INVESTMENT NOTES
By CUSTOS
THE technical rally which could have ended the bear market was rudely stopped by Mr. Khrushchev. But I fancy that it is only temporarY. Defence expenditures in the US are certainly not going to be reduced and this might be the turning-point for Wall Street. Many shares there have fallen, as many in our own market, to 3 level which allows the institutional investor to buy on a reasonable yield basis. I would therefore expect institutional buying to develop on these occasional setbacks. If the private investor is still nervous he could make an entry into the brewerY share market—which has special reasons for advance—in mergers and property revaluations. The latest merger—between Joshua Tetley and Walker Cain—reminds me that I have in the past recommended JOSHUA TETLEY at 35s. 9d.; they are now 75s.•For future mergers I suggest mar:Hi:C.', AND BUTLER at 79s. 6d. to yield 4.1 per cent., NORTHERN BREWERIES at 13s. to yield 3.7 per cent. and ANSELLS at 74s. to yield 4.3 per cent. The last might well be taken over.
Positive and Negative in Growth
At one time I thought that UNITED mouts.st.`, had possibilities as a recovery stock, but the last report stated that tanker freight rates were low and would stay.low—the tanker surplus will take years to eliminate—and that the company's earn- ings would decline further this year. The tax- free dividend of 15 per cent. will probably he maintained in view of the strong liquid position and even the special distribution of 31 per cent• might be repeated. But where is the growth for this company? I presume the directors are on the look-out for a 'take-over` to diversify their business—at one time there was a rumour that a bid might be made for Manbre and Garton—but no hint is given in the report of any contemplated purchases. Investments stand at nearly f14 mil- lion and account for' 12 per cent. of the total profit. The shares at 41s. 6d. yield 6.1 per cent. gross or 7.6 per cent. if the special distribution is repeated. Compare this with the 1.6 per cent. yield from PHILIPS LAMPS, but compare also the potential growth. This company is participating in the dynamic expansion of Europe, in particular in the television boom (the Continent is ten years, it is said, behind Great Britain) and in the growth in electronic equipment generally. The Philips President has told the financial journalists, in a recent interview, that he expects a threefold or fourfold increase in sales over the next ten years, Implying an annual rate of increase of 12 per cent- to 15 per cent. This seems to be the order for the current year Dividends may be expected to rise at least as fast as earnings, so that although the shares at the present price return a yield of only 1.6 per cent., in five years' time they will be returning a yield of at least 3 per cent. Two-thirds of the capital expansion are being financed by re- tained profits and this implies that 'rights' issues Will be made- from time to time Last year the company gave a stock bonus of 5 per cent. Philips shares, on this low yield basis, have met with criticism but they are not out of line with other dynamic growth shares such as International Business Machines.
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