Your Next Great Stock: How to Screen the Market for Tomorrow's Top Performers

Chapter 16. The New Dogs Screen

I can't tell my loukoumades from my glykismata or my amygdalopita from my diples, but I love a good Greek dessert. I was thrilled a year ago when a Greek pastry shop opened just a few blocks from my NewYork City apartment. One of the owners ran the store with the help of his daughters. The other, I learned, was a passive investor, or was meant to be, at least. I sampled some of the honey-drenched unpronounceables. They were tasty, so I kept going back. So did a lot of my neighbors. Within several weeks, the shop had lines at the counter nearly every night.

Then it closed, with no explanation. Curious, I asked a couple of friends who own restaurants in the area what had happened. (Small business owners secretly delight in making their best it's-a-pity face and explaining why a new competitor failed.) They told e that the two owners couldn't agree on how to split the profits. Their argument had become bitter, with both threatening to close the business down. Finally, they both did.

Profit squabbles have long been a challenge for shared companies. Early merchant shippers had a way to avoid the problem. I mentioned it in Chapter 4. After each voyage, they'd simply dissolve and distribute the profits to investors. The emergence of perpetual share-issuing companies like Dutch East India—companies that issued stock for longer than a single voyage—was made possible by a financial innovation. This innovation helped smooth relations between those waiting quietly ...