COMPANY NOTES
B Y CUSTOS THE stock markets opened nervously after the holiday under the shadow of an inter- national crisis and a sharp setback in Wall Street. The centre of the selling storm was, of course, the oil share market. As Tuesday was the last day of the long Stock Exchange account the speculators in BRITISH PETROLEUM, HURMAH OIL, SHELL and ROYAL DUTCH were badly caught. BP suffered most with a fall of 10s., making 30s. down over a week. The previous rise in oil shares had been so steep that the fall can go much farther before the market steadies. Clearly, until we know the outcome of the Suez conference it will be dangerous to make a plunge, but the investor who has steady nerves should be able to pick up some bargains in this crisis. My choice is for Shell and Royal Dutch, because their political risks are more widely spread round the world than those of British Petroleum. Under 140s. (against a recent 'high' of over 170s.) Shell will begin to yield nearly 4 per cent. (over 12 per cent. on earnings) which would be an attractive investment level. We must not forget that a war scare is bad for gold shares but good for the gilt-edged market, which, if the worst happens, could look forward to exchange control and a pegged rate of interest lower than the
prevailing 5 per cent. * * It was inevitable that with the threat of war both investors and speculators would turn to Canadian stocks. This demand caused a sharp rise in the dollar premium which touched 8 per cent. before falling back to 61 per cent. Two months ago it was only 11 per cent. It must be remem- bered that at this premium (which is calculated on the official exchange rate) investors are buying the Canadian dollar at about $2.56 against an official rate of $2:80. Moreover, Canadian securities have been rising for some considerable time and
are now at prices which discount future earnings far ahead. For example, BRITISH AMERICAN OIL, which 1 recommended on June 22 at 76f London have risen to 96/ and yield only 1.8 per cent. BRITISH COLUM- BIA POWER at 93+ London have risen from $66 this year and yield only 2.65 per cent. This Company will secure the franchise for natural gas when the new natural as pipe- line is built but this is looking ahead a year or more. ALUMINIUM have risen from $181 London to $280 and yield only 1+ per cent. INTERNATIONAL NICKEL have jumped to $2061 from a low' this year of $141. The recent sharp rise was prompted by the news that the American Government is offering premiums above the posted price of nickel to encourage new nickel production. At $2061 Nickel yield 3.4 per cent. The Canadian banks have also enjoyed a con- siderable market appreciation and now yield 2+ per cent, or more. I mention these statistical facts to impress upon investors that Canadian stocks are not cheap. On any sharp setback in Wall Street American stocks may be preferable.
After their long and substantial fall FORESTAL LAND seem to have grounded at 14s. 6d., which allows a return of 12 per cent. on the basis of the reduced dividend of 9 per cent (covered 1.7 times by earn- ings). I have been making inquiries and find that while the introduction of substi- tutes for leather has permanently affected the heavy leather tanning industry, so that the company's sales in Great Britain have fallen sharply, a 'limit to this substitution has probably been reached. In the mean- time new uses for tannin extracts are being developed. While weaker companies may founder, there is no doubt that Forestal Land will stand and emerge from the present crisis with a stronger hold on the tannin extract trade than Before.
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