INVESTMENT NOTES
By CUSTOS
HE weekly publication of good company I reports-witness those recently from TURNER AND NEWALL and DECCA-generally manages to bring new buyers into the market just when it is looking easier, and this week we can look forward to encouraging statements from COLVILLES and UNITED STEEL. (The investor would be Well advised to add or increase his stake in these two equities if he is not overloaded with steel shares.) Only some external shock is capable of putting the market back seriously and this could happen if Bank rate were to be raised to,5 per cent. Just as dearer money brought a substantial setback on the German bourse, so it could do the same here, unless the authorities made it clear to the market that it was a temporary measure. As for the gilt- edged market the short-dated and short-medium bonds would be badly affected, but the long-dated have already fallen on the mere threat, and in my opinion already discount a 5 per cent. Bank rate. War Loan, for example, which was recently touching 68, is back to 651 to yield £5 6s. 6d. per cent. The highest yield from an undated stock is £5 7s. 6d. per cent. from 4 per cent. Consols at 754 (which, believe it or not, touched 116.8 in the Dalton cheap money epoch), while the largest tax- free capital profit is offered by 2+ per cent. Savings 64/67 at 85+. The redemption yield 'grossed up' is 6.2 per cent. In two years' time this will be rated as a 'short.'
Metal Industries
I cannot understand the repeated tips in the popular press to buy the depressed equities of the shipping companies. These shares are depressed for a very good reason-that the world slump in freights will not be overcome for a long time- not until there has been sufficient scrapping of old tonnage to remove the surplus accumulated during the building boom in the shipyards. This may take a year or two yet and in the meantime it seems more logical to buy the equity of a company like METAL INDUSTRIES which will benefit from the in- creased scrapping. For the current half-year (up to September) this company reports a 25 per cent. rise in profits (before depreciation) mainly due to recent acquisitions and the directors add that if the present rising trend continues it should be possible to raise the dividend from 14 per cent. to 15 per cent. This puts the shares at 69s. on a 4.3 per cent. yield basis and a potential earnings yield of not less than 9 per cent. From the shipyards to the scrap yards seems to be a wise investment move.
Tozer Kemsley
TOZER KEMSLEY is an old recommendation and for the year ending this month it should be able to report a very satisfactory rise in profits. The relaxation of import restrictions in Australia and New Zealand should greatly improve its trade. On the 124 per cent. dividend the yield at the present price of 49s. is just over 5 per cent. and the earn- ings yield on last year's results nearly 20 per cent. This seems a good addition for anyone's portfolio who wants income.
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