Snappy Plays the Stock Market
Snappy was very pleased with his successful investment in the Deer Brothers’ Lawn Service. He had begun to make a name for himself amongst the other forest creatures as an up-and-coming young squirrel!
Snappy Plays the Stock Market
Thinking that there might be other companies with as good profits as those earned by the Deer Brothers, he decided to consult with Auntie Pip about other opportunities in the forest.
Snappy Plays the Stock Market
Auntie Pip recommended that he should look into investing in companies with increasing sales over the last few years. Rabbit’s Clean Water Company, for example, had made a very good profit last year and Skunk’s Perfume Company was slowly earning a little more each year, as his perfumes became more popular.
Snappy Plays the Stock Market
Snappy wasn’t sure, however, in which company to invest. He didn’t know much about perfumes and was a little concerned that Skunk was a somewhat unsavory character. Rabbit’s company was doing pretty well, but Snappy didn’t quite understand how the water was made cleaner by Rabbit’s special process.
Snappy Plays the Stock Market
“Don’t invest in a company just because you like its product or its founder,” recommended Auntie Pip. “Let’s look at companies that make more profit each year and that pay back some nuts, or ‘dividends’, to its investors each year. And we should look at companies that don’t cost too many nuts to buy their stocks.”
Snappy Plays the Stock Market
So Snappy started doing some research. The Deer Brothers’ Lawn Service had increased profits, called earnings, each year for three years and paid dividends each year, but now it cost twenty nuts to buy a stock. That seemed too expensive to Snappy.
Snappy Plays the Stock Market
Auntie asked if the Lawn Service company was likely to increase sales enough next year to justify the high price, but Snappy thought they were already working on as many lawns as they could take care of.
Snappy Plays the Stock Market
Rabbit's Clean water had earned profits last year, but not the two earlier years, so Snappy decided not to buy them either.
Snappy Plays the Stock Market
Skunk's Perfumes had smooth earnings growth and regular dividends, and only cost ten nuts worth of stocks for one nut of profit paid out in dividends, so Snappy decided to buy some of that company.
Snappy Plays the Stock Market
Both Skunk and Snappy were happy. Skunk was happy to have more capital to create more interesting perfume combinations, and Snappy was happy to invest in a profitable enterprise. Even though he thought the perfumes smelled terrible, Snappy was pleased with his investment and its earnings.