COMPANY NOTES
STOS
By CU As my colleague anticipated on March 4, the equity market has again tested its recent low point of 177 on the index. On Tuesday of this week—the last day of the account and the close of the financial year for many Stock Exchange firms—it dipped to 175.7.
Imperial Chemical is, however, an excep- tional case. I have been looking at the yields obtainable from other 'growth' shares and I do not rind them so attractive. For ex- ample, only 3 per cent. is obtainable from REYROLLES, 3.55 per cent. from E.S. AND A. ROBINSON, 3.45 per cent. from LUCAS, 3.8 But the volume of business fell on the de- cline and on Wednesday there was a share recovery in prices. -this pleased the chart readers, for the market has now established what they call 'a double bottom.' If it could rise convincingly from this plateau they would claim that the bull market is still functioning. The clue to the riddle prob- ably lies in the gilt-edged market. At 175.7 for the equity index the average yield from industrial shares is 4.96 per cent. This can be regarded as above normal for times of prosperity. But the yield on old Consols last Tuesday was 4.04 per cent. The differ- ential of 0.92 is below the normal except for times when investors are expecting a big increase in dividends. This hardly applies today. The position would be righted if the gilt-edged yield were to fall. The lively recovery in the gilt-edged market this week—this too has established a 'double bottom'—is therefore of great im- portance. If it can be held, the equity share market can be stabilised and the institu- tional investor might be tempted again to buy. I advise investors to watch IMPERIAL CHEMICAL as the test case. It fell to 38s. 6d., recovered to 42s., fell again below 40s., and is now 41s. If this company pays 10 per cent. on its doubled capital a potential yield of nearly 5 per cent, is obtainable for a premier 'growth stock.'
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per cent. from PERMUTIT. Although the earnings yields are high in the case of Reyrolle, Lucas and Permutit, the market is surely discounting an increase in divi- dends too far ahead. A more difficult case to decide is F. PERKINS, the well-known makers of diesel engines. This share has fallen 124 per cent. to 44s. 3d., at which price it yields 4.35 per cent. on dividends of 20 per cent. covered by earnings of 47 per cent. The meteoric rise of F. Perkins since the war has been a reflex of the great development of the diesel engine for com- mercial lorries, agricultural tractors, buses and taxis. The company's reconditioned en- gine service and spares and maintenance organisation, which is world-wide, has put it in the lead in the diesel field. It is now meeting with fierce competition from abroad, but is holding its own.
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