FINANCE AND INVESTMENT
By CUSTOS
Just. as industrial share prices seemed well set for regaining the peak level reached in January they have suffered a sharp jolt this week. Just what happened to change the mood of the market from cautious confidence to nervous uncertainty it is hard to say, but there can be little -doubt that the main contributory influence has been the latest attack of nerves on Wall Street. Market men are mindful of the effect in Throgmorton Street last summer when New York took a headlong plunge and, fearful of a repetition of that experience, they have been lightening their speculative commitments. That, so far, is all that has happened on the selling side, although investment buying has been noticeably smaller. All eyes are now watching Wall Street for any indications the New York stock market may give of a coming fall in commodity prices and a recession in American business activity. Fortunately, there is little evidence of any large accumulation of inventories by American industry, and with so much of world demand still unsatisfied it would be incongruous indeed if America staged a first-class slump. What looks much more probable is a minor recession of the adjustment type, for which the situation would subsequently be all the healthier. Meantime, London markets are technically sound and the genuine investor should not regret a policy of seeing things through.
CABLE GROUP PROBLEMS
By bringing a petition for a liquidation some of the stockholders of the Eastern Telegraph Company have put the cat well and truly among the.pigeons in the Cable and Wireless group. The importance of this case, which is to be heard before Mr. Justice Vaisey on June 2nd, is not only. that it will determine the future of the Eastern Telegraph Company itself, but the implications the decision may have on the closely-related question of whether or not Cable and Wireless (Holding) should wind up or continue in existence when the Government compensation stock is handed out. The argument of the petitioners is that the substratum of the Eastern Telegraph Company has disappeared, but this view will be opposed by the company's directors. Meantime, Eastern Telegraph 34 per cent. Preference stock, which stands to gain very substantially in a liqui- dation, has been fluctuating violently on the Stock Exchange. After reaching 153 it has now fallen back to 12o. Even at this lower level it is standing much higher than the price it would command if the liquidation petition fails. As a 31 per cent. well-covered Preference in a continuing business it might be reasonably valued around 1o5. On the other hand, its break-up in a liquidation is estimated at something over 200.
Anybody who feels inclined to take a chance on the Court decision going in favour of a winding-up without incurring any great risk of loss can do so by buying Eastern Telegraph Preference around 12o, but at the same time purchasing twice the amount of Cable and Wireless (Holding) Preference around 118. The theory behind such a combined purchase is that if liquidation is ordered Eastern Telegraph Preference might be expected to rise by, say, 4o points from the current level of 120. On the other hand, the Preference of Cable and Wireless (Holding) would doubtless fall, say, to Ito. on fears that a similar legal judgement might be given at a later stage for the holding company itself. Conversely, if the winding-up petition for Eastern Telegraph should fail, the Preference stock of this company would fall to) about 15 points to to5. That loss would be offset, however, by a fresh rise in Cable and Wireless (Holding) Preference which, with liquidation fears for the holding company greatly diminished, would improve to at least 125.
WILLIAM GRIFFITHS' YIELD A yield of 64 per cent. on the ordinary share of a company with a good balance-sheet and promising prospects is hard to come by in these days. It can be had on the los. shares of William Griffiths, the quarry masters, stone merchants and contractors, which stand at 15s. 6d. and pay a to per cent. dividend. Although weather has an influence on the fortunes of a company of this kind, the earnings prospects look to me to be favourable. The balance-sheet shows holdings of cash and gilt-edged at over £75,000 and net liquid assets at £163,00. It would not be surprising, therefore, if the opportunity were taken before long to pay off the 5 per cent. debenture stock, with corresponding benefit to the ordinary shareholders. For their generous income return and prospects of improvement the shares look a worth-while investment.
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