10 JANUARY 1964, Page 27

Investment Notes


THE ebullience of last week has disappeared from the market as I write because of the general fear and dislike of the Chancellor's threat to company profits which emerges from his pres- sure tactics at the NEDC. In the interview with the Sunday Express, to which my colleague refers, Mr. Maudling was asked whether he intended to make an official request for dividend restraint as Mr. Selwyn Lloyd did. He replied: 'Business- men obviously must bear in mind the need to keep down costs and prices in deciding how to apply profits. But one must recognise that unlike wages profits are not uniform in any one in- dustry and can go down as well as up. I think business people are sensible enough to co-operate and I don't see the need for a renewed official request at present.' This should reassure the equity investor who is enjoying one of the rare periods when company profits arc rising through increased output. I think the NEDC storm will soon blow over.

Investment Trusts

Last year the Financial Times index of invest- ment trusts rose by 18 per cent in market value. Investment experts are always searching this market for stocks which can be bought at a dis- count on their net asset value and with a divi- dend cover which' indicates a probable increase in dividends. My attention has been drawn to three shares which seem attractive. LONDON AND CLYDESDALE have 34 per cent of their portfolio invested in dollar securities. In view of the high dollar investment premium, now 111 per cent, its next valuation should show excellent results. The shares can be bought at 22s. 71d., which is at a discount of 11 per cent on their net asset value. The yield is 3+ per cent and the divi- dend cover 1.26. GUARDIAN INVESTMENT at 16s. 6d. stands at a discount of 151 per cent on its net asset value. It has 22 per cent in dollar securities. The- yield is 3 per cent and the dividend cover 1.32. DOMINION AND GENERAL has 27 per cent in dollar securities and at 20s. 4Id. stands at a discount of 11 per cent on its net asset value. The dividend yield is 3.4 per cent and the dividend cover 1.3. These three shares should constitute excellent holdings for the pri- vate portfolio.

Reed Paper

INTERNATIONAL PUBLISHING (the Daily Mirror Group) has touched a new high of 18s. to yield 5 per cent and I suggest that holders might switch part of their holding into REED PAPER at 57s. to yield 54- per cent. Reed Paper is con- trolled by International Publishing and its chair- man, Mr. Cecil King, is busy putting the manage- ment right. As everyone knows, the EFTA tariff cuts increased the competition from the Scan- dinavian paper-makers and caused Reed Paper to expand its overseas production, particularly in the coarser grades of paper which would eventually become uneconomic to produce in the UK. Some two-thirds of Reed newsprint production is now in Canada and it is hoped eventually to transfer a major part of its kraft production from the UK to Canada. All this will enable Reed Paper to compete effectively with Scandinavia. The company's main activity is now in converted packaging and wrapping papers. which account for 51 per cent of its sales. News-

print is only 24 per cent of sales. For the six months ending September total sales were 5 per cent up and net profits 17 per cent up. At the present price the potential earnings yield must be well over 10 per cent.