company’s ability to arrange for the necessary distribution and marketing of the product or service. Earnings Per Share (EPS) indicate the company’s ability to create and sustain profit margins.

The EPS is a measure of owner benefit, and the RR is a measure of the customer’s benefit. The relativity factor is desirable as investment portfolio management is an exercise in alternative selection and making data comparable to the alternatives is useful. Investors will eventually want to consider investing in companies that are increasing their revenues relative to the revenue change experienced by the average of other comparable companies.

Investing in revenue royalties, a percentage of a company’s revenues for an agreed period, rather than in the stock of a company, which is generating the revenues, is the practice we recommend for financial involvement in startup and early-stage privately owned companies. It would also be our preference for many established companies if the opportunity of this type of investment were available.

 

Arthur Lipper, Chairman                          arthurlipper@gmail.com
British Far East Holdings Ltd.