THERE was a sigh of relief in the City when the stock markets at the end of the fortnightly account had quite a 'shake-out.' There is no doubt that the fortnightly settlements both encourage and check speculation. As long as the stamp duty remains at 2 per cent. it will always be tempting for 'profes- sionals' to try to make a turn within the fortnight. The profit taking was well ab- sorbed and the good news from Indo-China caused the upward trend to be resumed on Wednesday, especially in the market in foreign bonds. I have constantly advised investors to make their long-term purchases during these pauses or reactions in the hull market. A reader has asked me which of the 'blue chips' I would pick out on such occasions. My first chol-
IMPERIAL CHEMICAL a0,--ASSOCIATED ELEC- TRICAL. The former at 36s. ex bonus yield 4.15 per cent. on the assumed dividend of 15 per cent. and the latter at 57s. 6d. yield 4.65 per cent. on the 111 per cent. divide-nd which was last covered 3.8 times. Both are 'growth' stocks with the prospect of divi- dend increases. Next I would choose TURNER AND NEWALL and ASSOCIATED PORT- LAND CEMENT. The former at 84s. return 4.15 per cent. on dividends of 171 per cent. covered 4.3 times and the latter at 84s. 6d. returns 4.14 per sent. on the same dividend covered 4.2 times. There is little to choose between them. Finally to make the 'big five' I would pick METAL Box at 73s, ex bonus to yield 4,1 per cent, assuming that dividends of 15 per cent. will be maintained on the increased capital. Perhaps this is the best 'growth' stock of all.
To make up a 'big six' I would select FORD MOTOR. The motor industry has been breaking records this year, having produced 100,000 more cars in the first half of this year than in the first six months of 1953. The total was 380,000 cars and 128,000 vehicles. Ford has been increasing its share of the total and is now planning extensions to its Dagenham factories. At 68s. the yield is only 34 per cent, on dividends of 12 per ccnt, but these were covered last year 3.8 times and will probably be increased in the current year. I have not forgotten %ski AND SPENCER but for the moment at 54s. ex bonus the Ss. shares seem high to yield• only 3 per cent, on the equivalent dividend of 324 per cent. It is possible that 40 per cent. will be paid this year, affording a yield of 31 per cent., so that the shares might be picked up on any future reaction. 1 have not included streee in my first list, although most investing advisers would have done so, because I feel uncertain about the immediate oil prospect and do not care to take so much of the dividend on trust from the Shell directors. But I see that they came back sharply from 51% ex bonus to 418.
INDUSTRIAL FINANCE AND INVESTMENT is not lavish with the information it doles out to its shareholders but it has possibilities which are well worth following up. It is a finance house which tends to go liquid when it considers the investment outlook uncertain and becomes active when it sees the 'green light' ahead. For the year to June, 1954, it must have found good outlets for its funds, but we must wait till October for the full results. However, it declared a 20 per cent, scrip bonus last month and indicated that it would pay 10 per cent. on the new shares for 1953-54. The bonus enabled the 12s. 6d. shares to be written up to 15s. so that at 22s. the shares return the satisfactory yield of 6.8 per cent. Two interesting features make the shares attractive for other reasons than the income yield. First, it heads the group which controls Minerals Separation, a company which manufactures chemical compounds for foundries and holds large investments in the Rhodesian copper pro- ducers. (This company declared a 300 per cent. share bonus three months ago.) Secondly, it had large investments in Germany before the war which were written down to nil in its balance-sheet in 1940. It is now in process of recovering part of these investments and the present bonus of 20 per cent. no doubt reflects these gains up to date. But there is more to come and eventually I would not be surprised to see a further writing up of Industrial Finance and Investment shares.